Once a major pillar in Tunisia’s economy, state-owned enterprises (SOE) are suffering from the severe financial crisis, plaguing the economy.
One such institution is the Gafsa Phosphate Company. It might be a clear-cut example of the SOEs deteriorated financial situation which is witnessing haphazard demonstrations destroying their production and exports. They have become heavy burdens on the state after once taking in profits of USD 900 million annually.
Once a major pillar in Tunisia’s economy, state-owned enterprises (SOE) are suffering from the severe financial crisis, plaguing the economy.
One such institution is the Gafsa Phosphate Company. It might be a clear-cut example of the SOEs deteriorated financial situation which is witnessing haphazard demonstrations destroying their production and exports. They have become heavy burdens on the state after once taking in profits of USD 900 million annually.
The crisis has been tightening and loosening its grip on some state companies which once brought the state significant financial resources. Today, the government is imposing taxes on all categories to make up for the deterioration of its depleted companies.
Exhausted companies
For example, citizens and factory owners have always complained against the high and expensive bills of the Tunisian Company of Electricity and Gas which suffers financial losses that reached USD 500 million in October 2016.
Public transport companies such as the National Tunisian Railway Company and the Transport Company of Tunis, which respectively operate the networks of metros and yellow cars, suffered from a financial deficit of USD 500 million, which will aggravate the burdens of the already exhausted state.
The aforementioned companies are just examples of other companies which are about to go bankrupt due to the economic recession, including some state banks. This has forced the state to pump rescue funds into company budgets.
The World Bank has already sounded the alarm, admitting in one of its reports, the dwindling revenues of 95 SOEs by 30%, highlighting that their net losses in 2012 exceeded 200 million dinars (USD 86.5 million).
Causes of collapse
Moez Judi, an economic expert, says: “There are three reasons behind the deterioration of these institutions: poor governance and absence of monitoring, rife corruption and filling positions based on political alliances.”
He adds that the situation of some established SOEs, including the National Tunisian Railway Company and the Gafsa Phosphate Company has deteriorated due to their decreasing revenues, stressing that one of the reasons is “exceeding their logical operational capacities.”
Many economic experts agree that no fundamental reforms have been carried out to upgrade SOEs since 1990s. In light of the current situation, the National Anti-Corruption Authority is warning against the growing levels of corruption in SOEs.
Judi believes that in light of the absence of structural reforms, the current SOEs deterioration is likely to continue hence negatively affecting the state which should provide more financial support and loans.
Proposed solutions
Judi believes that the feasible solutions to save these institutions from imminent collapse include the need to carry out audits to figure out the causes that have led these institutions to their current deteriorated situation and identify the institutions that should be maintained in the key sectors of energy, electricity and water.
The state, he believes, should privatize institutions in the sectors that are witnessing fierce competition to revitalize these institutions, exploit the expertise available in the private sector and provide new financial resources.
He wonders why the state is continuing to support more than 200 institutions in fields “which are not strategic, such as the Tires Manufacturing Company which is suffering from a severe financial crisis and about to go bankrupt.”
He stresses that privatization of certain SOEs might bring significant profits and ease the burden of the state’s external borrowing, and that 20 SOEs can be privatized to save them from bankruptcy and liquidation.
Government position
Obaid al-Buraiki, Minister of Public Function, Governance and Anti-Corruption, says that privatizing SOEs next year is not on the table. He warns that such a move could ignite a new crisis between the government and the work unions especially in light of their already strained relationship due to the government’s insistence on freezing pay raises for workers in the upcoming year.
However, he admitted that SOEs are in a difficult situation and suffering from structural or temporary crises. “It is about time we start carrying out reforms and reevaluate the scope of state intervention in the activities of some institutions and facilities.”
