Islamabad, Mar 2, 2025: In response to worries about the state-owned enterprises’ (SOEs’) lack of accountability and poor financial transparency, the government has directed all SOEs to reveal their assets and beneficially held interests.
The decision follows the discovery of significant shortcomings in SOE management and board disclosures by the Central Monitoring Unit (CMU), a special organization that oversees public sector accountability.
A Finance Ministry memorandum, sent to all SOE boards through their respective ministries, underlined mandatory compliance with Section 30(1) of the State-Owned Enterprises (Governance and Operations) Act, 2023.
“All entities must adhere to the Act’s supplies as part of continuous efforts to recover governance and transparency within SOEs,” the document said. The decision is in line with a planned modification to the Civil Servants Act that would mandate that members of 12 occupational categories disclose their assets to the public.
However, the total impact of this rule would be limited because it would only apply to 25,000 people. Reports of federal ministers and contract workers holding SOE board posts in contravention of governance laws prompted the Finance Ministry to launch its crackdown.
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Despite legislative limits, a federal minister continues to serve on the board of Pak-Arab Refinery Limited (PARCO), while a contractual employee of the Finance Ministry currently serves on the Privatization Commission board.
The Finance Ministry has not yet applied the same rules to its own staff, even though it enforces compliance on SOEs. According to the law, “A SOE’s directors and senior management officers are required to report any changes to the board within two weeks and submit their assets and beneficially held investments to the board on an annual basis.”
Financial transparency is further strengthened by the State-Owned Enterprises (Ownership and Management) Policy, 2023, which mandates that SOEs match disclosure regulations with their governance frameworks. All boards and management have been directed by the Finance Ministry to report on the status of implementation.
Additionally, Pakistan has been encouraged by the International Monetary Fund (IMF) to investigate inconsistencies between declared assets and income sources, enforce fines for non-compliance, and adopt risk-based verification of civil servant asset disclosures.
Referring such instances to the National Accountability Bureau (NAB) has been discussed. As required by the SOE Act and SOE policy, the board of the Pakistan Revenue Automation Limited (PRAL), which is essential to the government’s Rs. 3.7 billion tax IT modernization plan.
Has started operations without declaring conflicts of interest or establishing a code of conduct. Legal frameworks created in collaboration with international financial institutions to enhance governance in state-run organizations are broken when conflicts are not disclosed.
The Corporate Governance study from CMU states that poor risk management, delayed financial reporting, and other governance issues are common in oil and gas SOEs.Ineffective board procedures, which damage national energy security and public confidence.
A merit-based appointment system was suggested in the report as a way to improve decision-making. The problems with energy supply and circular debt have gotten worse for power sector SOEs due to operational inefficiencies, financial losses, poor financial management, and ineffective boards.
The board members of LESCO, HESCO, TESCO, and GEPCO lack energy management experience, according to the CMU. To enhance governance, the paper recommended a skill-based selection procedure.
The CMU recommended that board appointments for Development Financial Institutions (DFIs) be determined by professional qualifications rather than political connections. However, the Finance Ministry is currently placing contractual workers and bureaucrats in independent director positions, a practice that is against the law and policies.
The CMU also pointed out that Pakistan International Airlines (PIA) has suffered from ongoing political meddling, which has reduced the airline’s profitability and operational effectiveness. According to the paper, “improving governance requires ensuring independent board appointments based on merit rather than political considerations.”
As the government works to strengthen financial monitoring and rebuild trust in state-owned enterprises, SOEs are coming under more pressure to adhere to transparency standards as governance reforms come under closer examination.
