The Pakistani authorities have worked to enhance the country’s governance, management and financial efficiency of the SOE, a State-owned company (SOE) governance and operations act, the World Monetary Fund stated (IMF).
In its recent report, the IMF stated that the Act, approved in March 2021, was submitted by the Cabinet to the National Assembly by State-Owned Enterprises in the Middle Orient, North Africa, and Central Asia, Size, role, performance and challenges.
The IMF Technical Assistance Mission in early 2020 pointed out that the corporate management of the SOEs in Pakistan was weak, which could at least partially explain the SOE portfolio’s performance with low productivity and efficiency levels and substantial financial losses and contingent government liabilities.
It further said that the existing ownership model has been fragmented, and the Ministry of Finance plays a minimal role in blurring its functions amongst sector ministries and regulatory authorities in many areas.
This is the case with energy, where the Ministry of the Line has a final word on the price adjustment process, with civil aviation infrastructure in the aviation industry, and with financial sector in which the regulator is the primary stakeholder in a systemic state bank.
Internal audit operations were inadequate, and financial reporting was riddled with many accounting exclusions that might play a substantial role in the total SOE portfolio’s real financial performance.
The research also indicated that the new SOE Act seeks to increase the performance of SOEs by improving the governance framework and limiting the financial risks arising from their business.
Furthermore, the paper states that the new SOE Act seeks to improve SOEs’ performance and limit their financial risks by enhanceing the SOEs’ corporate governance framework.
The law provides the basis for a gradual move towards a more centralised model for ownership and supervision in a newly established Ministry of Finance SOE unit, which separates the regulatory and policy functions in the State in relation to its SOEs. The law also provides for an improved and more centralised system of ownership and supervision of property.
By publishing “Federal Footprint – SOE Annual Report,” the Ministry of Finance has already started enhancing its supervisory role in a more systematic and transparent approach to evaluate the risks in the SOE portfolio.
The Act proposes for selecting SOE board members a “nomination committee” chaired by an SOE minister with four other members: the Secretary of the division in charge, the Finance Secretary or his nominee, and two experts from the private sector with at menos 20 years of experience. The Act proposes that SOEs should select members of the committee.