The role of a Central Independent Governance Authority for KOKE would not be to replace the management of these organizations, but to act as a guardian of their good governance

State Organizations and State Enterprises (KOKE), more commonly known as quasi-governmental organizations, are an integral part of Cyprus’s economic and social life. They manage critical infrastructure, provide vital services, and directly influence the daily lives of citizens.

Despite their strategic importance, successive governments, acting in their capacity as the state-owner, have largely ended up using these organizations as a vehicle for patronage and partisan interests, gradually eroding citizens’ trust in these institutions.

Restoring public trust and ensuring the long-term sustainability of these organizations require institutions that operate according to the principles of good governance, promoting transparency, accountability, and professionalism.

The current government, through the creation of the Advisory Council, has taken a positive step regarding the process of appointing members to the boards of directors, which are entrusted with the governance of the KOKEs. However, this is only a first step in the right direction, and the discussion should not be limited to who is appointed to the boards of directors.

The fundamental question runs deeper: does the Republic of Cyprus currently have a comprehensive and coherent governance framework for quasi-governmental organizations?

International organizations, such as the Organization for Economic Cooperation and Development (OECD) and the World Bank, are increasingly recommending centralized models of governance for state-owned enterprises. The basic principle is that the state must act as a responsible owner through a specialized mechanism that applies uniform governance rules to all organizations.

Currently, there is a fragmentation of responsibilities among ministries and an unclear institutional framework that hinders the effective governance, smooth operation, and oversight of state-owned enterprises. In this context, Cyprus could consider establishing a Central Independent Authority for the Governance of KOKEs, which could serve as the institutional evolution of the existing Advisory Council and to which the state’s ownership responsibilities would be transferred. Such a reform would enhance continuity and consistency in the governance of these organizations, would create and consolidate valuable institutional expertise, and would more clearly distinguish the state’s different roles as owner, policy maker, and supervisory authority.

The role of a Central Independent Governance Authority (KOKE) would not be to replace the management of these organizations, but to act as a guardian of their good governance. In this context, it would be responsible, among other things, for:

• appointing boards of directors through open, transparent, and merit-based procedures,
• monitoring and evaluating the performance of the organizations through specific performance indicators and strategic objectives. Board members will be accountable to the Authority for the manner in which they perform their duties through an annual Directors’ Report,
• to oversee the implementation of the Corporate Governance Code governing these organizations,
• to monitor issues of integrity, impartiality, and conflicts of interest,
• to provide training for members of the boards of directors,
• to submit recommendations regarding the legislative and regulatory framework of public organizations, so that these organizations remain competitive and flexible in the face of contemporary challenges,
• and to promote and guide the necessary reforms and restructuring of state agencies.

At the same time, the Authority itself must be subject to high standards of accountability, through annual activity reports to the Council of Ministers and the Parliament, as well as through systematic communication with civil society.

If the discussion is limited to who is appointed and who leaves the boards of directors, and if we settle for creating an Advisory Council without the necessary resources and the required institutional support, then the reform will remain incomplete. The real challenge is to create a comprehensive governance framework that ensures that the KOKEs have the appropriate structures, procedures, and accountability mechanisms to meet the challenges of the future. Only through such an approach can the state function as a truly responsible and strategic owner, ensuring that quasi-governmental organizations effectively serve the public interest.

*This article is based on a related working paper by the EIMF Center for Good Governance (Link)

Governance Series: A series of articles by the EIMF in collaboration with Alpha on Sundays. As part of this initiative, the EIMF and Alpha Cyprus are offering ten scholarships for the Master’s Program in Governance, Risk, and Compliance (offered in-person) and the Master’s Program in European Economic Governance and Policy (offered online), thereby contributing to the development of professionals specializing in governance, accountability, and public policy. Interested applicants may submit their applications by June 30, 2026 (Link – https://eimf.eu/scholarships/).