The National Agency of State Property of Georgia (NASP) organized the roundtable on “Importance of Good Corporate Governance and Transparent Accounting and Reporting at State Owned Enterprises (SOEs)”. The event, which gathered over 40 representatives of the NASP and approximately 15 members of Georgia’s largest SOEs, was held with the support of the World Bank’s Centre for Financial Reporting Reform (CFRR) and the International Finance Corporation (IFC). Its aims were threefold: to raise awareness among SOEs on the importance of following good governance and transparent reporting; to highlight the main challenges in transforming Georgia’s SOEs; and to establish a platform for continuing dialogue between the SOEs and the State.
Challenges of effective SOE reforms
During the opening session, Mercy Tembon, the World Bank’s Country Director for the South Caucasus, stressed the importance of good governance and proper accountability of SOEs, which often affect sustainable economic development and have major social impact on the society via public service delivery and substantial budgetary costs. Implementing effective SOE reforms represents a significant challenge for most countries around the world, and Georgia is no exception. At the same time, Georgia has taken initial steps in initiating SOE reforms. Ms. Tembon underscored the importance of remaining focused on achieving efficient governance of these enterprises, taking Georgia’s economic circumstances and current best practices into consideration.
During the roundtable, NASP representatives shared their vision and action plan to help Georgian SOEs improve their accountability via a gradual transition to International Financial Reporting Standards (IFRS), publication of financial statements, and enabling NASP to produce an aggregated SOE report for use by the public and the Government. Boris Janjalia, IFC Corporate Governance Officer, presented the main challenges and ways for improving corporate governance at SOEs, focusing on global trends, and connecting best international practices to the Georgian reality. Natalie Manuilova spoke about the main constraints in improving SOEs’ accountability, and also presented the major hurdles that regional SOEs encounter during their transition to increased disclosure and transparency.
Facilitating reform through continued dialogue
The SOE roundtable discussions confirmed that the largest SOEs in Georgia are willing to work on improvements in corporate governance, including strengthening their financial accountability and transparency. However, they are limited in financial resources and capacity. The event’s main discussions concentrated on the current status of SOE reforms, specific limitations in improving corporate governance practices of SOEs and changes that are coming with the new Accounting & Audit Law. In particular, participants highlighted the following: the need to establish Boards at large SOEs, the need to professionalize the Boards that already exist at the several largest SOEs; the importance of internal audit function; and improvements required in transparency and reliability of SOEs’ reporting. The event helped participants understand good international practices and policy options that are available. All parties agreed to continue the dialogue in the format of roundtables, meetings and consultations in order to facilitate reform.