What to do with the loss-making SoEs?

In the face of mounting debt of the state-owned enterprises (SoEs), the government has recently launched an online platform known as the SABRE+ system. Developed by the Finance Division, SABRE+ stands for State-owned Enterprises and Autonomous Bodies Budget, Reporting, and Evaluation System. The platform is designed to streamline budget preparation, financial reporting, and performance evaluation for SoEs and autonomous bodies. Its implementation is expected to strengthen transparency and accountability in their management. 

The need for a data-driven, transparent, and accountable governance framework for the effective operation of SoEs cannot be overstated as they have long been plagued by irregularities, inefficiency and debt. According to a Finance Division report, the total liabilities of 101 state-owned enterprises (SoEs) and autonomous bodies stand at over Tk 6.39 trillion, with 26 per cent of the amount tied to subsidiary loan agreements. Based on their balance sheets, the Finance Division's Monitoring Cell has placed these entities into five categories. Of the 101 entities reviewed, only two are classified as "very low risk", 20 as "low risk", and 37 as "moderate risk". The remaining 42 entities are in critical condition - 28 designated as "high risk" and 14 as "extremely high risk". Together, these 42 entities hold Tk 3.13 trillion in government loans and guarantees.

Notably, the 14 entities categorised as "very high risk" hold liabilities of Tk 1.72 trillion against liquid assets of only Tk 28.37 billion. Many of these entities, such as sugar mills, are so financially distressed that they continue to accumulate debt each year while struggling to service existing obligations. Some have even lost the capacity to meet interest payments against their debt, signalling a deepening financial crisis. This imbalance poses serious fiscal risks and demands immediate policy intervention.

So, even after the implementation of SABRE+ system to streamlines their budget framework, the pressing question remains: what should be done with these loss-making ventures that have been draining the public exchequer? Should they be privatised, brought under public-private partnerships, or revitalised through improved management and governance?

Notably, SoEs with monopolistic businesses such as energy import and distribution, submarine cables and utility service providers are generally profitable. However, SoEs that have to compete in the market alongside the private sector are in dire straits. For example, Bangladesh Railway, Biman, BTCL, BRTC, sugar mills, jute mills, and many more have been incurrimg massive losses year after year. Even the Teletalk, which entered the market with much fanfare, has been reduced to a damp squib, while foreign mobile operators continue to generate hefty profits. 

SoEs in these sectors were expected to serve as a counterbalance to private-sector monopolies, ensuring that essential services remain accessible and affordable for all citizens. For without robust government oversight and effective price-control mechanisms, the private sector could prioritise profit maximisation over public welfare, leading to unchecked price gouging and service degradation. Unfortunately, the deplorable trend of profit maximisation has become a common phenomenon, largely due to the weak performance of the SoEs. The question is, if private companies can operate profitably in these sectors, why can't public enterprises do the same, despite holding significant assets and market advantages?

There is a plethora of factors behind the poor performance of SoEs. Historically, policy decisions in Bangladesh have often favoured private businesses at the expense of the broader public interest. For example, there are allegations that ministries or officials responsible for maintaining certain sectors, such as the railway, have deliberately undermined public operations to benefit private competitors like bus operators. Unfortunately, this pattern is not limited to transport; similar instances of policy manipulation have been observed in healthcare, education, and other sectors, where public interest has been sacrificed for private gain. Thus, one of the greatest obstacles to the effective performance of SoEs is the entrenched self-interest of certain ruling party leaders and government officials. Whether this will change in the future remains to be seen.

Another major reason behind the lackluster performance of public enterprises is the lack of good governance. This encompasses a glaring lack of efficiency, accountability, and the pervasive issue of corruption. Despite incurring persistent losses that burden taxpayers and the nation, senior management and officials maintain their secure government jobs.  To date, there is hardly any instance of a top executive of these SoEs being removed from their posts or held accountable for the financial losses incurred under their leadership. This absence of consequences perpetuates a cycle of inefficiency and financial drain.

Moreover, the attitude of employees in these enterprises is a significant problem. The experience of seeking services at most state-run institutions, whether in the service or commercial sectors, is often disappointing. Service seekers are frequently met with indifference, if not outright disrespect, and subjected to unnecessary delays. Many government employees tend to treat public offices as their personal domains. There is a lack of discipline and punctuality, with officials often arriving late, leaving early, or being absent during their office hours. Apparently, the permanent nature of government jobs, along with promotions and pay raises regardless of individual performance or the organisation's profitability, fosters a lackadaisical attitude among employees. True, a chronic lack of investment and outdated equipment have been major drawbacks in their performance, but without comprehensive reforms in the system of governance, increased investment is unlikely to bear fruit.

It is, therefore, imperative for the government to conduct a comprehensive evaluation of the SoEs to strengthen governance and enhance efficiency. For those with little prospect of recovery, alternative options such as divestment, merger, or dissolution should be on the table. Maintaining white elephants that drain the state's limited resources is both unsustainable and unproductive. However, such reform would require strong political will, as vested interests, labour unions, and political patronage networks often resist change. Experts also argue for enacting a law to establish a clear process for privatisation, merger, or dissolution of loss-making entities. At present, state-owned enterprises are established under separate laws and lack a unified legal framework, meaning any move to privatise, merge, or close them requires cumbersome, time-consuming parliamentary approval. Without addressing these institutional, legal and political barriers, propping up loss-making SoEs will continue to drain limited public resources.

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