Improving the management of state-owned enterprises in the Republic of Croatia

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On 24 and 25 May 2022, within the framework of the OECD project to improve corporate governance of state-owned enterprises, representatives of the European Commission and the OECD team were on a working visit to Zagreb. During this visit, the mission was also received by Minister of physical planning, Construction and State property Ivan Paladina.

Members of the mission, Frank Van essDriche of the European Commission and OECD representatives Hans Christiansen, Arto Honkaniemi and Arijete Idriz held a series of inter-departmental meetings with members of the Steering Committee, consisting of representatives of the Ministry of Physical Planning, Construction and State Assets headed by State Secretary Sanja Bošnjak, adviser to the Prime Minister Tomislav Pokaz, and representatives of the Ministry of Finance, Ministry of Economy and Sustainable Development, Ministry of the Sea, Transport and Infrastructure, Ministry of Foreign and European Affairs, Ministry of Labour, Pension System, Family and Social Policy and CERP.

At the meetings, among other things, the activities undertaken so far under the Action Plan, the draft Act on State-Owned Enterprises as well as plans for the implementation of the reform were highlighted.

As a part of their two-day stay in Zagreb, at the meeting held with Minister Ivan Paladina, a brief summary of the main findings in the Review of corporate governance of state-owned legal entities was presented.

We would like to remind that in June 2020 the Ministry of Physical Planning, Construction and State Assets launched the project “Improving corporate governance in state-owned enterprises by reviewing and aligning legislation with the OECD Guidelines on corporate governance” financially supported with technical support funds for structural reforms from the European Commission — Directorate-General for Structural Reform Support (DG REFORM).

The project is based on two main activities, namely:
 
  • OECD analysis of corporate governance in state-owned enterprises in the Republic of Croatia in relation to the OECD Guidelines on Corporate Governance in State-Owned Enterprises, by the development of a Review on the State of Corporate Governance in State-Owned Enterprises in the Republic of Croatia (SOE Review); and
  • support to the Republic of Croatia in the design and implementation of legislative reforms in order to address non-compliance identified by the SOE Review.

This EUR 350,000 worth project represents a very complex and comprehensive reform in corporate governance of state-owned enterprises aimed at improving corporate governance in state-owned enterprises by reviewing and aligning legal regulations with the OECD Guidelines on Corporate Governance in SOE. The aim of the project is to create preconditions for a more active role of ownership bodies in setting financial and operational goals, and to achieve better coordination between competent state bodies which share ownership powers in relation to state assets in the form of stocks and shares.

In its Report on the state of corporate governance in state-owned enterprises in the Republic of Croatia of June 2021, the OECD drafted recommendations for improving corporate governance of state-owned enterprises in the Republic of Croatia relating to: strengthening the function of state ownership, harmonising the legal and regulatory framework of state-owned enterprises, maintaining a level playing field with private companies, improving transparency and disclosure practices, strengthening the internal control system and strengthening the autonomy and independence of the supervisory board.

We should also add that the Review of corporate governance of state-owned legal entities prepared in June 2021 was published on the official website of the OECD, providing information on the current situation and a review of management of legal entities owned by the Republic of Croatia, evaluating the existing Croatian legislation in relation to the standards of the OECD Guidelines and subliming the official conclusions and recommendations of the OECD for their improvement.

The received OECD recommendations imply significant regulatory and institutional changes as well as reorganisation of powers regarding the management of state-owned enterprises, which will lead to the creation of preconditions for a more active role of ownership bodies.

In October 2021, the official act of the Government of the Republic of Croatia on the implementation of the relevant OECD recommendations was adopted as well as the Decision on the adoption of the Action Plan for the implementation of OECD recommendations and the establishment of a Steering Committee for its implementation.

Since the OECD recommendations relate to the broader competence of state administration bodies, in particular given that ownership powers over state-owned enterprises are currently fragmented both through regulations and institutional competence, the Action Plan defines the roles, responsibilities, deadlines and implementation actors of the given recommendations on which they are actively working and the outcomes of which, as the most significant reforms in the field of corporate governance of state-owned enterprises, are recognised and harmonised also within the framework of the National Recovery and Resilience Plan 2021-2026.
 

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