In some economies, certain enterprises are kept under state ownership for purely investment purposes, so that their profits contribute in a meaningful way to the country’s coffers.

In Pakistan, public-sector losses are one of the major factors impeding growth. At present, there are about 220 PSEs, which fall under some form of partial or full state ownership. According to some estimates, the poor performance of PSEs in Pakistan results in an estimated loss of almost 1.5 per cent of GDP due to inappropriate governance, corruption, inefficiencies and lapses in policymaking.

Realising the impact of the governance structure on the inept performance of the PSEs in Pakistan, a task force was constituted by the government to propose new guidelines for the governance of PSEs. While these guidelines have recently been launched in the form of Corporate Governance Rules (2013) for PSEs, the real challenge will be faced at the time of their implementation.

At present, ownership and oversight is dispersed between various sector ministries with inadequate reporting mechanisms. Limited recognition of the need for safeguarding public assets and enhancing their market valuation by the concerned ministries have led to pervasive state interference in PSE affairs and appointments, over-employment and skill mismatches. These interventions into the operational affairs of the PSEs have opened the door to corruption and conflicts of interest within the PSEs resulting in huge losses to the exchequer. While the ideal state for corporate governance of PSEs would be to move towards a centralised ownership structure, akin to the Temasek model in Singapore or the Khazanah model employed in Malaysia, this may not be appropriate for Pakistan in terms of political will and ease of implementation. A sensible first step would be the setting up of an independent committee to nominate, monitor and determine the remuneration of board members.

However, before discussing the implementation modalities for this, a certain amount of groundwork needs to be done to clarify the government’s policy on PSEs and to ensure that the enabling environment is there for them to contribute effectively to the country’s economy.

Develop a clear PSE policy:
1. Reasons need to be enunciated for the government to own or control companies that are deemed critical to Pakistan’s security and economic wellbeing.

A rationalisation of the current list of PSEs into those that are of strategic importance or those that are for special assignment is needed to focus government attention towards privatisation or corporatisation.

2. All remaining PSEs should be brought under standard legal structures. Proper compilation of accounts and information sharing will enhance overall transparency.

3. For those remaining under government control, the majority shareholder needs to clearly articulate the mandate and key performance indicators for the PSEs. This should be kept distinct from the government’s function of policymaking, market regulation or social obligations.

Create an enabling environment for reform of PSEs:
1. PSEs have to be managed on a sound commercial footing and held accountable for the judicious use of public resources. PSEs should make full disclosure of tradeoffs they face in terms of costs and quality of delivery. The budget should annually provide for financing of the required shortfall or subsidies in a transparent manner.

2. State ownership should not create a competitive edge for the PSEs. There is a need to ensure a level playing field by nurturing competitiveness in markets. Competition will enhance economic efficiency and innovation.

3. There is also a need to enhance the role and capacities of the sector regulators and the Competition Commission to examine the PSEs’ role in sectors which often operate as “natural monopolies” (even if private entry is allowed) and examine whether state ownership is ensuring an adequate level of service provision.

Set up an independent steering committee to oversee implementation:
There is probably no institution better placed than the board of directors to ensure good corporate governance at the entity level. Therefore the primary focus of corporate governance reform of PSEs needs to be on the selection of qualified and competent people on the board of directors of these entities.

The appropriate mechanism needs to be put in place that ensures the right selection and continuous monitoring of the members of the board, divorced from political interference.

This mechanism could take the form of a separate government department, similar to the Department of Public Enterprises in India, or it could be outside the ambit of any particular ministry like the Crown Company Monitoring Advisory Unit in New Zealand. The proposed steering committee needs to be comprised of members from both the public and private sector to ensure an appropriate mix of skills as well as to ensure ownership of the process across a broader spectrum.

Professionals need to be tapped for the steering committee, applying the same fit and proper criteria developed for individual board members of PSEs. Ex-officio membership from ministries should be discouraged as should institutional representation. These recommendations have been made keeping in mind that some of the more successful centralised models of governance may be premature and impractical in Pakistan’s milieu.

However, if the above corrective measures prove inadequate to stem the rapid deterioration in the PSEs, a more radical shift towards centralised ownership models may be required. As with all reform measures, the implementation has to be in “letter and spirit” so that its chances of success are not sacrificed at the altar of political expediency.

The writer was a member of the Task Force on Corporate Governance for Public Sector Enterprises.

After two days of deliberations on the challenges and opportunities for women entrepreneurs in governance, technology and trade, delegates from different countries presented their respective country strategies. The Pakistan Country Strategy took cognisance of the circumstances in Pakistan hindering the development of entrepreneurship in general and women’s development in particular.

Current population estimates place two-thirds of the population of Pakistan under the age of 30. There are four million entrants into the job market every year with increasingly limited employment options.

Entrepreneurship needs to be given a fresh impetus if our country is to provide a means of livelihood to the millions seeking jobs in the coming years. The alternative is obvious. We will be faced with a tidal wave of the relatively uneducated, unemployed youth with all the trappings of deep-seated social discontent.

Due to the persistent poor law and order situation, weak governance, corruption, the unavailability of seed capital and lack of encouragement from society, the rate of formal business start-ups in Pakistan is the lowest in the region.

The environment is no more conducive for the female population which despite a 51 per cent representation in the demographic data has a mere three per cent representation in the formal economy. The recent Global Gender Gap Report of the World Economic Forum ranked Pakistan 132 out of 134 countries.

For a strategy to be effective, it has to be rooted in pragmatism. No one panacea can cure the myriad issues that plague women’s development in Pakistan.

Our target group may have to be limited to the relatively educated women in Pakistan, who with the right enabling environment, would be able to move themselves and their families beyond their current income tiers.

Providing basic education has to be the goal of a much more comprehensive national strategy, and perhaps one that can be positively impacted by the right demonstration effect with our limited target group.

With this basic assumption in mind, the following goals need to be achieved in any strategy targeting women entrepreneurs in Pakistan.

Encourage women’s participation in non-traditional sectors: It is important to give women an opportunity to break out of their comfort zones and be better equipped to meet the emerging business demands. The focus on relevant subjects at secondary school and college along with career counselling can help to refocus the girls’ attention on subjects hitherto preserved for the male domain.

Showcasing the few role models of successful women entrepreneurs who have made it against the odds in running manufacturing, construction or logistics firms will help to attune their minds to the possibilities that exist or that they can create for themselves.

Risk mitigation funds with incubation centres for early phase start-ups will undoubtedly help to reduce the fear of failure so endemic in our society. Franchise opportunities for small local businesses will provide relatively easy market access to women choosing to re-enter the job markets after an early marriage.

Procurement quotas reserved for women-run enterprises by the larger corporations will give them a chance to compete in a male-dominated marketplace. These are just some of the many possibilities that exist to encourage women’s participation in a much wider economic space.

Combat corruption: A number of international studies have pointed to the positive impact of women in the workplace, not just in terms of enhanced efficiency but also in inculcating ethical practices. We need to build on this by encouraging all women-run business (and indeed all others) to sign a pledge to say ‘no’ to corruption. All educational institutions should be encouraged to introduce a course on ethics as part of their mandatory curriculum. A volunteer group of women lawyers can create a helpline to provide guidance and support to women entrepreneurs for the many cases of extortion and bribery that have become commonplace in our business environment. An active media campaign is needed to bring awareness about the rampant plague of corruption in the country.

Increase regional trade: South Asia has the lowest regional trade in the world. While India-Pakistan trade will hopefully get a boost from the recent rapprochement between the two countries, we need to ensure that our future relationship is grounded in solid business dynamics.

The momentum created by the symposium in Dhaka needs to be maintained by a follow-up symposium, hosted in Pakistan in 2014. A trade exhibition organised on the fringes of this symposium will give a chance to women entrepreneurs from the region to showcase their products.

Regional chambers could be approached to arrange business-to-business exchanges and facilitate e-trade by creating a uniform payment system across borders. Finally cross-border information on the ‘ease of doing business’ can be compiled in collaboration with various chambers and trade bodies.

Create an enabling environment: The wish list presented above cannot be possible without some basic enablers in place. Of this perhaps the most important is the access to finance.

There is a need to encourage financial institutions to create loan mechanisms that mitigate risk without the need for onerous collateral. There is also a need to train bankers to change their mindset towards cash flow analysis and appreciate the business case for funding female entrepreneurs.

Changing mindsets can be a long and laborious process, but can be expedited by making women part of the decision-making process. Pakistan needs to follow the global drive to recruit more women at the board level.

Prioritisation of key objectives is critical to effective implementation. Commonality of purpose will spur the change but only active engagement with all stakeholders will ensure sustainability.

The writer headed the Pakistan delegation to the South Asia Women’s Entrepreneurship Symposium in Dhaka. She was formerly executive director, SECP and head of strategic management, SBP.

skhan@selar-enterprises.com