The difficult job of divestment

That the supply of quality stocks in the country's stock market has been highly inadequate against the demand for the same is a fact known to all concerned.

Policymakers and other stakeholders in the bourses have been in agreement that divestment of some profitable state-owned enterprises (SoEs) could partially meet the demand for issues having strong fundamentals.

The demand for offloading stocks of profit-earning SoEs turned louder from various quarters at least on a couple of occasions in 1996 and 2010, when stock investors lured by manipulators had gone berserk. As the supply of stock was very limited investors bought even poor quality stocks, hoping for an overnight change in their fortune. But most of them suffered huge losses following crash of the market.

When the market was at its peak both in 1996 and 2010, in the face of rising pressure from the investors and stock brokers, the government policymakers had made the move to offload stocks of some SoEs to beef up supply of 'good' stocks in the market.

But the initiative lost steam following the collapse of the market. However, committees formed to select some SoEs for partial divestment through the bourses continued their activities albeit at a very slow pace to find out SoEs suitable for meeting the purpose.

The Ministry of Industries in line with the government decision formed a committee to make some potential SoEs under it profitable and offload their share on the stock market.

The committee concerned, reportedly, made a review of the situation with, at least, five SoEs, namely, Chittagong Dry Dock Limited, Progoti Industries Ltd, Bangladesh Insulator and Sanitary ware Factory Limited, Karnaphuli Paper Mills Ltd and Chhatak Cement Ltd selected earlier for divestment. The finding of the committee has been quite frustrating. The units under review are experiencing multiple problems and there is little chance of making them profitable within a short period.

However, the move to divest SoEs either through bourses or in any other manner has not been successful in recent years. Rather a section of policymakers are found to be more interested to regain state control of the SoEs privatised earlier.

It is rather obvious on the part of the employees to oppose divestment of any SoE, for they remain uncertain about their future under new owners. But there are some other people who tend to torpedo the divestment move, overtly or covertly. The bureaucracy in particular, it is alleged, does not like the idea of divestment. Besides, some ruling party people still believe in state control of enterprises notwithstanding the fact that the government's ownership has been causing severe and continuous haemorrhages to the national economy.

The state corporations and entities suffered losses in most years. However, in some years they were in the green only when the Bangladesh Petroleum Corporation (BPC) earned hefty profit. The financial results of the BPC in recent years bear testimony to that fact.

Besides, the accumulated debt-servicing liabilities of the SoEs are now huge and the government, it seems, is not particularly interested to recover the same.

Instead of making futile efforts to turn the SoEs profit-earning, the government should better go for their full divestment to save the nation from continuous economic haemorrhage. Such divestment, if done properly and maintaining full transparency, the government can earn sizeable resources every year because most state enterprises do own sizeable land area.

But the experience gathered from privatisation of SoEs in the past has not been quite relishing. A favoured few got hold of a number of SoEs at throwaway prices. In fact, the owners of SoEs were not real entrepreneurs and their main goal was to grab the valuable land belonging to the SoEs. Only a few private owners have kept their units running until now.

So, greed to earn money unduly by a section of unscrupulous people both in the administration and in the private sector polluted the very process of privatisation.

There is no denying that a number of SoEs have kept their existence only in name at the cost of the national exchequer. There is no valid reason for the government to keep them operational. Yet the government has been dragging this burden for years together.

If the government is really unwilling to dispose them of fully, there should be some way to improve their performance. But under state management that is not possible. One way or other, those units should be transferred to efficient private management. The government has tried the mechanism in the case of some textile units. But the results have not been positive, mainly because of flaws in the selection of private sector managers.

The divestment of SoEs is a delicate issue for the government. If it wants to divest a profit-earning entity, even partially through the stock market, questions will be raised about the need for such a move. But the truth is that investors will not put in even a penny in a loss-making SoE.  But there must be some ways to make a few SoEs profitable. What is needed most is sincere and honest move on the part of the government to make it possible.

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