The International Monetary Fund (IMF) will provide technical assistance to the government in drafting State Owned Enterprises (SOEs) Law by end-December 2019, according to recently released Staff Report of the IMF. The draft of SOEs Law will then be submitted to the Parliament by end-September 2020 for legislation. The purpose of new law is modernising and clearly defining the role of the State as owner, regulator, and shareholder of SOEs.
The Fund noted that various applicable laws and rules significantly weaken the governance, supervision, and transparency of the sector. In this context, the government recognised the need to have a clear, coherent and modern legal and regulatory framework that defines the behaviour and role of the State as an owner, as a regulator, and as a shareholder of SOEs.
Key elements of this law will include: (i) a clear definition of the overall goals and rationale for State ownership; (ii) clear definitions of the roles and responsibilities of the key institutions (ministries, boards, management); (iii) and establishment of performance agreement procedures and responsibilities.
The recently established holding company to manage SOEs will follow the required governance and transparency principles in line with international best practices.
The government has committed the Fund that it will prepare a comprehensive report on SOEs, which will comprise the following elements: a) an overview of the sector during the year, including financial performance; b) a full list of the companies owned by the government, broken down by industry, policy objectives (provision of public services, commercial), and type of ownership (e.g. majority or minority-owned, strategic companies, etc.); c) an overview of how the government has exercised its ownership policy, including the appointment of board members and organisational and governance arrangements; d) the impact of the sector on government finances (budget transfers received and dividends paid, borrowing/lending from other public entities, state guarantees received, etc) and the economy more broadly; e) information on individual companies, including abridged financial statements and indicators of financial performance, a list of board members and auditors, and the amount of subsidies received from the budget, if any.
From this report, the government will derive a triage of all SOEs, dividing them into companies to: (i) maintain under state management; (ii) privatise; or (iii) liquidate (end-September 2020 structural benchmark. The authorities will sort SOEs into companies for sale, liquidation, or retaining under state ownership by end-September 2020.
To further increase transparency, Pakistan International Airlines and Pakistan Steel Mills will conduct new audits by international auditors based on financial years until end-2018. The audits will be completed and published by end-December 2019. The Auditor General of Pakistan will complete and publish by March 2020 a special audit of Pakistan Railroads based on Financial Year 2019.
The government has further informed the IMF that it will privatise seven companies based on their good privatisation prospects. However, no timeframe was given in the report. The federal government has set a target of Rs 150 billion from privatisation proceeds in 2019-20. The Cabinet Committee on Privatisation (CCoP) on October 31, 2018 approved new privatisation plan for 64 state-owned entities to be privatised in five years in three phases.
The Fund was informed that Financial Advisor (FA) for the privatisation of two RLNG plants has been appointed and it is intended to approve the Transaction Structure latest by September 2019 after the FA has completed its due diligence. Appointment of FA(s) for privatisation of SME Bank and Services International Hotel has been completed in June 2019.
The government will follow best practices regarding the process and conditions of privatisation to ensure a successful and transparent outcome and will identify additional companies for divestment and the possibility to divest valuable non-core assets of large SOEs.
In the first phase, the government has put seven PSEs in the active privatisation programme and is aiming to complete the initial phase within a period of 12 to 18 months. These PSEs include: (1) National Power Management Co Ltd; (i) 1,230 MW Haveli Bahadur Shah and (ii) 1,223 MW Balloki Power Plants; (2) SME Bank Limited; (3) Services International Hotel; (4) divestment of government of Pakistan's residual shares in Mari Petroleum Company Limited (MPCL); (5) Jinnah Convention Centre, Islamabad; (6) Lakhra Coal Mines; (7) and First Women Bank Limited.
Comments
Comments are closed.