In a press conference held on Thursday, Caretaker Finance Minister Dr. Shamshad Akhtar announced that the government’s priority will be to improve the financial performance of 85 out of approximately 200 state-owned entities (SOEs) in Pakistan. These entities have the potential to generate dividends and either currently profitable or have the potential to become profitable in the future.
The caretaker government will review the draft policy on SOEs that was circulated by the previous government and build upon the positive aspects of this policy. The ministries and other relevant stakeholders will be given an opportunity to provide their input on the draft policy, which will then be presented to the federal cabinet for approval.
A list of the top 10 profitable and top 10 loss-making companies has already been finalized by the ministry. The government plans to turnaround the performance of the loss-making companies and consider their privatization.
Dr. Shamshad Akhtar highlighted that many of the underperforming SOEs have suffered from inefficiency, misgovernance, and external interference over the years. The SOE’s Governance and Operations Act of 2023, which was passed in February, aims to address these issues but has not been implemented.
To address these challenges, a central monitoring unit (CMU) has been established within the finance ministry. The CMU will collect and update the financial results of all SOEs and will serve as the hub for coordination and monitoring. It will maintain comprehensive data on financial, commercial, and operational matters of the SOEs to ensure better governance and performance.
According to the SOE’s Governance and Operations Act, boards of directors of the SOEs will be appointed on independent nominations to ensure their autonomy. The board will be responsible for the selection of CEOs without any interference from the relevant ministries or the government, except for policy guidelines approved by the federal cabinet.
The government intends to retain strategic SOEs while phasing out non-strategic entities. According to the draft SOE policy, the government will not establish new SOEs in the future unless it is necessary for strategic reasons or under an agreement with an international partner. The aim is to offload the majority of the existing 200 entities that are currently operating at a loss, in line with the requirements of the IMF program.
However, there may be exceptions where the federal government could consider establishing a new SOE if there is no private sector firm providing the necessary goods or services in the relevant sector. In such cases, the new SOE must adhere to principles of competitive neutrality and not have exclusivity in provision of services or goods.
Additionally, if a new SOE is formed through the corporatization of an existing government function, it will be categorized as either commercial or non-commercial based on its purpose. This will only be done if it is required by law or if the services cannot be procured through a private sector firm due to legal restrictions. Another exemption for new SOEs is in the case of government-to-government agreements with other nations.
In conclusion, the caretaker government aims to rescue and improve the financial performance of viable SOEs while phasing out non-viable ones. The establishment of the central monitoring unit and implementation of the SOE’s Governance and Operations Act are crucial steps towards ensuring better governance and autonomy of these entities.