Opaque funding of SoEs

Dhaka,  Tue,  26 September 2017
Published : 24 Aug 2017, 21:08:32 | Updated : 24 Aug 2017, 21:14:26
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OPINION

Opaque funding of SoEs

A section of policymakers and bureaucrats is found unwilling to dispose of SoEs. Some of them are opposed to divestment of SoEs, maybe, because of ideological reasons. But others find the SoEs as handy sources of pecuniary and other undue benefits, writes Shamsul Huq Zahid
A feeling of love-and-hate marks the relationship between the government and the state-owned enterprises (SoEs). 

The Ministry of Finance in particular always grumbles when the SoEs seek bailouts or fail to service their debts. But the government, it seems, does never relish the idea of giving up its ownership right over the loss-making enterprises. 

This kind of attitude of the government towards SoEs has led to the buildup of massive debt-service liabilities (DSLs) of the latter. The truth is that the government has always been rather indulgent to the errant SoEs and not adequately serious about recovering the funds given to them as loans or funds borrowed from donors against various development projects. 

Besides, the government has been making available a substantial amount of subsidies every year to a good number of SoEs. Some subsidies are justified and some are not. 

In the case of loans, it has become more of a practice on the part of the relevant SoEs to express their inability to pay the funds they have borrowed from the government and make requests for converting the same into grant. 

Overall, the sanctioning of loans and subsidies to the SoEs and their recoveries have always been opaque. Many tend to feel that the money given from the national exchequer to the public sector enterprises is mere wastage of taxpayers' money. 

Though belated, the policymakers, apparently, have felt the need for a review of the issue of loans and subsidies to the SoEs. This is because the DSL of the SoEs has reached to an unsustainable level. 

A report published in this newspaper some days back indicated that there exist anomalies in the sanctioning of loans and subsidies to the SoEs. Now the government has decided to streamline it. 

The Ministry of Finance reportedly has approved a reform agenda to promote government expenditure in a more transparent and efficient way. Under the agenda, the SoEs would be classified into separate categories on the basis of the suitability to receive either loans or subsidies. The aim of the reform, it seems, is disbursement of loans and subsidies in a transparent and accountable manner. 

Experts have opined that the government should inform the public about its spending on the SoEs and adequately highlight the disbursement of loans and subsidies to the enterprises under its ownership.

Dissemination of such information is all the more necessary because of the poor performance of a number of SoEs. A good number of SoEs have been incurring losses for year after year. Yet the government has allowed those to exist at the cost of the national exchequer. 

In the face of strong demand for divestment or closure of the inefficient and loss-making SoEs, the government has expressed its tacit opposition to it. The ministries owning these units have in one way or another tried to justify continuation of their existence. 

The government's policy should be to give up the ownership of inefficient SoEs. It should sell off such SoEs in a transparent manner and try to utilize the funds in productive activities. Neighbouring India has disposed of hundreds of public sector units until now and the process is still on. 

A section of policymakers and bureaucrats is found unwilling to dispose of SoEs. Some of them are opposed to it, maybe, because of ideological reasons. But others find the SoEs as handy sources of pecuniary and other undue benefits. 

zahidmar10@gmail.com
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