Government Directs State-Owned Enterprises to Disclose Assets

March 2, 2025 Mahi Bukhari

Lack of Transparency Prompts Government Action

Introduction

The Pakistani government has mandated all state-owned enterprises (SOEs) to disclose their assets and beneficially owned investments. This directive follows concerns over financial transparency and accountability failures within these public sector entities. The move aims to strengthen governance and ensure compliance with the law.

State-Owned Enterprises Under Scrutiny

Widespread Non-Compliance with Asset Disclosure

The Central Monitoring Unit (CMU), a specialized government cell responsible for financial oversight, recently uncovered major lapses in SOE governance. It was revealed that most board members and management officials were not complying with the requirement to disclose their assets. This lack of transparency constitutes a direct violation of the State-Owned Enterprises (Governance and Operations) Act, 2023.

Government’s Directive for Transparency

In response, the Ministry of Finance has issued new guidelines requiring all SOE boards and management teams to disclose their assets and beneficially owned investments. This directive was communicated through an official memorandum, emphasizing that compliance with Section 30(1) of the Act is mandatory.

According to the law:

“Directors and senior management officers of an SOE shall annually submit their assets and beneficially held investments and properties to the Board. Any changes therein must be reported within two weeks.”

The Ministry has further instructed all boards to provide implementation updates to ensure adherence.

Challenges in Governance and Compliance

Political Influence and Conflict of Interest

Several SOEs continue to face governance challenges, including political interference and conflicts of interest. Reports indicate that federal ministers and contractual employees are serving on SOE boards, violating established policies. For example:

A finance ministry employee is currently on the board of the Privatisation Commission.
A federal minister is a board member of Pak-Arab Refinery Limited (PARCO).

Despite directives from the Ministry of Finance, these conflicts remain unresolved, undermining efforts to establish transparent governance.

State-Owned Enterprises Facing Governance Issues

The CMU’s latest Corporate Governance report identifies severe governance challenges in multiple sectors:

1. Oil and Gas Sector

Delayed financial reporting.
Weak risk management practices.
Inefficient governance structures leading to declining public trust.

2. Power Sector

Widespread operational inefficiencies and financial losses.
Persistent circular debt and unreliable energy supply.
Poor board composition in power distribution companies such as LESCO, HESCO, TESCO, and GEPCO.

3. Development Financial Institutions (DFIs)

Political affiliations influencing board appointments.
Lack of professional expertise and financial management skills.
The Ministry of Finance filling vacant board positions against governance policies.

International Pressure for Reform

IMF’s Recommendations on Financial Transparency

The International Monetary Fund (IMF) has urged Pakistan to enforce stricter financial disclosures for government employees. The IMF has proposed:

Risk-based verification of declared civil servant assets.
Penalties and investigations for undeclared or mismatched financial records.
Referring cases of bureaucrats with excessive assets to the National Accountability Bureau (NAB).

Key Concerns and the Way Forward

Addressing Governance Failures

The CMU’s report recommends key reforms to enhance governance within SOEs:

Merit-based board appointments: Ensuring skilled professionals lead state enterprises.
Enhanced financial oversight: Establishing stringent financial reporting requirements.
Accountability measures: Strengthening the role of independent auditors and regulatory bodies.

Strengthening the Legal Framework

To further reinforce accountability, the government is considering amendments to the Civil Servants Act. However, the existing legal framework only affects approximately 25,000 individuals, limiting the scope of reforms. Broader legislative changes may be necessary to ensure comprehensive oversight.

Conclusion

The government’s directive for SOEs to disclose their assets represents a crucial step toward financial transparency and accountability. However, challenges such as political interference, weak governance structures, and compliance gaps remain significant hurdles. Strengthening legal enforcement and ensuring merit-based leadership are vital for achieving sustainable reforms in Pakistan’s public sector.

FAQs

1. What is the new directive for SOEs?

The government has mandated all state-owned enterprises to disclose their assets and beneficially owned investments as per the State-Owned Enterprises (Governance and Operations) Act, 2023.

2. Why is financial transparency important for SOEs?

Financial transparency helps prevent corruption, ensures accountability, and enhances the efficiency of state-run businesses.

3. What are the key challenges in SOE governance?

Major issues include political interference, conflict of interest, inefficient board management, and delayed financial reporting.

4. What role does the IMF play in Pakistan’s financial reforms?

The IMF has recommended risk-based verification of government employees’ assets, penalties for undeclared wealth, and investigations into financial discrepancies.

5. How can governance in SOEs be improved?

Governance can be improved through merit-based board appointments, stricter financial oversight, and enhanced accountability mechanisms.