Restructuring govt-owned organisations: Pakistan’s missed opportunity—and a rare success

Pakistan’s economic history is inseparable from its struggle with structural imbalances. Since independence, the country has oscillated between periods of growth and crisis, but one feature has remained constant: persistent fiscal deficits, rising public debt, and an ever-expanding burden of inefficient government-owned organisations (GOOs).

From the early years of import-substitution policies to nationalisation in the 1970s, and later partial liberalization and privatization attempts, Pakistan has repeatedly postponed hard structural reforms. The result is visible in every federal budget. A significant portion of public resources is consumed not on development, education, or health, but on keeping loss-making state entities alive.

The fiscal drag of government-owned organisations

Government-owned organisations in Pakistan operate across key sectors—energy, transport, aviation, steel, railways, and utilities. Collectively, these entities incur annual losses running into hundreds of billions of rupees, a figure that has become a structural feature of Pakistan’s budget rather than an exception.

Every year, these losses translate into:

• Direct cash injections from the federal budget

• Government guarantees for borrowing

• Accumulation of circular debt, particularly in energy

• Opportunity cost in the form of foregone development spending

In practical terms, taxpayers subsidize inefficiency, overstaffing, weak governance, and political interference.

Repeated reform attempts—same outcome

Almost every political government—regardless of ideology—has promised reform of state-owned enterprises.

• Privatisation drives in the 1990s faced political resistance and weak institutional capacity.

• Restructuring and “rightsizing” plans under successive governments were announced but rarely implemented.

• SOE reform roadmaps, performance contracts, and holding company models were launched, rebranded, and quietly shelved.

The pattern has been depressingly consistent: strong rhetoric, weak execution.

The reasons are well known:

• Political reluctance to confront organized labor

• Fear of public backlash

• Short electoral cycles

• Bureaucratic inertia

• Boards that existed in name but lacked authority

As a result, reforms remained cosmetic—new organizational charts without real change in cost structure, productivity, or accountability.

The current government—good intentions, familiar constraints

The current government, like those before it, acknowledged that Pakistan cannot stabilize its economy without fixing its state-owned enterprises. Reform initiatives were announced, diagnostic reports commissioned, and policy statements issued.

Yet, despite these efforts, tangible outcomes remained elusive. Structural reform demands painful decisions—workforce rationalization, compensation realignment, and breaking entrenched entitlement cultures. These steps proved politically and administratively difficult, and most reform efforts stalled before reaching execution.

One exception that broke the pattern

Against this bleak backdrop, Inter State Gas Systems Limited (ISGS) stands out as a rare and credible exception.

Unlike other entities where reforms were imposed—or avoided—ISGS undertook a painful but principled restructuring, driven not by external pressure but by internal realisation.

This restructuring had several unprecedented features:

• Workforce rationalization aligned with actual operational needs

• Salary reductions by employees—a first in Pakistan’s government sector

• Compensation restructuring linked to workload and scale of operations

• Board-led initiative, supported unequivocally by the Minister for Petroleum

Most notably, this was not a cosmetic exercise. It resulted in approximately 40% reduction in operational expenditure, translating into around Rs 400 million per annum in cost savings.

Why this matters—beyond the numbers

In macroeconomic terms, Rs 400 million per annum – 40 percent of operational expense - is not a game-changer. It barely registers against Pakistan’s overall fiscal deficit. One could dismiss it as a rounding error.

But doing so would miss the point entirely.

The true significance of ISGS’s restructuring lies in what it demonstrated:

• That boards can lead, rather than merely endorse decisions;

• That employees can act responsibly when treated as stakeholders, not liabilities;

• That political support, when sincere, can enable reform rather than obstruct it; and

• That public-sector organizations do not have to be hostage to inefficiency.

This was not coercion. It was consensus. Employees accepted salary rationalization because they saw transparency, sincerity, and shared sacrifice—starting from the top.

A precedent Pakistan desperately needs

ISGS has set a precedent that challenges long-held assumptions:

• That public-sector employees will never accept reform;

• That boards of SOEs are powerless; and

• That meaningful restructuring is politically impossible.

If replicated—even partially—across other government-owned organizations, the cumulative impact would be transformative. More importantly, it would restore credibility to the state’s promise of reform.

Conclusion: from rhetoric to resolve

Pakistan does not suffer from lack of plans, reports, or reform slogans. It suffers from lack of execution and moral courage.

The experience of Inter State Gas Systems Limited shows that reform is possible—when boards act like boards, ministers provide cover instead of interference, and employees are treated as partners in survival rather than obstacles.

The fiscal impact may be modest today, but the signal it sends is powerful. It lights a path for other organizations, other boards, and other policymakers.

If the promise of reform made by Pakistan’s leadership is ever to be realized, it will not come through sweeping declarations. It will come through replicable, painful, and honest actions—exactly like the one taken by ISGS. The question is no longer whether reform is possible.

The question is whether others have the will to follow.

Copyright Business Recorder, 2026