Pakistan to introduce amendments in SOE Laws for efficient management

January 22, 2024 (MLN): To improve state-owned enterprises (SOEs) governance, transparency, and efficiency as well as limit their fiscal risks, the government has committed to introduce further amendments to the four dedicated SOE laws, in consultation with the International Monetary Fund (IMF).

The first review report under the Standby Arrangement published by the fund highlighted the structural policies for the SOEs.

The new SOE Act took effect in January 2023 and ensures that SOE operations are grounded on a commercial footing, including by defining what constitutes a commercial SOE.

Moreover, with the support of the Asian Development Bank (ADB), the new SOE Act was operationalized into a policy that clarifies ownership arrangements and defines the division of roles within the federal government.

Furthermore, the laws governing four specific State-Owned Enterprises (SOEs) — the National Highway Authority, Pakistan Post, Pakistan National Shipping Corporation, and Pakistan Broadcasting Corporation — underwent revision.

The government also adhered to continue amending other SOE-dedicated laws, to similarly align them with the provisions of the new SOE Act.

To ensure that the SOEs that have come under the ownership of the newly-created SWF remain under the same high-quality governance structure as other SOEs, further safeguards will be implemented to regulate SOE ownership functions, including appointment of SOE Board members, performance monitoring and evaluation, and financial oversight.

The government will implement transparency and accountability mechanisms, including the requirement for top SOE executives and Board members to file asset declarations and prohibit lending by the SWF to any other public bodies.

SOEs are continuously audited by external auditors and their audit reports are usually published, while the Auditor General conducts the ‘compliance with authority’ audit of the accounts of SOEs.

In addition, the IMF has asked its Auditor General to conduct special audits of several SOEs (i.e., SSGCL, HESCO, and PESCO) because of their size and importance in their sectors.

The scope and terms of reference have been finalized and we plan to have the audit initiated in FY24Q3.

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