addressing macro-fiscal risks from state-owned enterprises in seychelles
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Addressing Macro-Fiscal Risks from State-Owned Enterprises in Seychelles
Ashwin MOHEEPUT
Seychelles Conference 2013:From Stabilization to Sustained Growth: Five Years
of Successful Reforms and the Challenges AheadVictoria, October 31, 2013
Roadmap and Introduction
2
PART 1 – Financial Performance Analysis of State-
Owned Enterprises (SOEs)
Profitability
Cash-Flow
PART 2 – SOEs and the Government
Dividends, Subsidies and Transfers
Development Grants
Debt of SOEs
PART 3 – Broad Assessment of SOEs
Good practices for benchmarking performance of SOEs
Risk Assessment of SOEs in Seychelles (benchmarked
against scorecard)
Going Forward - Policy Implications
Profitability indicators show an improvement in performance since 2010,
although the situation for some SOEs (e.g., SEYPEC and SPTC) continues to
warrant attention.
4
-100
-80
-60
-40
-20
0
20
40
60SEYPEC
No
uvo
banq
Air
Seyc
helle
s
PU
C
STC
DBS
SPTC
SC
AA
Oth
er
To
tal
Pe
rce
nt
Figure 1. Seychelles. Returns on Assets and Turnover Growth, 2010-12
2010 2012 Turnover growth
Many SOEs were making operating losses in 2010 and have represented a
net drain on resources of the government through their Quasi-Fiscal
Activities (QFA)…..
5
-600
-500
-400
-300
-200
-100
0
100
200
300
400
All
DBS
PU
C
No
uvo
banq
SEYPEC
Air
Seyc
helle
s
Oth
er
SO
Es
SR M
illio
ns
Figure 2(a). Seychelles. Cash Flow Activities of SOEs, 2010
Operating Activities Investment Activities Financing Activities
Note:
1. Investment activities include asset acquisition, disposal as well as
development grants from the government
2. Financing activities include borrowings and debt repayments
…but in 2012, the overall cash flow situation improved with most SOEs
posting positive operating activities.
6
-600
-400
-200
0
200
400
600
800
1000
1200
All
DBS
PU
C
No
uvo
banq
SEYPEC
Air
Seychelles
Oth
er
SO
Es
SR M
illio
ns
Figure 2(b).Seychelles. Cash Flow Activities of SOEs, 2012
Operating Activities Investing Activities Financing Activities
Note:
1. Investment activities include asset acquisition, disposal and development grants
2. Financing activities include borrowings and debt repayments.
Dividends paid to the government averaged less than 2 percent of GDP in
the 2008-13 period whereas subsidies and transfers received from the
government have averaged over 4 percent of GDP annually over the same
period.
8
0
1
2
3
4
5
6
2008 2009 2010 2011 2012 2013
Pe
rce
nta
ge o
f GD
P
Figure 3. Seychelles - Dividends & Total Transfers, 2008-2013
Transfers Air Seychelles Dividends
Government support also takes the form of development grants designed
to cover investment needs (e.g., PUC) and various loans and
restructurings.
9
0
5
10
15
20
25
30
35
40
45
0
50
100
150
200
250
300
350
400
450
2007 2008 2009 2010 2011 2012
Pe
rce
nta
ge
SR, M
illio
ns
Figure 4: Seychelles - Development Grants, 2007-2012
PUC Budget dependent bodies Proportion of Cap. Exp. (in percent) (RHS)
As of June 2013, total debt of SOEs accounted for over 10 percent of GDP
(excluding debt of PUC).
10
Government loan guarantees (explicit and implicit guarantees) pose contingent liabilities.Past loans taken by government: Air Seychelles (1.5 percent) and DBS (0.6 percent)
SOE CurrencyAmount in
SR millions
As percent
of GDP
SEYPEC EUR, USD, SR 1125.8 7.4
PUC1 115.7 0.8
STC SR 61.0 0.4
IDC SR 7.5 0.0
HFC SR 129.6 0.8
DBS SR 260.8 1.7Source: PEMC1 Loan disbursed in third quarter of 2013
Table 1. Seychelles. Debt as of Quarter 3 of 2013
Risk Assessment of SOEs in Seychelles
(benchmarked against Good Practices scorecard):
Appropriate tariffs – Tariffs on medium-term path to full economic cost recovery, but not there now.
Regulation – Electricity (SEC) largely independent (room for improvement). No independent regulation for water.
Governance and Monitoring – Two bodies SSI and PEMC but roles and capacity still under development, including for enforcement. Governance audits to be developed.
Performance contracts and incentives – Air Seychelles through partial privatization and management contract. Incentives and contracts not fully established for other SOEs.
Sector strategy and legislation - Water master plan established. For electricity not clear if a master plan has been discussed and approved nationally.
Targeted assistance - Cross-subsidies in tariffs currently commonplace. Activities in which some SOEs have monopolies cross-subsidize contestable activities.
Corporatization with safeguards - Some commercial SOEs are planning on expanding activities in competitive markets.
12
Going Forward - Policy Implications :
Fully implement recommendations of consultants on tariff adjustments
according to best-practice.
Enhance monitoring by giving it the authority to identify and monitor
contingent liabilities of SOEs on an ex-ante basis and to enforce any policy
recommendations that are appropriate to tackle these risks.
Enhance transparency in information dissemination about the financial
state of public enterprises to third parties through publication of the
financial results of SOEs in a website.
Consider risks of model currently adopted by some commercial public
enterprises seeking to expand activities.
Strengthen governance - more separation of management and Boards?
Governance audits.
13
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