Understanding Pakistan’s SOE problem

Once the illusion is stripped away, Pakistan’s SOE problem becomes remarkably simple. The country does not suffer from an absence of reform ideas, governance laws, or diagnostic reports. It suffers from an unwillingness to assign and enforce `responsibility on those who already exercise power.

Accountability, in this context, does not mean witch-hunts or criminalization of policy failure. It means aligning authority with consequences. At present, Pakistan does the opposite: it centralises control in secretaries and ministries while dispersing blame across boards, enterprises, and “legacy constraints.” Real reform begins where this logic ends.

The first requirement is to recognize that ownership is an active function, not a ceremonial one. If the federal government owns an SOE, then someone must be clearly designated as the owner’s agent and judged accordingly.

Today, that agent exists in practice but not in consequence: the Principal Accounting Officer. The PAO signs off on subsidies, guarantees, recapitalization, and continued operation. Yet PAO performance evaluations remain completely disconnected from SOE outcomes. This must change.

If an SOE under a ministry requires repeated fiscal support without credible restructuring that outcome should formally reflect in the PAO’s performance assessment.

Persistent losses should trigger mandatory explanations to Parliament, not routine technical summaries. Audit paragraphs should carry career implications, not be treated as annual rituals. Accountability does not require new laws—it requires the state to use the ones it already claims to respect.

The second requirement is to end the fiction surrounding boards. Pakistan pretends to have corporate boards while using them as administrative extensions of ministries.

Secretaries and additional secretaries dominate boardrooms, often as chairpersons, while simultaneously controlling budgets, policies, and appointments. This dual role eliminates fiduciary clarity and guarantees failure without consequence.

CEOs, senior staff and board members are all appointed by the PM. In reality the PM does that on advice from the principal secretary to the Prime Minister who is also part of the ruling club of secretaries—the Pakistan Administrative Service.

There are only two defensible options. Either secretaries should not sit on SOE boards at all, limiting their role strictly to ownership oversight, or—if they do sit on boards—they must be treated like any other director. That means performance evaluation, removal for failure, and formal responsibility for outcomes.

The current arrangement, where secretaries enjoy board power without board liability, is indefensible in any governance system.

Third, Pakistan must stop hiding political decisions inside corporate accounts. Many SOEs fail not because they are inherently unviable, but because they are burdened with unfunded public service obligations: cheap tariffs, loss-making routes, employment guarantees, regional cross-subsidies. These are political choices. Pretending they are management failures only entrenches dishonesty.

If the state wants SOEs to perform social functions, those functions must be explicitly defined, transparently their cost determined and fully funded through the budget. Once they are funded, boards can be judged on what remains: operational efficiency, investment discipline, and service quality. Without this separation, accountability is impossible because no one knows what success even means.

Fourth, reform must finally accept exit as a legitimate outcome. Pakistan treats closure or privatization as moral failure rather than economic necessity. As a result, dead enterprises linger for decades, absorbing public resources and managerial attention.

Real accountability requires pre-committed triggers: performance thresholds beyond which enterprises are restructured, sold, or shut down—automatically, not at the discretion of the same officials who presided over failure.

This is where most reform efforts collapse. Exit threatens rents, jobs, and administrative discretion. So, the system defaults to “more time,” “more studies,” and “more coordination.” Accountability requires removing discretion at the point where discretion has already failed.

Finally, Parliament must stop being a passive audience. SOEs impose one of the largest and least transparent fiscal risks on the state, yet parliamentary oversight remains episodic and toothless. Regular hearings tied to specific SOE outcomes, summons of PAOs—not just CEOs—and public disclosure of guarantees and contingent liabilities would shift reform from internal paperwork to public scrutiny.

But then parliamentary committees must be cleared of conflict of interest. They should have no relationship to the SOEs or their board members to have any contractual association with the SOE.

None of this is radical. None of it requires foreign consultants or donor blueprints. It requires political honesty about who controls SOEs and bureaucratic courage to accept that control comes with consequences.

Pakistan’s SOE debate has gone on for decades because it keeps circling the same safe terrain: governance frameworks without enforcement, autonomy without accountability, ownership without responsibility.

Reform will only begin when failure becomes costly for those who have the power to prevent it. Until then, SOEs will continue to lose money, reports will continue to pile up, and the state will continue pretending that the problem lies somewhere other than where authority actually sits.

Copyright Business Recorder, 2026