Transforming Pakistan's SOEs

State-Owned Enterprises (SOEs) play a pivotal role in economic development, infrastructure growth, public service delivery and national competitiveness of a country. But, in Pakistan, they are making huge losses. Almost all SOEs here have been draining public finances since forever because governance standards are weak and because opaque structures create opportunities that do not align with public interest. As per a recent report, an amount of about Rs1.9 billion a day is being squandered to keep the SOEs alive. The scale of the losses should generate outrage because Pakistan cannot thrive if the billions needed to improve health and education are instead being set on fire to keep SOEs afloat.

Across the globe, state-owned enterprises (SOEs) often serve as engines of economic growth and promote strategic national assets. Countries like Norway with Equinor and China with the State Grid Corporation, show how SOEs can thrive when managed effectively.

On a global scale, SOEs hold considerable economic significance; the OECD notes that their share in the top 500 global companies by revenue has tripled between 2000 and 2023, now representing 12% of global market capitalization. This demonstrates the crucial role that well-functioning SOEs can play in driving national economies. However, in Pakistan, the reality is quite different. Many of its SOEs are burdened by chronic inefficiencies and financial losses, which are symptoms of a deeper, persistent governance crisis that also hinders the attraction and retention of professional talent. According to a special chapter on SOE reforms in the State Bank of Pakistan’s (SBP) Annual Report FY24 on the State of Pakistan's Economy, bailout packages and subsidies to SOEs have surged to a staggering Rs5.7 trillion, or 1.4% of GDP, over eight years (FY16 to FY23). A large chunk of the financial aid, directed mainly toward sectors such as power, infrastructure, transport and information and communication technology (ICT), has exacerbated the financial burden on the government.