SoEs on track to rack up Tk 56b losses next fiscal

Economists suggest reform to cut misuse of public money

FE Report | Published: June 17, 2019 09:54:01 | Updated: June 19, 2019 10:18:45

Picture used for illustrative purpose only — Collected

The government said state-owned enterprises (SoEs) will incur a loss of Tk 56.7 billion in the next fiscal year, accentuated by rising price of fuel in the international market.

The forecast is higher than Tk 13.1 billion losses incurred during the fiscal year 2018.

This picture was evident in the brief budget on the SOEs, a part of the fiscal blueprint.

The document shows that the 49 non-financial organisations will incur loss even before paying taxes.

"Profit before tax is expected to be negative Tk 37.1 billion as a result of rising trend in price of fuel in the international market," according to the document.

The estimation has been made by assuming a 10 per cent growth along with the rate of inflation, investment and depreciation of machinery.

It also feared the utilisation of assets will be lower next year than fiscal year 2017-18.

Dismissing the government's logic, economists, who are familiar with the matter, said SoEs are inefficient organisations and for this reason they sustain losses year after year.

They suggested conducting a public sector reform to make them profitable.

Dr Sadiq Ahmed, vice chairman at the think-tank Policy Research Institute of Bangladesh (PRI), told the FE the government's arguments over the losses of SoEs cannot be justified.

Terming the SoEs a burden of the government, Dr Ahmed said their inefficiency is the main reason for the losses.

"They remain inefficient for a long along with weak management," Dr Ahmed, who authored several papers on the SoEs.

There is now a need for reform in the public sector as there is no justification for misusing the public money.

"Some state-owned banks have also been suffering as they had invested there," said Dr Ahmed, who was once country director of the World Bank in Pakistan.

Dr Zahid Hussain, lead economist at the Dhaka office of the World Bank, said that one of the key reasons behind losses of the public sector banks is the troubled loans of state firms.

He said there should be an assessment whether products made by state firms have any demand in the market or not.

He said: "The machinery they use are obsolete and the people work are not fit for a competitive environment."

Now either they have to make commercially viable or needed to be liquidated, Dr Hussain noted.

"I don't find any rationale of bearing losses year after year of the SoEs," he told the FE.

In the meantime, the profit on investment will stand at 0.50 per cent, the document said.

It also said the net profit on operating income will also stand negative 2.63 per cent in the next fiscal year.

The revenue they will generate is expected to be Tk 2.0 trillion in fiscal year 2020 against Tk 1.9 trillion in the outgoing fiscal.



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