Domestic Regulatory Environment Linkages with Trade and Foreign Investment
This article discusses the recent developments and components of the domestic regulatory environment (DRE) and explores the effects of sub-optimal DRE on trade and foreign investment. It also delves into policy drivers of DRE, both domestic and international, shedding light on the implications for economic growth.
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T R E A S U R Y P E R F O R M A N C E M A N A G E M E N T & M A N A G I N G C A S H M A N A G E M E N T S P E R F O R M A N C E TURKISH TREASURY
Contents Performance Management as part of the Public Financial Management System 1 2 TreasuryStrategic Plan & Performance Management ManagingCash Management Performance 3 4 TheWay Forward
PERFORMANCE MANAGEMENT AS PART OF THE PFM SYSTEM 1
Legal Background Public Financial Management and Control Law Enacted in 2003 Came into Force in 2005 Law No. 5018 Strategic Planning Performance Programs Accountability Reports Article No.41 The heads of public administrations and authorizing officers to whom appropriations are allocated in the budget shall issue accountability reports each year. These reports include information on activities and performance information performed as per strategic plans and performance program. Article No.9 Article No.9 Public administrations shall prepare their performance programs which includetheir performance targets and KPIs. Public administrations shall prepare their budgets on performance basis and in accordancewith the r strategic plans. Public administrations shall prepare strategic plans in order to form missions and visions and determine strategic goals and measurable objectives.
Content of the Reports Prepared for each 5-year period Prepared annually Prepared annually Performance Programs Strategic Plans Accountability Reports General info about the institution Performance targets and indicators General info about the institution Vision and mission statements Performance results for the preceding two years Core policies and priorities Core values and principles Financial results&budget realizations Planned activities to reach performance targets Strategic targets and objectives Strategies Performance results and evaluation Envisaged cost for each activity Performance indicators Envisaged cost for activities Explanations for deviations Submitted to Ministry of Development until preceding April Published until preceding October Published in January Published in April
TREASURY STRATEGIC PLAN & PERFORMANCE MANAGEMENT 2
Roles&Functions of Treasury A wide spectrum of functions Public Foreign Economic Relations Shareholder Executive Regulation and Audit of Insurance Sector Economy Advisor of the Government Regulation of FX Regime Finance Mng. Monitoring State Aid Supervising legislation regarding the protection of the value of Turkish lira Monitoring developments related to financialsectors Implementing and monitoring regulations for the insurance market Auditing insurance sector Foreign borrowing Executionof relationships withIMF, World Bank etc. Cash&Debt Management Risk Management Receivables Management Treasury Accounting 1 1 PowerPoint Diagrams designed by ThemeGallery preparing evaluation reports Economic and financial analyses and forecasts, and Shareholder of SOEs Preparation of annual general investment and financing programs of SOEs 2 2 Preparing legislationfor stateaidand implementation of support measures 3 3 5 5 5 6 6 7 7 4 4
Strategic Plan of Treasury An institution accepted as a pioneer in ensuring economic development and a model in institutional governance Vision To manage public financial assets and liabilities, to regulate, implement and supervise economic, financial and sectoral policies, and to ensure the coordination of international economic relations in cooperation with all economic actors in a transparent, accountable and efficient way in order to contribute to the development of our country. Mission Strategic Pillar Strategic Goals MANAGEMENT OF PUBLIC FINANCIAL ASSETS AND LIABILITIES Increasing effectivenessof public financial asset and liability management INTERNATIONAL ECONOMIC RELATIONS Increasing effectivenessof Turkey in internationaleconomicrelations INSURANCE SECTOR AND PRIVATE PENSION SYSTEM Stimulatingthe growth potentialof the insurance and private pensionsystem Strengtheningfinancial systemand stabilityby increasingthe variability in the financial productsand services, financial depth and inclusion FINANCIAL SECTORS Monitoringthe state aid implementationsin an holisticmanner in order to provide measurability, predictability, transparency and effectiveness STATE AID INSTITUTIONAL MANAGEMENT Institutionaland managerial excellence
Management of Public Financial Assets and Liabilities Improving the forecasting capabilities of cash management Improving the borrowing process and debt stock structure Diversifying the financial instruments and investor base Strategic Objectives Reducing credit risks arising from treasury-guaranteed credits, on-lent external credits and other transactions Implementing corporate governance principles in public enterprises Ensuring that the Turkish State Mint performs its functions in a cost-efficient, timely, continuous and reliable manner Enabling the effective utilization of the funds provided under EU IPA
Public Finance Management Performance Strategic Objective KPI Target Value Strategic Goal Improving the forecasting capabilities of cash management Average deviation from monthly cash program Percentage Improving the borrowing process and debt stock structure The condition that 70% or over of the strategic benchmarks determined by the Debt and Risk Management Committe have been met Binary (0 or 1) The condition that a new financing instrument has been introduced during the year. Binary (0 or 1) Increasing effectiveness of public financial asset and liability management Number of new investors for foreign bond or SKUK issuances which have not participated for the preceding three year period. (If the number of new investors exceed 5 then the performance value is 1; otherwise 0) Binary (0 or 1) Diversifying the financial instruments and investor base The ranking of Turkey in the following categories identified by the Institute of International Finance (IIF): Overall Assessment of Investor Relations Program and Data Transparency Practices (Category-1) , Data Dissemination Practices (Category-2) and Best Practices in Investor Relations (Category-3) Number (Rank) Reducing credit risks arising from treasury- guaranteed credits, on-lent external credits and other transactions The proportion of the on-lent and guranteed credits provided to institutions with low credit rating over total credit stock Percentage
Strategic Benchmarks and Indicators Liquidity Risk Currency Risk Borrowing mainly in TL Keeping certain level of cash reserve A nominal ceiling for FX borrowing and FX cash A minimum nominal figure 1 2 reserves 3 Interest Rate Risk Using fixed rate TL instruments as the major source of domestic cash borrowing Refinancing 4 Risk Increasing the average maturity of domestic cash borrowing taking market conditions into consideration Decreasing the share of debt which has interest rate refixing period less than 12 months Decreasing the share of debt maturing within 12 months
3 MANAGING CASH MANAGEMENT PERFORMANCE
Monitoring Treasury Cash Management Performance-I Deviations from daily cash program are reported daily to the top management and deviations from monthly program are examined at the regular meetings with DG and Undersecretary. Cash management KPIs are part of 5-year Strategic Plan and annual performance programs of Treasury since 2009/2010. Initially set as a single KPI based on deviations from the projected cash surpluses/deficits on a monthly basis. Since 2014, two separate indicators defined as the average monthly deviation in the total revenues (cash inflows) and expenses (cash outflows) of which the results are reported monthly. [??? ???] ??? ? [??? ???] ??? ? ? ? ?=1 ?=1 <BMR ; <BME i: Month i subject to performance measurement Rai; Eai: Actual revenue and expenses respectively Rpi; Epi: Programmed revenue and expenses respectively BMR;BME: Benchmark value (minimum acceptable performance) for revenue and expenses CMD is subject to Turkish Court of Acccounts s audits and accountable for these KPIs
Monitoring Treasury Cash Management Performance-II Due to relatively less controllability issue the benchmark for the revenue side ise higher. 2014 2015 2016 2017 1st half 2017 overall Realization Benchmark Realization Benchmark Realization Benchmark Realization 5,78% 6,00% 5,19% 5,50% 5,84% 5,00% 4,77% 4,50% Benchmark Realization 5,00% 4,00% Benchmark 5,00% 4,00% Revenue Expenses 4,16% 3,24% 5,50% 4,50% 3,43% 3,97% 7,84% 3,16% Benchmark values (the minimum acceptable performance) have been set more stringent year by year. A continous improvement in the performance outcome apart from the second half of the 2017. Poor performance in terms of revenue forecasting was mainly due to unexpected overperformance in the tax revenue in this period.
Monitoring Institutions Forecasting Performance-I Forecasting performance of the agencies are measured an objective parameter that includes three criteria. Criteria Objective to Measure Formula Weight in Total Score Weighted Average Absolute Monthly Deviations Weighted Average(ABS(Monthly Realization-Monthly Forecast)/Monthly Forecast)) Deviation in Monthly Forecasts 50% Total Forecasted Amount over Total Annual Realizations (Total Annual Forecast-Total Annual Realization)/Total Annual Realization Continuous Overforecasting 40% Average rate of realizations when the realization surpasses the forecast by 150% IF(Realization- Extreme Unforecasted Realizations 10% Forecast)/Forecast>150% => Weighted Average(Montly Realization- Monthly Forecast)/Montly Forecast)) Forecasting performance of the agencies is an important input while determining monthly cash program for each agency.
Monitoring Institutions Forecasting Performance-II A subjective score is added based on the evaluation of Treasury personnel based on the level of responsiveness and professionalism of the agencies. l t Kanaat Puan (0,2) De erlendirme Skoru 10% 14% 22% 22% 30% 6% 17% 42% 33% 35% 30% 54% 41% 57% 47% 56% 33% 29% 49% 57% 60% 67% 54% 72% 66% 72% 132% 132% 209% 333% l t Puan (0,8) Nihai Puan Kurulu lar KRED ve YURTLAR KURUMU ORMAN BAKANLI I TARIMSAL DESTEK DEMELER DS DI LER BAKANLI I SGK A LE ve SOSYAL POL T KALAR BAKANLI I T B TAK SA LIK BAKANLI I TCK o/w AFET ve AC L DURUM Y NET M BA KANLI I BA BAKANLIK ULA TIRMA DEN ZC L K ve HABERLE ME BAKANLI I ADALET BAKANLI I MAL YE BAKANLI I EKONOM BAKANLI I M LL E T M BAKANLI I K LT R BAKANLI I G MR K ve T CARET BAKANLI I B L M SANAY ve TEKNOLOJ BAKANLI I AVRUPA B RL BAKANLI I EVRE ve EH RC L K BAKANLI I LER BAKANLI I SPOR GENEL M D RL M LL SAVUNMA BAKANLI I GIDA TARIM ve HAYVANCILIK BAKANLI I ALI MA ve SOSYAL G VENL K BAKANLI I o/w ORMAN GENEL M D RL GEN L K ve SPOR BAKANLI I KALKINMA BAKANLI I 98 96 92 93 88 100 95 82 87 86 88 77 83 75 80 76 87 89 79 75 74 70 77 68 71 68 39 39 1 1 95 88 95 90 95 30 50 95 70 70 60 90 63 92 69 85 40 30 65 65 64 75 43 70 55 20 60 40 40 25 97 95 93 92 90 86 86 85 84 83 83 79 79 79 78 78 77 77 76 73 72 71 70 68 68 58 43 39 9 6 High performers Average performers Bad performers An annual performance report is prepared internally and presented to the top management and the agencies are informed about their performance results in an unofficial context.
Strategies to Achieve Performance Targets Empowering the IT infrastructure for cash management as part of the new TSA Project. Organizing informative programs for spending agencies in order to improve their forecasting capabilities. Improving the communication between Treasury and spending agencies in terms of information sharing related to cash programs and financial assets. Conducting regular meetings with MoF in order to maintain coordination between cash and budget management.
4 THE WAY FORWARD
Additional Cash Management KPIs Additional KPIs are proposed for measuring the performance in different aspects of the cash management for the new strategic plan for year 2019-2023. Criteria Objective to Measure Formula Average daily deviation in the day-end reserve level Average((Realization-Forecast)/Forecast)) for the day-end Treasury reserves Daily Forecasting Number of the institutions taken under the coverage of the new TSA system Coverage of the TSA Total number of the new institutions introduced to the new TSA system for each year Return on Treasury reserves normalized by the average Treasury borrowing rate Remuneration of the Treasury Reserves Remuneration Income/Average Reserve Level Average Borrowing Cost of Treasury 2 out of 3 proposed KPIs are planned to made part of the new strategic plan.
Automotized Continous Performance Reporting A new IT system is being developed for the new TSA system consists of various sub- modules. Reporting module of the new TSA IT System is configured in order to generate performance reports. The system will enable to track Treasury cash management performance results on- line on a continous basis. Agencies will be able to monitor their own forecasting performance dynamically via this system.
Thank You! TURKISH TREASURY
