ISLAMABAD: Caretaker Finance Minister Dr Shamshad Akhtar said on Thursday the government would prioritise the improvement of 85 out of some 200 state-owned entities (SOEs) which had the capacity to pay dividends, and were either profitable, or could become profitable.
Speaking at a hurriedly-called news conference, the minister said caretakers have decided to review the draft policy on SOEs circulated by the previous government and carry forward the “good work it had inherited”.
She said it had been decided to provide another opportunity for the ministries and other stakeholders to come up with their views on the draft policy which could then be presented to the federal cabinet for approval.
She said the ministry had finalised a list of top 10 profitable entities and top 10 loss-making companies, which could be turned around and taken up for privatisation.
She said the majority of the bad performers had been marred over the years by inefficiency, misgovernance and external interference but the SOE’s Governance and Operations Act of 2023 passed in February could not be implemented.
But these decisions have been taken on the basis of three-year-old financial results, showing over Rs500bn in annual losses in FY2020.
The interim minister said the performance of the SOEs deteriorated because of a lack of autonomy, external interference, appointment of inappropriate boards of directors and CEOs who did not meet the proper criteria, leading to a decline in their service quality and a massive drain on public resources.
She said a central monitoring unit (CMU) had been created in the finance ministry that would collect and update the financial results of all SOEs within two months and act as a hub for coordination with and monitoring of SOEs. The CMU will not interfere in the day-to-day affairs of the SOEs but take up issues with the cabinet committee on SOEs or the cabinet and maintain comprehensive data on financial, commercial and operational matters.
Under the SOE’s Governance and Operations Act, the majority of the members on the boards would be appointed on independent nominations and would be given security of tenure. The board would then be responsible for the selection of CEOs without any interference from the ministries concerned or the government except the policy guidelines approved by the federal cabinet.
The government would retain strategic SOEs but phase out non-strategic entities. Under the draft SOE policy, the government will not set up new SOEs in future unless required for strategic reasons or under an agreement with any country and gradually off-load the majority of the existing lot of 200 entities mostly operating in losses. All this is required under the IMF programme.
The only exemption where the federal government could consider establishing a new SOE would be if there is no private sector firm operating within the relevant sector providing the goods and/or services that the new SOE will provide and that the government wants to establish a particular market in any sector of the economy which will be supported by the creation of an SOE, provided that such SOE shall under no circumstances be given exclusivity in provision of services or goods and shall strictly adhere to the principle of competitive neutrality.
In case, a new SOE has been formed through the corporatisation of an existing government function, the new SOE will be clearly categorised as either commercial or non-commercial and should be created if required under the law or the services could not be procured through any private sector firm due to a legal restriction. The exemption for new entities would also be there if SOE is required under any government-to-government agreement with another sovereign nation.
Published in Dawn, September 22nd, 2023
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