Reforming Pakistan’s SOEs

Pakistan’s State-Owned Enterprises (SOEs) occupy a central role in the country’s economic landscape. These entities are meant to safeguard the nation’s strategic interests, provide essential public services, and support overall development. However, in reality, they have increasingly come to symbolize inefficiency, fiscal strain, and missed opportunities.

The recent Cabinet Committee on State-Owned Enterprises (CCoSOEs) meeting revealed a concerning net loss of Rs 122.9 billion for FY 2024-25. Despite these challenges, the gap between their potential and performance highlights the immense untapped value that SOEs represent for Pakistan’s economy.

Instead of seeing SOEs solely as liabilities, we should consider them as institutions with the potential for meaningful reform. With the right approach, they can contribute to economic growth, foster innovation, and improve overall stability. Achieving this transformation will require a concerted focus on two key areas: improving governance and integrating private sector expertise.

Many of Pakistan’s SOEs continue to struggle due to deeply ingrained structural and governance weaknesses. In several crucial sectors, the challenges faced by SOEs are more the result of unclear mandates, weak leadership structures, and ongoing political interference than due to market conditions. Decision-making within these organizations is often reactive, lacking a clear strategic direction, and accountability is dispersed across various levels.

At the core of the problem lies a governance deficit. The boards of these enterprises are often restricted, management lacks true operational autonomy, and leadership tenures are too short or unstable to allow for long-term planning. Without clear goals and measurable responsibilities, even well-intentioned reforms fail to make a lasting impact.

In my article, “Pakistan’s State-Owned Enterprises: From Struggling Liabilities to Engines of Growth,” I emphasized the critical importance of governance reform. Real reform begins with depoliticizing the decision-making process, strengthening the governance structures, and empowering professional management to run these organizations with clear objectives. Leadership should be selected based on competence, not political affiliation, and performance expectations should be clearly defined and enforceable.

International experience has shown that state ownership does not necessarily lead to inefficiency. In countries where strong governance frameworks are in place and the strategic direction is clear, state-owned enterprises have been able to compete, innovate, and even lead their respective sectors. Pakistan can follow this path by recognizing that governance reform is not just about making administrative changes, it is about resetting the entire foundation of how these enterprises are run.

However, governance reforms alone won’t be sufficient. Many SOEs are still operating with outdated models that are ill-suited to today’s economic and technological realities. A major reason for this stagnation is the lack of specialized expertise at critical decision-making levels within these organizations.

Bureaucratic management structures, while essential for ensuring procedural compliance, often struggle to respond quickly to changes in the market, technological advancements, or the need for operational efficiency. Innovation tends to be slow and incremental, rather than transformative.

For Pakistan to truly modernise its SOEs, a hybrid institutional model is needed, one that combines public sector oversight with private sector expertise. Bringing in experienced professionals from the private sector to lead and manage these enterprises could provide the technical depth, commercial discipline, and innovative thinking that is urgently needed. Explicitly explained in my article “From Bureaucracy to Innovation: Integrating Experts for Sustainable Development in Pakistan,” published in Business Recorder.

To make this integration work, it must be more than just a symbolic gesture. Experts should be given real authority, competitive salaries, and performance-based incentives. Their roles must be protected from bureaucratic resistance and short-term political pressures. By empowering expertise, rather than limiting it, SOEs will have the capacity to modernize, improve service delivery, and explore new growth opportunities.

Countries like Singapore and Estonia have successfully blended public oversight with private sector innovation, leading to rapid economic growth and more efficient public services. Pakistan can adapt this model to its own context by giving private sector experts the autonomy they need to drive change, while still ensuring that their actions are aligned with public interests.

One critical aspect of governance reform is the appointment of the Board of Directors and C-level executives. This process must be highly competitive to ensure that only the most qualified individuals are placed in these positions. Ideally, the appointment process should be outsourced to a reputed talent acquisition firm, free from government interference. This will allow for a merit-based selection of individuals who have the expertise and leadership capabilities to drive change.

Beyond internal reforms, collaboration with the private sector presents another powerful lever for transforming SOEs. Public-private partnerships (PPPs) have proven to be successful in many countries, providing SOEs with access to private sector efficiency, technology, and management practices, while still allowing for public ownership and control.

When structured thoughtfully, PPPs can help modernise infrastructure, improve service quality, and reduce operational risks. They also introduce competitive benchmarks, encouraging SOEs to move away from complacency and adopt a more performance-driven culture.

Beyond the hard aspects of partnership, there is also value in fostering softer collaborations. For example, cross-sector engagement, such as talent exchanges and joint projects, can help spread innovation and best practices across institutional boundaries. Over time, this can help cultivate a culture of learning and adaptability that many SOEs currently lack.

Transforming Pakistan’s SOEs will require more than just quick fixes. It will require a sustained and coherent reform strategy. This strategy should include leadership reforms, bringing in private sector expertise, fostering public-private collaborations, and ensuring that SOEs are governed in line with international standards of transparency and accountability.

Pakistan’s SOEs do not need to remain symbols of inefficiency and financial stress. With the right reforms, they can become pillars of growth, innovation, and public value creation. By moving beyond short-term fixes and focusing on deeper institutional change, rooted in governance and expertise, Pakistan can unlock the full potential of its SOEs.

The hybrid approach of combining strong public sector oversight with private sector innovation offers a practical and forward-thinking path. By embracing this model, Pakistan can reimagine its SOEs not as burdens to be managed, but as institutions to be strengthened capable of contributing to a more resilient, competitive, and inclusive economy.

Copyright Business Recorder, 2026