ISLAMABAD: The government is taking steps to improve the governance and performance of state-owned enterprises (SOEs) through different initiatives according to WealthPK.
The Ministry of Finance has proposed to establish Central Monitoring Unit (CMU) in the Finance Division to periodically review the operational and financial performance of SOEs and generate detailed reports for onward submission to the federal cabinet, WealthPK reported.
The federal government will establish the CMU in the Finance Division which will also maintain an electronic database of the financial and operational performance of SOEs and the following information in relation to SOEs, namely, statement of corporate intent, business plan, half-yearly and annual reports and any other information prescribed in the SOEs management policy, reads the draft of the SOEs (Governance and Operations) Act 2021.
The statement added that there are over 200 SOEs controlled by the federal government which is under the administrative control of around 20 ministries/divisions.
These SOEs have a significant presence, particularly in the banking, insurance, power, energy, railways and aviation sectors.
Limited autonomy is enjoyed by SOEs as a number of ministries/divisions convey rules and regulations on their workings. The role of government is not structured in issuing instructions and appointments on boards and no performance benchmarking exists in it.
The SOEs Act aims at improving and integrating the legal framework of SOEs governance through clearly defining the roles of the government as an informed shareholder, line ministries and the boards of SOEs.
The proposed bill lays down principles of good governance such as performance measurement, monitoring and reporting. It covers SOEs registered under the Companies Act or established through special enactment with the stipulation that there is now conflict in this bill with special enactments of the SOEs and regulatory requirements under Companies Act 2017, WealthPK reported.
It provides a structured mechanism to appoint suitable candidates to Board of Directors (BoD) and duly clarifies the jurisdiction of the BoD and line ministries/divisions. It requires the federal government to develop and periodically review SOEs ownership and management policy for giving effect to the objectives of this bill.
It added that the CMU will undertake analysis on the financial, commercial and operational performance of SOEs and on the basis of such analysis submit recommendations to the government on the matters related to the performance and governance of SOEs. Every SOE shall be required to submit information to CMU as required under this Act.
According to a report of the Ministry of Finance, currently, there are around 212 SOEs operating in various sectors of Pakistan. The overall revenue of all the SOEs in 2018-19 was Rs4 trillion (approx.), while the book value of their assets was Rs19 trillion.
The revenue in 2018-19 was roughly 10 percent of nominal GDP. Additionally, SOEs provided employment to more than 450,000 people which constitutes around 0.8 percent of the total workforce.
Despite their important role in providing essential public goods and services, the financial performance of several SOEs has remained unsatisfactory. In FY 2018-19, commercial SOEs collectively recorded net losses of Rs143 billion, while the net losses incurred by the SOEs in FY2017-18 were Rs287 billion.
Currently, 21 SOEs from the real estate, financial, industrial and energy sectors are part of the Ministry of Privatisation’s ongoing privatisation programme.
The privatisation or restructuring of loss-making SOEs is the need of the hour to save huge money and avoid massive losses to national exchequer. The government should expedite the process of privatisation and restructuring of sick SOEs. -INP
