Autonomy continues to be the key word driving efforts to transform and perfect the state enterprise system, while also taking steps to improve efficiency, by moving away from bureaucratic processes and top-down decision making structures.
The improvement process, which has gradually been carried out across the state enterprise sector since 2011, is geared toward giving greater autonomy to these entities, with clearly defined objectives which include separating enterprise functions from those of the state, improving efficiency and organization, as well as ensuring that entities generate capital to reinvest and transforming revenue distribution mechanisms.
The new legal regulations for the Cuban state enterprise system, published December 13 in Extraordinary Official Gazette No.58 represent, according to officials from the Ministry of Economy and Planning (MEP) and the Permanent Commission for Implementation and Development of policy guidelines (CPID), another step toward achieving these goals and aligning legislation with approved policies for the updating of Cuba’s economic model.
Regarding Decree No.336, Johana Odriozola Guitart, the MEP’s legal director, stated that it does not apply to all of the more than 80 Central Enterprise Management Organizations (OSDE), which exist in the country today, but rather those created as part of the process to improve Central State Administration Bodies (OACE) and others which already existed but had been restructured as part of these efforts.
An important feature of these new regulations, she said, “is that the state enterprise system will no longer come under the control of the ministries. The OSDEs will have direct relations with all other OACEs, Cuban state organizations and institutions.
“What does having direct relations mean? Before, in order for the OSDEs and other entities to undertake any procedure with another organization, they had to first request authorization from the ministry with which they were affiliated. Now (once the regulations come into effect) any such activity can be dealt with directly by the president of an OSDE.
“This, in addition to speeding up the process, contributes to separating state functions from those of enterprises by freeing ministries of these aforementioned daily processes, which in many cases, consist of administering resources for the state enterprise system.”
These transformations, noted Odriozola Guitart “also imply an important change in mentalities with relations now based on coordination, guidance, and supervision rather than subordination.”
According to the MEP’s legal director, the new regulations do not mark the beginning of a process, but are rather part of the process of institutional improvement already in place.
The Ministry of Economy and Planning, for example, will now draw up a plan for OSDEs linked to ministries which have undergone the improvement process. In this way, planning processes are more directly to the organization’s economic activity, and to reality, she said
Likewise, after giving a brief overview of Decree-Law No.334, and Decrees No.334 and No.335, Yovana Vega Mato, deputy director of the CPID’s Entity Improvement Department, announced the authorities that had been extended to the state enterprise system and which were previously not applicable to entities undergoing the improvement process.
In this sense she emphasized the work of governing bodies, which represent the interests of the State in the management of the enterprise system, and which were initially designed to deal with entities undergoing institutional improvement.
Their gradual extension to the OSDEs was approved in 2012, with 28 currently in existence and another 23 in the process of being formed.
These governing bodies, noted the official, are responsible for approving OSDE strategic development plans, assessing the relevance of their economic agendas, conducting quarterly checks to ensure that they are complying with managerial directives, and managing the distribution of earnings.
Meanwhile, Vega Mato stressed the importance of adequately training administrators, because new powers mean greater responsibilities.
“At times, gaps in the knowledge and shortcomings in training of those responsible for carrying out transformations at all levels, have meant that we have not always achieved the outcome we had hoped for,” she noted.
Thus a broad training process is set to be carried out starting February, 2018 and involving around 40,000 senior officials from across the country.
Both Yovana Vega and Johana Odriozola stressed the importance of having an Enterprise Law, given that the new regulations represent interim measures until other issues affecting state enterprise management can be resolved, such as financial autonomy, the distribution of resources, and currency and exchange rate unification.
In institutional and structural terms, the new regulations are an attempt to standardize the entire enterprise system, stated Odriozola Guitart, who noted that the success of this process will depend on adequately training cadres responsible for implementing the changes, which affect everyone.
In April 2011, the Sixth Party Congress approved Guidelines six, seven and 15, which state:
The state enterprise system should be composed of efficient, well organized, and effective entities; state and enterprise functions should be separated and the Enterprise Improvement processes be integrated into the Economic Model policies.
In April, 2016, the Seventh Party Congress approved:
-The Conceptualization of the Cuban Economic and Social Model of Socialist Development
- The bases for the National Social and Economic Development Plan through 2030, the nation’s vision, priorities and strategic sectors
- Economic and Social Policy Guidelines of the Party and Revolution for the period 2016-2021.
- Guideline number nine specifies: Proceed with perfecting the state enterprise system, by gradually awarding directors of entities new and clearly defined powers, in order to create more autonomous, effective, and competitive entities, on the basis of a rigorously designed and implemented internal accounting system; with well-organized, disciplined, and rigorous administrative management. Systematically assess the results of its application and its impact.
- Draw up a legal framework to comprehensively regulate enterprise activity.
MAIN TRANSFORMATIONS TO THE CUBAN STATE ENTERPRISE SECTOR (2011-2017)
The Council of Ministers grants enterprises the authority to use up to 50% of after-tax earnings to create funds for development, investments, and workers’ salaries, once they have fulfilled their commitments to the State and established responsibilities. Entities are no longer required to submit depreciation and amortization payments to the state budget.
Resolution No.132 of 2013 of the Ministry of Economy and Planning allows enterprises to offer services or products linked to their social objective to any individual or legal entity. Enterprise directors are responsible for undertaking any secondary activities stemming from the entity’s principal activities as defined in its social objective. Once they have fulfilled their commitments to the state, enterprises are authorized to sell any surplus at market prices.
Implemented on an experimental basis, is a new concept of "encargo estatal," the state's order, designed to contribute to gradually expanding the wholesale market, by allowing directors to sell (based on market demands) certain surplus goods and services to legal entities, once the enterprise has fulfilled its commitments, and covered all its costs, expenses, and tax obligations.
The Council of Ministers approves the legal policy and regulations to perfect Cuban export enterprises, based on Guideline 107 designed to “promote the establishment of enterprises and alliances abroad, in order to better position Cuban interests in international markets, provided that it is economically justifiable and appropriate.”
Presented are the basic concepts governing relations between the Council of Ministers and OACE with OSDEs, based on the need to separate enterprise functions from those of the state, give entities greater autonomy, and increase their levels of responsibility, efficiency, and management of resources.
Resolution No.17 of 2014 of the Ministry of Labor and Social Security, linking wages to results, comes into effect. Other regulations linked to the price of surplus wholesale products and new financial regulations for enterprises are issued.
Likewise, the responsibility of approving an entity's annual plan, passes from the corresponding sector ministry or Provincial Administration Council (CAP) to the OSDE president.
In order to create more efficient and competitive enterprises, amendments are made to Decree-Law 252 and Decree 281 of the Council of Ministers, regulating the enterprise improvement process, which is part of broader efforts to implement the Economic and Social Policy Guidelines of the Party and Revolution.
Issued is Decree-Law No.321, related to the objectives of the ministries of Foreign Trade and Investment (Mincex), Food Industry (Minal), Domestic Trade (Mincin), and Construction (Micons), as part of efforts by the Permanent Implementation and Development Commission to improve Central State Administration Bodies (OACEs).
The measure legally separates these organizations from the administrative activities of the state enterprise sector, allowing for the more comprehensive, organized and efficient functioning of their structures and freeing up public administration bodies, while also strengthening their regulatory, oversight and supervisory role.
Reviewed are proposals for improving the Ministry of Finance and Prices enterprise system, known as the Caudal S.A. Business Group, which offers professional services in the financial sector, specifically insurance. The proposals are geared toward resolving longstanding and current problems, and strengthening the organization, “which will offer insurance services, asset evaluations, audits, feasibility studies, consultation services, everything related to economic activity and management, in order to support the development of the enterprise sector and non-state forms of management.” These measures are also geared toward facilitating foreign investment in the country.
New measures linked to the functions and responsibilities of Basic Enterprise Units (UEB) are approved. Central Enterprise Management Organizations (OSDE), UEBs and other organizations, ratified as business entities, and the idea that even though they may have different responsibilities and roles, there is a close link between all of their functions, thus establishing the foundations on which to organize a more efficient and effective state enterprise system.
Resolution 6 of the Ministry of Labor and Social Security, which replaces Resolution 17, of 2014, relating to the link between employee wages and results, comes into force.
Decree-Law No.334: introduces amendments to DL 252/2007 “regarding the continuation and strengthening of the Cuban Enterprise Direction and Management System.”
Decree No.334: introduces amendments to Decree 281/2007 “Regulation for the implementation and consolidation of the Cuban Enterprise Direction and Management System.”
Decree No.335: “On the Cuban State Enterprise System”
Decree No.336: “On the system of relations between central enterprise management organizations.”
All these measures are designed to strengthen the organization, efficiency, and effectiveness of the socialist state enterprise.