ISLAMABAD: As required under the International Mone­tary Fund (IMF) programme, a Cabinet Committee on Wedne­sday cleared for cabinet appr­oval the State Owned Enter­prises (Ownership and Manage­ment) Policy 2023 with the aim of improvement in governance and operations of public sector entities currently causing more than Rs500 billion annual losses to the public exchequer.

The decision was taken at a meeting of the Cabinet Comm­ittee on State-Owned Enterp­rises (CCoSOE) presided over by Caretaker Finance Minister Dr Shamshad Akhtar.

The meeting attended by all members of the panel as well as the chairman Securities and Exchange Commission of Pakistan and senior government officials “recommended the revised policy for the approval of the cabinet”, a statement said.

“This policy marks a crucial step towards enhancing the governance and operations of SOEs, aligning with the broader objectives outlined in the State-Owned Enterprises (Governance and Operations) Act 2023”, the statement added.

Interstingly, the SOEs Governance and Operations Act of 2023 passed in February has also remained unimplemented even though the performance of SOEs deteriorated due to lack of autonomy, external interference and inappropriate appointments on the boards of directors and CEOs. This led to a decline in their service quality and a massive drain on public resources.

Under the draft SOE policy, the Central Monitoring Unint (CMU) in the Ministry of Finance would collect and update the financial results of all the SOEs by December to the satisfaction of the IMF and act as a hub for coordination with line ministries and the boards of directors.

The CMU will not interfere in the day-to-day affairs of the SOEs but take up with the cabinet committee on SOEs or the cabinet in case of a major issue and maintain comprehensive data on financial, commercial and operational matters.

Under the SOEs Governance and Operations Act 2023, the majority of members on the boards would be appointed on independent nominations and would be given security of tenure. The boards 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 SOEs policy, the government will not set up any new SOE 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 Federal Government shall own or retain only those SOEs that are determined to be strategic as approved under SOE Triage”, on the basis of significant strategic, security or social importance or owing and managing strategic assets that could not be entrusted to only private ownership, reads the policy.

Published in Dawn, November 16th, 2023