ISLAMABAD: On the instructions of multilateral organisations, the federal government is expected to submit the State Owned Enterprises (SOEs) bill in Parliament, for a better management of loss making entities.
The ‘State-Owned Enterprises Triage: Reforms & Way Forward’ report, prepared by ministry of Finance, states that the government of Pakistan agreed to complete two structural benchmarks by the end of September 2020 pertaining to SOEs portfolio. These benchmarks address the considerations in the backdrop of the discussion and finalization of Extended Fund Facility (EFF) 2019-22 with the IMF.
The current report primarily addresses the long-overdue need of a comprehensive review of SOEs for their continued ownership and control by the government through a well-defined ownership rationale.
Concurrently, the Finance Division has been working closely with IMF and ADB to draft an SOE Bill and an SOE Ownership and Management Policy to fill the gaps in the existing SOEs governance structure and help the government in well-informed performance evaluation and oversight of SOEs.
The original report states that the finance division shall shortly submit an SOEs bill in Parliament for better management of loss making entities. Â
Through this proposed enactment, the boards of directors of the SOEs shall be given more autonomy in terms of decision-making in addition to ensuring the separation of the office of chairman from the CEO in all SOEs including entities established through special enactments. Moreover, the role of the line ministries/divisions shall be streamlined for operational autonomy of the SOEs.
So far, no policy framework exists in Pakistan which covers the entire SOEs portfolio. To address the current policy gap, and the diversity of sectors and legal and institutional frameworks in which the SOEs operate, the Government of Pakistan intends to develop a policy to manage these SOEs through a coherent and institutionalized arrangement.
The clarity on the ownership rationale of SOEs; the role of the Federal Government as shareholder and the manner of the
exercise of the ownership function; the respective roles and responsibilities of the federal government, line ministries and the boards of SOEs; frameworks of competitive neutrality and public sector obligation; and necessary reporting and decision-making processes shall be important components of the proposed policy.
The report states that the Finance Division has initiated steps for the establishment of a Central Monitoring Unit which shall function as the central database and analytical unit for all the SOEs and shall report directly to the Federal Government.
The unit shall be staffed with experts to be hired from the market and necessary resources for its working shall be provided. The CMU shall have access to necessary financial and nonfinancial information of each SOE. It will also have the business plans and target performance outcomes.
The Unit shall prepare periodical performance evaluation reports of the SOEs and assist the Federal Government on matters of critical importance for better management of SOEs and their improved performance.
The Finance division after the consultation with IMF, WB and ADB selected 84 Commercial SOEs for Triage. From July 2023, the cabinet committee on SOE will start processing the possibility of inclusion in the privatisation list. Alongside the committee will be looking into hiring a Transaction Advisor. It will also be aiming to finalize the transaction structuring and bidding process for privatization till June 30, 2024.
The report states that the government will retain 25 SOEs including National Bank of Pakistan, Pak Arab Refinery Company etc.
Meanwhile, the government will also retain as well as restructure 14 organizations including PIA, Pakistan Post, Pakistan Railway.
The report also stated that 10 organizations are under privatization including Pakistan Steel Mills Corporation(Private) Limited, PPL and OGDCL.
The process for OGDCL will be initiated after PPL’s FA is on board while the process for hiring of FA has been initiated, the report added.
The report also disclosed that government has a plan to privatize 24 organizations in Next Phase which include 10 DISCOs, 4 GENCOs, 6 Manufacturing, Mining & Engineering, National Fertilizer Corporation of Pakistan (Private) Limited, Export Processing Zones Authority, National Construction Limited and National Insurance Company Limited.
