14ymedio, Madrid, 12 December 2023 — Fewer than ten days before the beginning of the next ordinary session of Cuba’s National Assembly – December 20 – where the green light will be given to the draft Law on the Socialist State Enterprise, the Cuban economist Pedro Monreal has given an advanced preview of the text, unknown until now, whose greatest novelty is the reorganization of the 2,009 existing entities under the control of a single structure.
The expert considers it “the most important modification in the country’s economic institutions since 1976,” although he admits that “it seems to be unjustifiably optimistic that the new framework could instill efficiency while maintaining a voluntaristic price formation mechanism.”
The new law structures the Cuban business system in a different way than has been done in the last 60 years, with the creation of the National Institute of State Business Assets, a kind of super-ministry, dependent on the Council of Ministers, which will exercise the functions of owner over all state companies, except for authorized exceptions. The change means that the current ministries and their leaders will stop “looking after them.”
The law structures the Cuban business system differently than it has been in the last 60 years, when the National Institute of State Business Assets was created.
“It is striking that the name of the new super ministry (National Institute of State-Owned Enterprise Assets) is similar to that of an important reform institution in China (State Commission for the Supervision and Administration of State Assets, Sasac)” Monreal reflects. “But there are notable differences between the two institutions,” he adds, the main one being that “Sasac works within the framework of an economy with a high degree of market mechanisms and private enterprise.”
Sasac was created in 2003 and is considered one of the key points in the process of change towards a market economy in China. In addition to entailing a change in management, its main function over the years has been to encourage foreign investment and the concentration of companies through purchases and mergers. In the year of its foundation, it owned 196 conglomerates with 34,280 companies; seven years later there were 121 conglomerates, with 23,738 companies. Today it has barely 97 conglomerates, most of them in the technology, energy and aerospace sectors.
“As of 2017, Sasac’s function has focused on channeling state funds towards strategic activities,” notes Monreal.
The draft Cuban law has a specific section precisely dedicated to science, technology and innovation that “constitute fundamental pillars in the operation of the company with the objective of ensuring growth and development, international competitiveness, export and the offer of goods and services for the population,” the text emphasizes. The Government of the Island has put some of its greatest efforts in these areas in recent years, committed to promoting, above all, biotechnology at an international level.
As already announced, the rule will divide state companies into three groups
As already announced, the rule will divide state companies into three groups. On the one hand is Category A, which includes entities whose “essential mission is to obtain high returns on invested resources and promote exports and operate under a competitive regime,” both against private and state entities.
On the opposite side is Category B, for companies that must provide universal public services – so they may, although it is not explicit, incur losses – or those that carry out activities exclusive to the State. In this group, although they are not named, there will be the sectors that the Government considers strategic: health, education, media, energy and supplies or legal services, among the most likely.
Finally, in Category C, there are those that are responsible for supplying certain “goods and services” to the population and although there will be state protection mechanisms and no growth or high profitability will be required, it will be recommended that they be able to maintain balanced accounts.
The draft states that there will only be subsidies for losses “in exceptional cases, for specific situations and not unlimited in time.” Furthermore, “the company that cannot comply with the payment of its debts and obligations with its assets, or presents losses on a sustained basis, will be subjected to an insolvency or bankruptcy process, in accordance with current legislation,” it specifies.
Monreal focuses his attention particularly on one of the less clear aspects of the text, which comprises only 33 pages at this time. “The provisions for state control over the managerial governance of companies are clear, but the weight of workers in key decisions is not ensured,” he points out.
The workers must have a representative on the company’s governing board, however, “workers who are members of the governing boards cannot be members of the companies served by said board,” a whole tongue twister whose rationality and purpose is ignored.
The workers must have a representative on the company’s governing board, however, “workers who are members of the governing boards cannot be members of the companies served by said board,” a whole tongue twister whose rationality and purpose is ignored.
In addition, a series of issues are established in which workers cannot be dispensed with, from company accounts, savings measures, efficiency and productivity, health and safety standards, innovation, etc. However, Monreal points out “it is not identified in what concrete way workers could participate in decisions on these issues, what the appeal mechanisms are, and other details.”
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