Cyprus Mail
BusinessCyprusGuest ColumnistOpinion

Utilising government assets for public finances


By Andreas Charalambous and Omiros Pissarides

Fiscal policy traditionally focuses on satisfying certain nominal targets, mainly regarding the fiscal deficit and public debt. An interesting discussion is currently taking place at European level, concerning a reform of the fiscal framework and aiming at: (a) placing more emphasis on developmental, social and environmental aspects, (b) enhancing flexibility and facilitating active public interventions to support the economy during challenging periods, (c) promoting administrative simplification, and (d) transferring the main policy responsibilities to the national level, while retaining a supervisory role for the European institutions.

In this context, one topic that deserves closer attention is the utilisation of public property, which includes enterprises, real estate, as well as investments in financial instruments.

Specifically for Cyprus, the state-owned real estate, estimated at €15 billion, is of central importance. Possible utilisation, such as the establishment of centres of excellence and photovoltaic parks, based on the criteria cited below, would yield noteworthy revenues of a magnitude of €450 million annually. Multiple benefits would also emanate from an improvement of the governance framework of public utilities.

Admittedly, only a few countries have formulated a comprehensive policy strategy concerning the utilisation of public property. Notable cases include some Asian countries, such as Singapore, and the Scandinavian ones.

The objectives of such a strategy would be twofold: (i) strengthening public revenues – the International Monetary Fund (IMF) estimates that, worldwide, state assets exceed 200 per cent of GDP – and (ii) contributing towards the achievement of national developmental, environmental and social objectives.

The setting up of an all-encompassing public registry and a balance sheet for the broad public sector, with a view to gaining an accurate picture of the overall state of public finances, as well as measures of institutional nature, including the formation of a dedicated structure tasked with the management of public property, are among the necessary preconditions that need to be put in place. In addition, the establishment of a legal framework, which would safeguard high governance standards, transparency, independence from political interferences, accountability and meritocracy, falls within best practices. Of particular importance is tackling the hot issues of interest conflicts and corruption, which constitute inherent features of public entities.

The proposal is no doubt demanding; however, it would potentially yield substantial benefits. Its implementation should be based on an independent viability study, with concrete terms of reference to develop proposals for adapting international best practices and establishing an evaluation framework, with a view to assess, identify and address shortcomings at regular intervals.

The main prerequisites for successful implementation are proper staffing and professional management of the dedicated entity responsible for the management of state assets.

In Cyprus, certain steps were taken towards implementation of the suggested strategy, notably the establishment of a comprehensive registry for immovable and movable state assets, based on international accounting standards. However, a lot remains to be achieved, especially concerning the utilisation of state property and the improvement of the management of public utilities.

Andreas Charalambous is an economist and former director at the Ministry of Finance. Omiros Pissarides is the Managing Director of PricewaterhouseCoopers Investment Services

Follow the Cyprus Mail on Google News

Related Posts

North university ‘in millions of debt’

Tom Cleaver

‘Cyprus can play a role in stabilising Middle East’

Tom Cleaver

Startups Can Now Apply for ReflectX Startup Programme, Unlocking Exclusive Benefits to Accelerate Their Journey

Press Release

Disparity in gaming commission board allowances raises concerns

Elias Hazou

Get to know Cyprus’ vineyards and producers

Eleni Philippou

Lakatamia mayor alleges election interference

Tom Cleaver