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State-owned Enterprises

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State-owned Enterprises

How to reform this crucial asset

Dr Omer Javed

Ownership is an important aspect of management of SOEs (state-owned enterprises or public sector companies (PSCs) in the case of Pakistan). In the context of SOEs, state is the ultimate owner, and its ownership policy should clearly identify first of all the rationale behind such ownership.

According to OECD (Organisation for Economic Cooperation and Development) in its report (2018) ‘Ownership and governance of state-owned enterprises: a compendium of national practices’, such rationale or objectives behind ownership in countries in general range from ‘(1) supporting national economics and strategic interests; (2) ensuring continued national ownership of enterprises; (3) supplying specific public goods or services (after determining the market cannot supply the same goods or services); (4) performing business operations in a “natural” monopoly situation; and (5) creating or maintaining a state-owned monopoly (or oligopoly) where market regulation is deemed infeasible or inefficient’. Based on a sample of 30 countries (Pakistan not included) of various economic levels, the report indicates that the two most prevalent rationales as being points (1) and (3) respectively.

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