Pakistan has now done the easier part of SOE reform. It has passed a law, issued a policy, created different forums for effective oversight of the framework as described in this writer’s last week’s article.
These are useful and genuine steps. They should not be dismissed.
But useful is not sufficient. And genuine is not the same as effective.
The harder test begins now — and it is a test Pakistan has failed before. Not because we lack the ability to design reform. We are remarkably good at designing reform. We produce laws, policies, frameworks, dashboards, committees, and reports with considerable sophistication.
What we have historically struggled to produce is the one thing that makes reform real: consequences.
A framework without consequences is not reform. It is ritual. And Pakistan cannot afford another ritual.
The stakes are too large for paperwork
Pakistan’s SOE portfolio is not a footnote in the national accounts. It is a central fiscal fact. Recent CMU data show around 117 federal SOEs, including 84 commercial entities. Their FY2025 revenues were approximately Rs12.4 trillion — nearly 11 percent of GDP. Total assets were about Rs38 trillion, close to one-third of GDP. Yet the portfolio still recorded a net adjusted loss of about Rs123 billion in FY2025.
Even this understates the real fiscal exposure. The true burden expands significantly once subsidies, equity injections, government loans, guarantees, circular debt, pension obligations, contingent liabilities and poor service delivery are included.
When SOEs underperform, the cost appears in higher tariffs, higher taxes, higher public borrowing, lower development spending and deteriorating public services. Taxpayers carry what boards and management avoid. Consumers absorb what governments refuse to fund transparently.
This is why SOE reform is not a technical governance exercise. It is a fiscal issue, a growth issue, a service-delivery issue and ultimately a test of whether the Pakistani state can function honestly within its own resource constraints.
The CMU has meaningfully improved analytical visibility over Pakistan’s SOE portfolio. For the first time, there is a structured effort to assess performance, fiscal risk, governance quality and portfolio-wide exposure. This is a valuable achievement that should be protected and strengthened.
But visibility is not enough.
If CMU identifies an unrealistic business plan, the plan should go back to the board. If an SOE repeatedly misses targets, the board, and CEO should explain and submit a credible recovery plan. If the recovery plan fails, leadership changes should follow. If a public service obligation is unfunded, it should either be funded or not imposed. If a commercial SOE is neither strategic nor viable, it should move towards privatisation, concession, listing, management contract, merger, or closure.
Without such consequences, CMU risks becoming a producer of excellent reports in a system that admires analysis but avoids action.
The consequence ladder
The missing element is not more framework. It is a clear and enforced consequence ladder.
At the first level, missed targets should require a formal explanation from the board and management. At the second, repeated underperformance should require a corrective action plan with specific timelines. At the third, continued failure should trigger CEO review, formal board evaluation and possible board changes. At the fourth, structurally weak SOEs should move towards restructuring — through privatisation, listing, concession, management contract or merger. At the final level, entities with no clear public purpose and no commercial viability should be closed or merged.
Without such a ladder, accountability remains a word rather than a mechanism.
Business plans and Statements of Corporate Intent should be the foundation of this discipline. They should not be compliance documents or public relations material. A serious business plan must state what the SOE will deliver, what it will cost, what risks exist, what government support is expected and what public service obligations are being carried. It should be reviewed rigorously by CMU, returned to the board if unrealistic, and used to evaluate board and management performance.
A weak business plan is worse than no plan. It creates the illusion of accountability without any of its substance.
The same applies to PSOs. For decades, governments have used SOEs to carry public policy burdens without paying for them. SOEs are directed to supply below cost, continue service despite non-payment, expand into uneconomic areas, absorb tariff delays, maintain excess staff or undertake politically attractive projects. Then the same SOEs are criticised for losses that were, in large part, imposed on them from outside.
This is fiscal camouflage.
A PSO must be treated as a formal government purchase of a public service. It must be written, costed, approved, funded, monitored and disclosed. If government wants a commercial SOE to do something non-commercial, it must pay for it transparently. No commercial SOE should carry an unfunded PSO. This should be a hard rule with no exceptions.
The tools to prevent future circular debt exist in the new framework. They now have to be used.
Board accountability must also become real. The board is the central institution in SOE governance. It approves strategy, appoints and evaluates the CEO, oversees risk, ensures internal controls and is collectively accountable for performance. If the board is weak, the entire reform fails regardless of what the law says.
Independent directors must be protected from arbitrary political removal. But protection from political interference is not the same as immunity from performance failure. A director who is secure from political pressure but faces no professional consequence for presiding over repeated failure is not an accountable director, but the one living in comfort zone.
Board membership is not an honour bestowed for past service. It is a fiduciary responsibility. Directors who do not understand the business, do not attend meetings, do not challenge management, do not disclose conflicts or do not contribute meaningfully should not continue.
Management accountability is the natural complement. A CEO of a commercial SOE should operate under a clear performance contract with measurable financial, operational, governance and reform targets. If the CEO delivers, there should be reward and continuity. If the CEO repeatedly fails, there should be replacement. Without this discipline, SOEs remain protected bureaucratic structures rather than performance-driven enterprises.
From state ownership to real accountability
Pakistan should be honest about a structural truth: most commercial SOEs should not remain indefinitely in government ownership.
The argument is not ideological. It is governance-based. In a government-owned enterprise, directors and management rarely have meaningful skin in the game. They do not share proportionately in value creation. They rarely bear the personal cost of failure. Losses ultimately move to taxpayers. This diffusion of consequence is an inherent weakness of state ownership, not merely an accident of poor management.
Where privatisation is not immediately feasible, other instruments should be used: stock market listing, strategic investors, concessions, management contracts, public-private partnerships or restructuring. The objective is the same — to introduce capital discipline, market accountability and managerial consequences into commercial activity.
This also requires institutional focus. The Cabinet Committee on SOEs has a heavy mandate: board appointments, performance reviews, restructuring proposals, PSO authorisation, policy implementation and privatisation categorisation. This cannot be managed as an occasional agenda item. SOE reform requires sustained senior political attention.
The Finance Division should retain fiscal-risk monitoring through CMU. But the reform and transaction agenda needs stronger alignment with privatisation and a dedicated political champion with authority, time and urgency. SOE reform cannot be a side assignment in an already overburdened ministry.
Pakistan has built a better SOE framework. That is genuine progress.
But the country will not be judged by the quality of its framework. It will be judged by what happens when the framework reveals failure — when a business plan is missed, when a board is found wanting, when a ministry imposes an unfunded obligation, when an SOE continues to absorb public money without accountability, or when CMU identifies a serious fiscal risk.
If the response is another committee, another report, another extension and another reset deadline, this reform will join the long list of well-designed but ineffective reforms.
If the response is corrective action — a plan returned to the board, a CEO replaced, a PSO funded, an SOE restructured, a non-viable entity closed — then this reform may finally become something Pakistan has rarely achieved in the public sector: a change that actually holds.
The first phase of SOE reform was about design.
The second phase must be about consequences.
Copyright Business Recorder, 2026
The writer, a former managing partner of a leading professional services firm, is a public sector governance and public financial management specialist and has done extensive work on governance in the public and private sectors. He posts on X @Asad_Ashah
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