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Dag Detter

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Transparency -- The First Step in a Government Revolution

Posted: 10/03/11 04:15 PM ET

Open access to key information provides a basis for government accountability and limits the opportunity for self-serving policies.

Government debt is a fully transparent security traded on the capital market, with its rating acting as a health indicator of government finances for the whole world to see. In contrast, the asset side and then especially commercial assets are more or less hidden in black box. Even the government may not have a complete picture of its contents, value or performance.

State-owned commercial assets are one of the largest asset classes in the world. They are truly public companies in the purest sense and should therefore be even more transparent than listed companies.

The first step in this process is for the government to publish an aggregated annual review simply outlining the total list of assets deemed to be commercial, as well as a breakdown of the perhaps five largest sectors.

The information made public about the portfolio is only the most basic in order to obtain an initial understanding of the strategic, financial and economic potential of the portfolio. This would include, potential market value, profit, leverage, and dividend for the portfolio as a whole and by sector. Such an exercise would only require a few months to produce and publish.

Similarly, understanding the vast real estate portfolios often held by governments, to be included in the aggregated report, can be done in parallel and finalised within the same time frame of a few months.

The ultimate goal in transparency is naturally a consolidated annual report, audited according to international standards, as well as quarterly reports to maintain a regular flow of information throughout the year.

Publishing a clear set of goals for each asset and their management, along with periodic assessments of how well they have achieved their objectives, as if they were privately held, is fundamental to good corporate governance. Hence, the quality of reporting and auditing should be of the highest international standards for each individual company as well as on an aggregated level for the entire portfolio.

The current financial crisis is a unique opportunity to challenge the vested interests wanting to preserve the poor performance of the past and keeping these assets away from scrutiny.

This is the time to finally demonstrate that the economic value is indeed greater than the political costs of opening up this black box -- to the benefit of taxpayers, customers, employees, and the world economy.