ISLAMABAD: The government of Pakistan Tehreek-e-Insaf (PTI) has decided to set up a new company named Sarmaya-e-Pakistan Limited with a capital of Rs500 billion in a bid to take over management control and have better oversight of all public sector companies, which will likely lead to a turnaround in loss-making firms.
The new company will be incorporated with 100% federal government shareholding. Government shares in the existing public sector companies will be gradually transferred to the new firm.
Nominations of board members of all these state-owned companies will be made by the board of directors of Sarmaya-e-Pakistan for final approval of the government.
The performance of the public sector companies has deteriorated over the past many years because of a host of factors, particularly the lack of relevant skills and expertise in the administrative ministries and divisions for guiding and helping these firms perform in a professional and competitive way.
Moreover, the uniform application of instructions issued from time to time by the Finance Division and relevant ministries has further complicated operations of the public sector companies in a competitive market economy.
In order to revive these enterprises, the present government has decided to frame an appropriate governance structure keeping in view the international best practices followed in Singapore and Malaysia. The Finance Division has also been advised to play a leading role in developing proposals for the purpose.
Accordingly, comprehensive deliberations and consultations were held in the Finance Division with key stakeholders including the Law and Justice Division and the Securities and Exchange Commission of Pakistan (SECP).
After the huddle, it was decided that there was a need to appoint qualified professionals on boards of directors of the public sector companies who could make prudent decisions. At the same time, qualified persons would be included in the senior management in line with best corporate governance models in order to improve efficiency.
Apart from these, it was suggested, the oversight and control of the companies may be given to the professionals having extensive experience and expertise contrary to the current practice where the administrative ministries and divisions had full control of the companies.
The Finance Division, in a recent cabinet meeting, proposed some steps for setting up the new company. It suggested that the company may be incorporated with authorised capital of Rs500 billion and initial paid-up capital of Rs100,000, which would be gradually increased after acquisitions.
The appointment of directors on the board will be approved by the prime minister. The companies engaged in commercial operations will be converted into companies having share capital and subsequently will be transferred to Sarmaya-e-Pakistan.
Statutory corporations and commercial concerns such as the National Highway Authority (NHA) will be incorporated as public limited companies and subsequently will be given under the control of the new company.
The cabinet was informed that in line with global best practices, services of professionals in specific sectors will be hired to assess the possibility of restructuring or privatising the state enterprises. Through such a professional and objective input, it was expected, interests of the state would be secured in a satisfactory manner.
The cabinet decided that secretaries of the Finance Division, Cabinet Division and Ministry of Industries and Production would sign the Memorandum and Articles of Association as subscribers and nominee directors of the new company. The Finance Division will issue a notification to announce the establishment of Sarmaya-e-Pakistan.
Published in The Express Tribune, November 23rd, 2018.