Economic reforms entering crucial stage

CUBA STANDARD — Three years after the Communist Party approved new guidelines for state companies, the chief coordinator of the economic reform process announced the 2014 budget will include “first steps” to grant more autonomy to “socialist state enterprises.”

Vice President Marino Murillo, in a speech before the economic commission of the National Assembly, said that next year’s national budget will allow state companies to retain 50 percent of net income, gain control over sinking funds to service debt, and grant their management decision-making power over issues not related to the company’s core mission.

“If we want to stimulate productive forces, we must transform the Socialist enterprise system,” Murillo told a National Assembly committee before the parliament’s mid-year session.

Meeting foreign correspondents after the parliament’s session, Murillo said that reformers will implement the “most profound transformations” during the remainder of this year and 2014. The next one-and-half years will be the “most complex” part of the three-year old reform process, he said, according to AP.

“The first stage of the reforms has so far, fundamentally, been the elimination of prohibitions in society,” Murillo added.

According to the 2010 Reform Guidelines passed by the Party, state companies will continue to be the “principal form of the national economy;” the state sector accounts for nearly 80 percent of all jobs in Cuba. However, the number and size of state companies is expected to shrink, leaving leaner companies in place, particularly in key sectors of the economy. With the funds left over after paying taxes and municipal fees, the 2010 guidelines say that state companies will be free to create development and investment funds. State companies will also be able to use profits for employee incentives, tying salaries to performance. The companies, in turn, will experience a “rise in responsibility about the material and financial resources they manage.” State companies that generate losses will be “liquidated,” the Guidelines say.

Murillo didn’t say when the “General Regulations” for state companies promised in the 2010 Lineamientos will be published.

Reform for state companies has been held up by concerns over mismanagement and corruption; the reformers’ response so far has been a crackdown on corruption and a rhetoric of ‘tough love.’

“We will not question entrepreneurial faculties, but we will confront irrational spending,” Murillo warned the parliamentary committee, suggesting that state companies that make losses during “several years” should be shut down or re-capitalized. “We had one company with nine years of losses. It didn’t pay its debts. How on earth could it survive?”

More recently, reformers have begun to put their attention at state companies in key sectors of the economy. Already, the government created at least two large state holding companies by consolidating smaller state companies and by shrinking ministries; Azcuba now operates all sugar business, and BioFarmaCuba is in charge all pharmaceutical production.

Meanwhile, Murillo said that while Cuba must attract more foreign investment, it will do so on its own terms.

“We are aware that our island needs more foreign investment,” he said, but added that the top priority will be investors that provide access to technology, funding and jobs.

Also, the government has begun to appeal to Cubans living abroad to invest on the island.

In a meeting in Miami July 14 with Cuban Americans who have supported normalization of U.S.-Cuban relations, Llanio González, a consul at the Cuban Interests Section in Washington, said that recent migration reforms in Cuba have made it easier for Cubans to go back and forth, and that his government wants more Cubans to follow this pattern. He said that the reforms made it easier for Cubans abroad to invest in the island by including them as a category of investors.

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