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The SOEs (State-Owned Enterprises) are generally being run at the whim of a chosen few, who are beholden to no system but instead their benefactors and appointers.

In this environment, there are no long-term plans in place for development of the entities and regard for the objective of profit maximization. Instead projects which are the short-term priority of the government of the day are green-lit, even if they are financially unviable, with time, effort and resources of SOEs being wasted.

A case in point is Pakistan National Shipping Corporation (PNSC), which has remained profitable since the fiscal year 2000–2001.

The challenge of SOEs – I

However, profitability is not the only criteria for success. PNSC’s vision and mission statement as defined on its website, setting the platform for goals of the organization is unintelligible, lacking any sort of forward thinking, oblivious of its responsibility to permeate the organization where all employees can meaningfully contribute towards the Corporation’s success.

The 2nd tier management at PNSC are professionals having an individual average of over 20 years’ experience in the industry. However, there is little that the 2nd tier management can do when the top leadership remains hamstrung in decision making because it lacks the knowledge and experience to efficiently and effectively run a highly complex and specialized organization.

PNSC has remained plagued with people who are unable to make critical decisions in a timely manner because they lack a firm comprehension of the situation and risks associated with decision-making due to which it is easier for them to set aside decisions than take decisions. In all of this sordid affair the ultimate loser has been PNSC and the people of Pakistan. The same is true for many other SOEs.

PNSC has been range-bound in its profits with the only exception being Fiscal Year 2021–22 as well as the current Fiscal Year where record profits were made and remain attributable to a historic surge in the freight market rates as well as the induction of four vessels at highly competitive pricing, with credit going to the Chairman and Board of Directors of the time who went out of their way to finalize the inductions.

It has recently been reported in various sections of the press that some of Pakistan’s SOEs have been offered to UAE’s investment arms, including Abu Dhabi Development Holding Company (ADO) and International Holdings Company (IHC). Both these entities typically have investment portfolios consisting of domestic UAE- based entities. Pakistan’s SOEs offered for investment include Oil and Gas Development Company Limited (OGDCL), Pakistan Petroleum Limited (PPL), National Bank of Pakistan (NBP), Pakistan International Airlines (PIA) and Pakistan National Shipping Corporation (PNSC).

The UAE’s potential acquisition of government shares in the aforementioned SOEs could be a godsend for these companies and for a cash-deprived government. Should the foreign investors decide to perform their pre-purchase due diligence of these entities, then every possible assistance must be afforded by the Federal Government for meaningful and successful due diligence of each organization.

The offer for investment in the equity of these organizations must include appointment of members to the Board of Directors along with management control with full option to replace the Chairman/CEO and CFO with individuals from the investor’s own team or hired them specifically for the purpose. This shall give the investors enough management control over the entities to make necessary management changes in these organizations with a view to improving efficiencies and in turn profits and returns.

As foreign investment flows into the respective listed organizations, with better management practices, ideally everybody should benefit. Increased performance will yield increased profit with more taxes and dividends being contributed to the government’s kitty.

Increased share prices of those entities will also see shareholders from the general public benefit from the investment thus boostting market capitalization.

With the Federal Government grappling with this latest bout of economic instability, this time replete with terrorism and flare-ups at our borders, it is evident that there seems to be a lack of long-term vision and direction, with SOEs being worse off as a result.

Attempts at policy re-calibration are interspersed over the years only punctuated with untimely reversals. Instability is keeping this nation from progressing. Our neighbors have developed by leaps and bounds simply because they have stability and continuation of consistent policy.

Unless we take stock of what has gone wrong instead of simply brushing it under the carpet, with truth and reconciliation for all, it seems we will remain doomed to repeat history with no regard for what the future may bring.

Saleable SOEs should be divested by the government to attract much-needed foreign exchange and in turn the private investors should be required to run the privatized organizations more efficiently than the government appointees. An opportunity for a win-win situation exists and the opportunity should be capitalized.


Copyright Business Recorder, 2023

Capt Anwar Shah

The writer is an advisor to the Karachi Chamber of Commerce and Industry

[email protected],


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