The 206 State Owned Enterprises (SOEs) of Pakistan, having assets worth $119 billion and equity of $31.5 billion, are causing a loss of over 3 percent of the country’s GDP and have become financially unsustainable. Their loans and subsidies totaled around $12.8 billion from FY2013 to FY2017, says the Asian Development Bank and government data.
Senior Economist of ADB, Laisiasa Tora, addressing a seminar on SOEs, said that the loss of only the four largest SOEs (PIA, Steel Mills, Pak Railway, and NHA) amounts to roughly 3 percent of the GDP of Pakistan. Further adding that only 57-60 SOEs out of the 206 are deemed “material” or workable.
The return on assets of SOEs is -1.37 percent, and the return on equity is -5.16 percent, said the ADB expert in his presentation.
Finance Minister, Miftah Ismail, was of the view that even though competent professionals are running SOEs, the overall governance framework is not in place. Mr. Miftah Ismail also shared how the present government has focused on stabilizing the economy through fiscal and international trade measures.
Minister of State for Finance and Revenue, Dr. Aisha Ghaus Pasha, stressed that the practice of hemorrhaging all the fiscal resources by a few SOEs should end.
Additional Secretary (Corporate Finance) Finance Division, Mr. Anwar Sheikh, shared the progress on SOE Law, SOE Policy, and the central monitoring unit. He said that the purpose of these initiatives is to ensure value for money for the Federal Government and improving service delivery of SOEs.
The seminar, organized by the Finance division, was aimed at consulting on the vital challenges for improving corporate governance and commercial performances and sharing experiences about the international best practices for reforming SOEs.
The International Monetary Fund (IMF), in its country report released in July 2019, highlighted the need for reforms in SOEs as a precursor for its $6 billion Extended Fund Facility. As a consequence, the Ministry of Finance developed an SOE Triage with support from World Bank and Asian Development Bank.
With the aid of both the lenders, a bill regarding SOEs was drafted, which was approved by National Assembly on 6 June 2022. The bill is currently awaiting approval from the Senate.
