KARACHI: All appointments to the boards of state-owned enterprises (SOEs) have been halted following the Supreme Court’s decision in the Ataullah Qasmi case in which the appointment of PTV’s managing director was found to be illegal.

Now the Ministry of Law is set to issue an opinion on the matter, and the process will resume by next week, says Finance Minister Asad Umar.

The appointments of the board of Sarmaya Pakistan Company (SPC), under which all SOEs are eventually to be clubbed, have also been impacted by this decision. Talking to Dawn on Friday, the finance minister was confident that by next week the process would begin to advance.

Arif Naqvi of Abraaj Capital advising govt; labour cost not core problem in SOEs

“Sarmaya Company has cabinet approval, all that is now needed is the Law Division’s guidance,” Asad said.

The board will consist of three government members and eight from the private sector including the chairman, said the finance minister, adding that under the board there will be five verticals. “They are power, oil and gas, manufacturing, financial services and logistics, and each ‘vertical’ will be responsible for developing the guidance and strategic direction of the entities under its control.

“Functional guidance as well as business guidance will come from the verticals,” he said. “Decisions such as what to keep, what to shut down, hiring and firing decisions in individual companies will remain with their respective boards. Guidance on layoffs can come from the verticals but the power to do so will be with the board,” he added.

The government will retain the power to appoint the top leadership of the holding company, but ministries are now going to be removed from administrative decisions in the enterprises themselves. “Take the federal secretaries under whom these companies are currently operating,” he asked, “how much time do you think they spend out of their day in dealing with the issues in the companies? I would be very surprised if it was more than 5 per cent.”

Once the SPC is made functional, and enterprises begin to be clubbed under it, advice and guidance will come from the company verticals instead of the ministries.

That is the core of the government’s vision and plan for the SOEs and their losses that place such a large burden on the government finances. Asad is adamant that the losses are not on account of high personnel costs, though he admits that some overstaffing may be a reality. “The real losses are mounting because of governance failures,” he asserted.

“There is no doubt they [the SOEs] are a drag on the economy, a drain on government money,” he said. “But a large part of the losses are coming from power sector pricing and regulatory issues” as well as other governance issues like line ministries lacking the credentials to manage business enterprises, and political and bureaucratic interference in their running, he added. “That is what the plan for a holding company seeks to stem.”

When asked specifically about the appointment of PIA chairman and MD/CEO, he demurred. Mr Asad confirmed that Arif Naqvi, founder of the embattled UAE-based Abraaj Group, is advising the government, but he did not get into the specifics of the areas where Naqvi’s advice is being sought.

“Yes, he is advising the government on more than one matter, in line with his expertise, though not in SOEs,” he said.

“I am sure this is an area where he will be advising the government later, I’m sure when the work begins on the SOEs, this is a topic on which he will definitely be consulted,” he added.

Published in Dawn, January 12th, 2019