The government has instructed the management and boards of all state-owned enterprises (SOEs) to disclose their assets and beneficially owned investments after discovering weak financial transparency and a lack of accountability within these entities.
The instructions were issued after the Central Monitoring Unit — a special cell set up to monitor financial progress and ensure accountability in the public sector — found serious lapses on the part of boards and management. An overwhelming majority of management and board directors were not disclosing their assets, violating an Act of Parliament.
Sources said there was hardly any government organisation whose boards and management disclosed their assets and beneficially owned investments. The Ministry of Finance has issued fresh instructions to the boards and management through their respective line ministries.
"As part of ongoing efforts to enhance governance and transparency within SOEs, it is imperative that all SOEs under the administrative control of respective line ministries comply with the provisions of the State-Owned Enterprises (Governance and Operations) Act, 2023," stated an office memorandum issued by the finance ministry.
The memorandum, sent to all SOE boards, mandates compliance with Section 30(1) of the State-Owned Enterprises (Governance and Operations) Act, 2023, which requires the annual disclosure of assets and beneficially held investments and properties.
These instructions come alongside a proposal to amend the Civil Servants Act to require public disclosure of assets by members of the 12 occupational groups. However, due to the limited scope of the Civil Servants Act, only about 25,000 individuals would be affected.
The state of affairs in some public sector companies remains concerning, as federal ministers and contractual employees continue to sit on the boards of these companies in violation of the SOEs Act. A contractual employee of the finance ministry is also on the board of the Privatisation Commission, while a federal minister remains a member of Pak-Arab Refinery Limited (PARCO).
While the finance ministry has directed all SOE boards to implement Section 30(1) of the Act, it has yet to enforce this requirement on some of its own employees.
The law states, "The directors and senior management officers of a state-owned enterprise shall annually submit their assets and beneficially held investments and properties to the Board, and any changes thereon shall be reported to the Board within two weeks of such change, subject to such reasonable restrictions on making this information public as may be imposed by the Board in its conflict management policy." The memorandum further highlights that the State-Owned Enterprises (Ownership and Management) Policy, 2023 reinforces principles of financial transparency and accountability. It mandates SOEs to establish governance mechanisms in alignment with the Act to ensure compliance with disclosure and reporting requirements.
The ministry has instructed all boards and management to provide updates on the law and policy's implementation status.
The International Monetary Fund (IMF) has already urged Pakistan to implement a risk-based verification of disclosed civil servant assets, impose penalties, and investigate officers whose assets exceed their declared sources of income.
During one of its meetings, the global lender discussed referring cases of bureaucrats with mismatched assets and income sources to the National Accountability Bureau.
The board of Pakistan Revenue Automation Limited (PRAL) — a key player in the government's Rs3.7 billion plan to modernise the tax machinery's IT arm — has also started operations without first disclosing potential conflicts of interest or developing a code of conduct, a legal requirement.
The non-disclosure of conflicts of interest violates the State-Owned Enterprises Act and the SOE policy — two legal frameworks developed with international financial institutions' assistance to improve governance in state-run entities.
The board has been holding meetings without ensuring that newly appointed members have no direct or indirect conflicts of interest while making key policy decisions.
The CMU's Corporate Governance report noted that despite their critical importance, SOEs in the oil and gas sector face governance challenges, including delayed financial reporting, inefficient governance practices, and weak risk management systems. These issues erode public trust and hinder the sector's ability to contribute effectively to national energy security, as per the report.
Transitioning to a merit-based appointment system is crucial to improving decision-making and reducing inefficiencies, the CMU recommended.
Similarly, the CMU reported that SOEs in the power sector face severe governance challenges, including operational inefficiencies, financial losses, weak financial management, and underperforming boards of directors. These issues have contributed to persistent circular debt, unreliable energy supply, and limited progress in achieving sustainable energy goals.
Boards of DISCOs such as LESCO, HESCO, TESCO, and GEPCO have frequently been criticised for including members with limited expertise in energy management. A merit-based and skill-focused approach to board composition is necessary to strengthen their performance, the report recommended. These findings are based on the situation as of June 2024.
Regarding Development Financial Institutions (DFIs), the CMU report stated that board appointments should be based on professional expertise and experience rather than political affiliations.
Contrary to this advice, the finance ministry is currently filling four vacant positions on DFI boards in violation of policies and the law. A contractual employee or bureaucrat cannot serve as an independent director on a board.
The Central Monitoring Unit also noted that Pakistan International Airlines has frequently been subject to political appointments and decisions that have affected its operational efficiency and profitability. Ensuring independent board appointments based on merit and expertise — rather than political considerations — is crucial to improving governance, it added.
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