- Caretaker finance minister says majority of directors on their boards should be independent
Caretaker Minister for Finance, Revenue & Economic Affairs Dr Shamshad Akhtar on Thursday highlighted the salient features of the State-Owned Enterprises (SOEs) policy.
Addressing media persons in Islamabad, Dr Akhtar said that a preliminary version of the SOEs policy has been drafted, however, the government is still reviewing and soliciting input.
The caretaker finance minister shared that a list of 10 companies has been prepared for privatisation initiatives or their turnaround.
Dr Akhtar said different governments during their tenures privatised several SOEs, however, there was no proper framework available.
Sharing the salient highlights of the SOEs Governance and Operation Act 2023, the caretaker minister said that majority of the directors of the board should be independent, and have a secured tenure.
“The office of the Chairperson of the Board has to be separate from the Chief Executive Officer (CEO),” she said. “Furthermore, SOEs are exempted from Public Procurement Regulatory Authority (PPRA) rules.
“Policy direction would be streamlined systematically, with approval from the cabinet. So no ad-hoc interference in these institutions,” she said.
Dr Akhtar said that Central Monitoring Units (CMUs) shall maintain the electronic database of the financial and operational performance of the SOEs.
“It will have the ability to submit recommendations to the federal government or the cabinet committees,” she said.
“SOEs that come under the scope of the Act will not comply with Public Sector Companies Corporate Governance Rules of Securities and Exchange Commission of Pakistan (SECP),” she added.
“Moreover, the federal government shall establish and retain strategic SOEs completely or partially engaged in strategic functions.”
Meanwhile, non-strategic SOEs will be phased out over the period, she added.
“As we move forward, the institutional arrangement will be more carefully laid out. We will have to have a hub of appointments and training of directors of the board of SOEs.
“There will also be issuance and reporting for guarantees of the SOEs. We have to really do the due diligence of where the guarantees are needed, especially, as we have limits on guarantees from the International Monetary Fund (IMF) programme,” she said.
“The basic instructions are no direction will be given to a SOE or a board of SOE by any ministry division to perform any public service obligation (PSO), or to bar the SOE from performing any official function without the approval of the federal government,” she said.
The caretaker finance minister said SOEs span energy, telecommunication, transportation, financial sector and trade marketing sector, she said.
“Over time the overall performance of these SOEs has been below par,” she said, adding the losses at the SOEs have mounted to Rs500 billion.
Sharing the financial figures of profit-making enterprises till fiscal year 2020, Dr Akhtar said, “The aggregate profits of SOEs have been around Rs330 billion, of which Rs185 billion were attributed to oil and gas companies.
“Companies have suffered because of lack of autonomy, external interference, weak management, limited accountability and inappropriate boards, which resulted in financial losses over the period of time,” she said.
Pakistan, facing a fiscal crisis, has been making efforts to privatise and/or turnaround its loss-making SOEs as it looks to reduce its budget deficit.
Pakistan International Airlines (PIA), once seen as a beacon of the aviation industry in the country, has been plagued with financial issues. In addition, government-owned power distribution companies as well as Pakistan Railways have also been heavily criticised for their operational inefficiencies and becoming a burden on the national kitty.