Speeches & Transcripts

Opening Remarks at the Conference on Corporate Governance Practices in State Owned Enterprises

June 10, 2014

İbrahim Çanakci Conference on Corporate Governance Practices in State Owned Enterprises Ankara, Turkey

As Prepared for Delivery

Distinguished representatives of public agencies and organizations, esteemed participants, I would like to welcome you to this conference, organized jointly with the World Bank, and I greet all of you with respect.

As the Undersecretariat of Treasury we spare no effort in raising awareness of SOEs about corporate governance principles and about extending the implementation of these principles.

We have organized this conference within the framework of that perspective.

The national and international experts and executives who have come from around the different parts of the world within the scope of this conference will tell us about different aspects of state owned enterprises during four sessions and will present us with a comprehensive perspective.

With these opening remarks, I would like to touch upon the place of SOEs within our economy, the importance of corporate governance in SOEs, and what we have done in this field to date.

Esteemed Guests, the leading status of SOEs in the Turkish economy has remained constant for several years - especially in capital-intensive sectors. In the mid-1980’s, within the scope of Decree Law 233, there were 48 enterprises. The ratio of gross sales revenue of these SOEs to overall GDP was over 20 per cent. As a result of privatization, there are currently 18 SOEs and 3 affiliated partnerships within the scope of the Decree Law and there are 6 actively operating enterprises with a more than 50 per cent public share within the privatization portfolio. According to 2012 data, the gross sales revenue of SOEs and enterprises in privatization portfolio has been 120 billion TL and the ratio to GNP is 8.5 per cent. It is targeted that SOEs and enterprises in privatization portfolio should realize an investment total of 9.5 billion TL in the year 2014. Such data illustrate that, despite the privatization strategy, SOEs still have a significant impact on the economy of our country.

One of our basic priorities is to have the existing SOEs operate in line with the principles of efficiency and productivity without causing a burden to the public.

One of the most important conditions to make this happen is to have these enterprises operate in accordance with the principles of corporate governance.

It is obvious that the SOEs will only be able to adapt to the increasing local and global scale of competitiveness by transforming basic principles of transparency, accountability, and responsibility into their corporate culture and by internalizing corporate governance principles.           

Esteemed Guests, as you know, the concept of corporate governance has been on the agenda primarily within the framework of problems that multi-party companies experience. In unlisted companies the concept of corporate governance is relatively new. OECD Guidelines on Corporate Governance were prepared in 2005 and disclosed to public - this is the first concrete study conducted in this field. These Guidelines, in sum, the importance of ensuring an efficient legal and regulatory framework for public enterprises, the State acting as a knowledgeable and active enterprise owner, professionalization of Boards of Directors of SOEs, and improving transparency were underlined.  

At this point I would like to mention that corporate governance principles are not static, solid principles written in stone. These principles can differ according to economic circumstances of the countries, development levels and legal systems. When management approaches and understandings change, such principles can be re-arranged in parallel with thesechanging conditions and needs. Accordingly, the OECD has been involved in revising the 2005 Guidelines on Corporate Governance in 2014 by taking into account the latest developments in the world in order to meet current requirements. We support the participatory approach adopted by the OECD in this respect and we are actively involved in these efforts.

In this scope, in 2013 we hosted the Fifth Regional Roundtable of Task Force on Corporate Governance of SOEs in the Middle East and North Africa. We are highly pleased to contribute to the efforts undertaken at this international platform.

As Undersecretariat of Treasury, we closely follow developments in the field of corporate governance practices in state owned enterprises and we spend maximum effort in reflecting these practices into our internal arrangements. In this scope I would like to share some of the steps taken in recent years.

In 2013, in accordance with the Turkish Commercial Code and provisions of relevant legislation with the purpose of establishing a transparent management and audit systems, we initiated efforts to establish an efficient internal control system in SOEs. We made it mandatory for SOEs and affiliated partnerships to establish an internal control system compatible with international standards. SOEs are required to prepare relevant action plans by the end of June this year and they will complete the effort to establish an internal control system by the end of June 2016. In this scope we held informative meetings for SOEs and completed training activities.

We organized a training program on international financial reporting standards for the personnel of Court of Accounts, SOEs, and Undersecretariat of Treasury in collaboration with the World Bank. Through this action, we contributed to the preparedness of SOEs and regulatory and auditory agencies of SOEs for the independent audit practice to be initiated in the year 2015.

We have undertaken a pilot study in two selected SOEs, together with the World Bank. Through this project we aim to ensure the successful fulfillment of the liabilities attributed to enterprises by legislation in the field of internal control and independent audit.

By taking into account the international best practices, the Undersecretariat of Treasury’s Shareholder Policy Document will be presented to the relevant institutions and organizations for review and is expected to be shared with the public in 2015. The aim of the Treasury’s shareholding, the role of the State in corporate governance, and the implementation of ownership policies, will be clarified by this document. In this way, we will be able to fulfill one of the issues recommended by the corporate governance principles of the OECD.

I would like to mention that we will continue our efforts on placing SOEs within a framework that is compatible with international corporate governance principles. I believe the support provided by you as distinguished stakeholders of the SOE system - especially the Ministry of Development, Ministry of Finance, Presidency of Privatization Administration and line ministries - will continue as well. I would like to emphasize the importance of the valuable contributions made by you, the distinguished managers and executives of SOEs.

Distinguished participants, Decree Law 233, which is the basic legal framework on Public Owned Enterprises in Turkey, is a regulation dating back to 1984.

It became obvious that the point was reached wherein the radical structural changes and the transformation process of the Turkish economy necessitates a redesign of the legal structure pertaining to public owned enterprises.

A legislative regulation to respond to the current needs and possible future requirements - one that is compatible with international good practices covering not only the SOEs but other public owned enterprises - is now an urgent and significant need that has to be met. As mentioned earlier, partial steps have been taken in this respect. But we need to consider these efforts under a more integrated approach and finalize these immediately.

I would like to underline that progress can only be attained in this field with the participatory, flexible, and self-sacrificing attitude of the parties involved.

I hope this conference will enlighten the steps that need to be taken in this direction and will be a tool for conducting a comprehensive evaluation of our existing practices within the framework of international best practices and what has to be done in this respect in the near future.

In conclusion, I would like to thank the World Bank for the contributions provided to our efforts in the field of corporate governance practices in SOEs and would like to express my pleasure in being involved in close cooperation with the World Bank on such issues.  

I would like to thank my colleagues and the World Bank staff - who have worked hard to bring this conference into being - as well as the distinguished speakers - who will share their valuable experiences in this field - and you the distinguished participants. I would like to greet all of you with respect.