Suggestion to govt: Establish holding company to turn around loss-making enterprises

Tarin says UK, China and Malaysia have adopted the same model.

Kazim Alam February 16, 2012


Former finance minister Shaukat Tarin urged the government on Thursday to establish a holding company having representatives from the private sector to run state-owned enterprises (SOEs).

Addressing Pakistan’s Economic Roadmap Summit organised by Nutshell Forum, Tarin said the holding company should be tasked with turning around SOEs within five years so that their management control could be transferred to the private sector.

“I’m suggesting the transfer of about 27% shares and management control of these enterprises. They’ll never be privatised if they remain under the ministries,” he said, adding the United Kingdom, China and Malaysia adopted the same approach to address the issue of loss-making SOEs.

He said if the loss-making SOEs costing the national exchequer Rs400 billion annually were not taken care of immediately, they would soon bring down the profitable SOEs like OGDC, PPL, SSGC, SNGPL and PSO. “They must be privatised. The government has no business doing business.”

Claiming that agriculture and retail sectors hardly paid any taxes, he called for increasing the tax-to-gross domestic product (GDP) ratio, which is currently a little less than 9%. He said retailers across the country paid taxes amounting to Rs125 million annually, of which Rs50 million came from the Canteen Stores Department.

Naming a few Karachi-based large superstores, he said there should not be any sacred cows when it came to collecting taxes.

Referring to the austerity plan approved by the federal government and four chief ministers in January 2010, Tarin said none of the measures the government agreed upon had yet been adopted. “Why does the government need 22 executive jets? Why should the convoys of the president and prime minister have 50 cars? The government must balance its books by cutting expenses.”

He also expressed hope that a survey of household incomes, being undertaken with the help of the World Bank, would lead to fair delivery of targeted subsidies. “Subsidies should always be targeted so that Shaukat Tarin doesn’t get cheap fuel and electricity.”

Speaking on the topic of tax reforms, AF Ferguson and Company Senior Tax Partner SM Shabbar Zaidi criticised the Federal Board of Revenue (FBR) for continuing with a presumptive tax regime, which was based on indirect taxation.

“Only tax collection demonstrates that the state’s writ is intact. In Pakistan, 99% tax is either voluntary or collected through the withholding source. The FBR has no active role in tax collection,” he said, adding, rather jokingly, that tax collection could actually go up if the FBR ceased to exist.

Addressing the summit, Tameer Micro Finance Bank Limited (TMFBL) President Nadeem Hussain said Pakistan achieved a positive GDP growth rate despite floods in two successive years.

He added the corporate sector was also doing well. “All my friends in the corporate sector are making money.” However, he said, banks did not want to risk their money by lending to the corporate sector only because the government guaranteed the Karachi Inter-Bank Offered Rate (Kibor) plus two percentage points on treasury bills.

Published in The Express Tribune, February 17th, 2012.


Cautious | 10 years ago | Reply

Why not take it one step further - make sure the management within the holding company are the best available which would likely mean you hire them on the international market. If you want to turn around these companies you need to get people who are not under the sway of govt - people who won't have any qualms about firing the overpaid/inept cronies who are currently running these enterprises into the ground.

Falcon | 10 years ago | Reply Of course banks are in the heavenly land because govt. has displaced private sector due to excessive and costly borrowing
Replying to X

Comments are moderated and generally will be posted if they are on-topic and not abusive.

For more information, please see our Comments FAQ

Most Read