P a k i s t a n P o l i c y N o t e — R e f o r m i n g S t a t e - O w n e d E n t e rpr i s e s 79568 Pakistan Policy Note 4 Sarwat Aftab and Sarmad Shaikh Reforming 1 J une 2 0 1 3 State‑owned Enterprises State-owned enterprises are a sizable element in Paki- Pakistan has substantial investment in its SOEs. stan’s economic landscape—more than 100 of them They contribute about 10 percent of GDP, and operate in a wide range of economic sectors, contribut- the State Bank of Pakistan estimates that the ing around 10 percent of GDP and representing about country has about 100 SOEs at the federal a third of stock market capitalization. But many are and provincial levels (Speakman 2012). These marred by weak corporate governance, cost-ineffective enterprises provide infrastructure services service delivery, and considerable financial losses. (power, transport, logistics), economic devel‑ This note highlights the negative implications of large opment services (oil and gas, mining), finan‑ state-owned enterprises and suggests that they are cial services (banks, insurance). And they are a burden to already strained fiscal resources, deliver spread throughout manufacturing. poor services, and create market distortions—all of which hold back economic growth and private sector Over the past several decades, Pakistan’s govern- development. Emphasizing the urgency of state-owned ments have followed various approaches to man- enterprise reforms, the note’s policy recommendations age SOEs. An Experts Advisory Cell was set propose measures (including commercializing state up under the Ministry of Industries to moni‑ enterprise) to curtail fiscal costs, professionalize the role tor and support industrial SOEs in the 1980s, of the government as owner, and improve corporate and in the early 1990s a privatization program THE WORLD BANK GROUP SOUTH ASIA REGION governance and accountability in state enterprises. was launched with a series of strategic sales in the industrial, energy, and banking sectors State-owned enterprises (SOEs) play an important (including one power plant, two gas distribu‑ economic role globally. Their weight may vary tion companies, and one bank.1 In the early from country to country but they remain prom‑ 2000s, the program conducted a series of capi‑ inent in energy and network industries such as tal market transactions that helped mobilize air and rail transport, electricity, gas and water domestic savings and strengthen the domestic supply, and natural resource extraction. SOEs capital markets. These transactions included are also predominant in the financial sector— international market listings in the form of particularly banking and insurance—and a global depositary receipts for United Bank considerable and increasing number are also Limited ($650.2  million) and Oil and Gas listed on national stock exchanges. They rep‑ Development Company Limited ($772.4  mil‑ resent a significant part of total stock market lion), which allowed the government to tap capitalization—from around a fifth in Singa‑ international institutional investors. Thus far, pore, a fourth in India and Thailand, a third in 167 privatization transactions have been con‑ Indonesia and Pakistan, half in Malaysia, and cluded, realizing about $9  billion (Govern‑ three-fifths in China (OECD 2010). ment of Pakistan 2011). P a k i s t a n P o l i c y N o t e — R e f o r m i n g S t a t e - O w n e d E n t e rpr i s e s A few SOEs incur substantial losses and have a (PEPCO), and Pakistan Railways. In 2011/12, major negative fiscal impact on public finances. the government issued guarantees aggregat‑ This is due mainly to poor labor and capital ing to PRs 203 billion (1 percent of GDP). The productivity, obsolete management practices, outstanding contingent liabilities as of June and inadequate regulatory arrangements for 30, 2012, stood at PRs 517 billion (2.6 percent utility tariffs. SOEs can also constrain private of GDP), which includes the stock of explicit sector growth because of poor service provi‑ debt guarantees in domestic (55 percent) and sion. They can crowd out private provision foreign (45 percent) currencies that appear in 2 in product and factor markets. And they may SOE’s books of account (Ministry of Finance generate a strong negative image of the public 2013). service. The estimated losses of some key SOEs during 2011 were PRs 28 billion for Pakistan Other than the publically guaranteed debt of SOEs, International Airlines Corporation, PRs 36 the government issues counterguarantees against the billion for Pakistan Railways, PRs 22 billion commodity financing operations of Trading Corpora- for Pakistan Steel, and PRs 300 billion for the tion of Pakistan, Pakistan Agricultural Storage and power sector. Services Corporation, and provincial governments. The Fiscal Responsibility and Debt Limitation Heavy fiscal deficits in recent years have generated a Act 2005 stipulates that the issuance of guar‑ large public debt. With little funds from external antees, including those for rupee lending, sources, financing has shifted toward domestic bonds, rates of return, output purchase agree‑ sources. Much higher fiscal deficits than in the ments, and all other claims and commitments recent past amplify the other challenges fac‑ that may be prescribed from time to time, as ing the government, including slow economic well as renewal of existing guarantees, should growth, recurring and devastating f loods, not exceed 2 percent of estimated GDP in any severe energy shortages, high inflation, and a financial year. Figure 1 illustrates the total weak security situation. guarantees outstanding and subsidies issued over the last three years. The SOEs are a significant drain on the state’s lim- ited resources. The State Bank of Pakistan in The fiscal support to SOEs in general and to the its Annual Report 2011–2012 stated that the eight SOEs on the radar of the Cabinet Committee fiscal deficit reached 8.5  percent of GDP in on Restructuring in particular is heavy (Figures 2 2011/12, or PRs 1,761 billion, deviating from and 3). During 2011/12, the government issued the provisional estimates of 6.4  percent of PRs  203 billion in guarantees. That year, the GDP. This considerable slippage was exacer‑ total outstanding stock of guarantees declined bated by shortfalls in tax revenues, nonrealiza‑ by PRs 42 billion, implying that PRs 245 billion tion of some nontax revenues, and overruns in guarantees either expired or were retired in expenditures on account of the energy sec‑ through government resources. tor’s “circular debt� and SOE losses.2 The fis‑ cal deficit also included one-off payments of Subsidies remain a major drain on the government’s PRs  391 billion (1.9  percent of GDP) for set‑ financial resources. In 2011/12, PRs 512 billion tling SOE debts (State Bank of Pakistan 2012). (2.5  percent of GDP) was spent on subsidies, Apart from these direct subsidies, contingent out of which PRs  464 billion (2.2  percent of liabilities represent an onerous fiscal impact: GDP) was for power. (In 2010/11, the equiva‑ guarantees issued to SOEs affect the state’s lent figures were 2.2  percent and 1.9  percent capacity to borrow and thus negatively affect of GDP; Government of Pakistan 2010.) It is the state in the medium term. These explicit important to eliminate the price differential and implicit guarantees include unfunded in electricity tariffs that generate circular debt losses of state-owned entities such as Pakistan in order to create fiscal space for development Steel Mills, Pakistan International Airlines expenditure. In 2011/12, 21 percent of the gov‑ Corporation, Water and Power Development ernment’s fiscal resources were consumed in Authority, Pakistan Electric Power Company power subsidies, a sharp jump from 6 percent Figure Guarantees outstanding and subsidies issued to state-owned enterprises, 2009/10–2011/12 1 Guarantees outstanding Subsidies issued 750 500 PRs billion 3 250 0 2009/10 2010/11 2011/12 Guarantees outstanding Subsidies issued 5 4 Percent of GDP 3 2 1 0 2009/10 2010/11 2011/12 Source: Government of Pakistan 2012b; Ministry of Finance Debt Policy Statement various years; Ministry of Finance Fiscal Policy Statement various years. Figure Annual fiscal support to state-owned enterprises—new guarantees issued, 2006/07–2011/12 2 Amount of guarantees Guarantees 300 3 Statutory limit under Fiscal Responsibility and Debt Limitation Act 2005: 2 percent of GDP 200 2 Percent of GDP PRs billion 100 1 0 0 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 Source: Government of Pakistan 2012b; Ministry of Finance Debt Policy Statement various years. of total fiscal resources in 2005/06 (Govern‑ the last four years, particularly due to increas‑ ment of Pakistan 2012b; Ministry of Finance ing power subsidies. In 2010/11 and 2011/12, Fiscal Policy Statement various years). Moreover, actual power subsidies were three and two actual expenditure on subsidies has been much times the budgeted amounts (Figure  4; Gov‑ higher than budget estimates consistently for ernment of Pakistan 2010). P a k i s t a n P o l i c y N o t e — R e f o r m i n g S t a t e - O w n e d E n t e rpr i s e s Figure Guarantees and subsidies issued to state-owned enterprises, 2011/12 3 (PRs billion) Guarantees issued Subsidies provided Trading Corporation Pakistan of Pakistan 18.3 Oil re neries/ Steel Mill 8.9 oil marketing companies 7.9 Pakistan Agricultural Pakistan Utility Stores Corporation 2.0 Others 4.4 Storage and Services International Airlines Corporation 18.7 Others 1.2 Corporation 9.5 4 Karachi Electric Supply Company 45.2 Water and Power Water and Power Development Authority/ Development Authority/ Pakistan Electric Pakistan Electric Power Company Power Company 180.4 419.0 Source: Government of Pakistan 2012a; Ministry of Finance 2013. Figure Power subsidies, budgeted and actual expenditures, 2007/08 –2011/12 4 Target Actual 500 400 300 PRs billion 200 100 0 2007/08 2008/09 2009/10 2010/11 2011/12 Source: ADB 2012. Key Policy Issues To improve SOE governance standards, the Minis- try of Finance constituted a task force of public and Absence of a legal and regulatory private sector representatives to finalize the corporate framework for state-owned enterprises governance rules for SOEs, drafted by the Securities and Exchange Commission of Pakistan (SECP). The government has taken some initial steps to These rules are for SOEs with a corporate improve the performance of key SOEs. In January structure and are based on the best principles 2010, the prime minister constituted a Cabi‑ of corporate governance of the Organisation net Committee on Restructuring of public sec‑ for Economic Co-operation and Development tor enterprises to tackle institutions’ financial (OECD). The task force completed its work losses. The Committee identified eight SOEs and the draft Public Sector Companies (Cor‑ for restructuring with the objective of improv‑ porate Governance) Rules were notified by the ing overall corporate governance of these SECP for public consultation in March 2012 entities, curtailing financial hemorrhaging, and were placed on the SECP’s website. To improving service delivery, and reducing the seek stakeholders’ views, a thorough consulta‑ fiscal burden on the exchequer.3 tive process was then followed and conferences held in various cities. These rules were formally There is no SOE Act or equivalent law in the country approved by the government on March 8, 2013, that would lay down the foundation for good corpo- and will be effective after 90 days of the issu‑ rate governance. Most jurisdictions have a SOE ance of the notification. law that provides the framework for how the state, as owner and policy maker, governs its Broader SOE reforms are being carried out as part SOEs. Others have developed an SOE owner‑ of Pakistan’s development agenda and framework ship policy, laying down the parameters of state for economic growth. Some of the government’s ownership, its role in the corporate governance other SOE reforms are in Box 1 (Economic of SOEs, and how the government will imple‑ 5 Reforms Unit 2012). ment its ownership policy. However, both the SOE law and ownership policy are missing in The government has started a program for granting Pakistan. stock options to SOE employees under the Benazir Employees Stock Option Scheme. The Scheme was Lack of clear ownership role announced in August 2009 and offers 12 per‑ cent stock options from the 80 public organi‑ A fundamental tenet of SOE reform is the need to zations to the employees of their respective separate the government’s role as owner from its role organization.4 Around half a million employ‑ as policy maker, coordinator, subsidy deliverer (typi- ees are expected to benefit. cally handled by the line ministry), and regulator (typically handled by an independent regulator). In Going forward, it is important to focus on SOE cor- some cases, the line ministry’s role is further porate governance reforms as this will help improve reduced by moving the subsidy-financing role management and thus in delivery of better and more elsewhere. Lack of clearly defined, explicit, cost effective distribution of goods and services to the and consistent ownership policy has resulted public at large. Currently, there is no diagnostic in vaguely defined roles and responsibilities for assessment of the sector and hence no roadmap the government, leading to conflicts of inter‑ or action plan formulated to move forward in a ests at the government level, ineffective moni‑ coherent manner. toring and evaluation of SOE performance, Box Some initiatives for state-owned enterprise reform 1 • The Economic Reforms Unit set up in the Ministry of Finance was designated as the secretariat to the Cabinet Committee on Restructuring. • The government has expedited implementation of the Power Sector Reform Plan 2010, which was upgraded under the Power Sector Recovery Plan 2011. Dissolution of Pakistan Electric Power Company is under way and will be completed by the end of September 2013 with transfer of operational functions to National Transmission and Dispatch Company and Central Power Purchase Authority. The Authority is already operating, and boards of directors for the nine distribution companies and Generation Holding Company have been reconstituted. • The board of directors of Pakistan Steel Mills has been strengthened and implementation of a business plan for revitalizing the company, approved by the cabinet, has started. • A restructuring framework for Pakistan Railways has been brought into operation. An asset management company is being set up for optimum use of the entity’s assets. Priorities are to repair locomotives—commercial borrowing has been obtained to repair 96 locomotives—and to rationalize routes and freight operations. Reconstituting the board of directors and senior management has also been part of the overall restructuring process since early 2012. • A restructuring plan for Pakistan International Airlines Corporation has been finalized, and addresses corporate governance, human resource rationalization, financial and operational restructuring, engineering improvements, procurement and logistics, airport services, and dispatch reliability. • Initial restructuring plans for Trading Corporation of Pakistan, Pakistan Agricultural Storage and Services Corporation, and Utility Stores Corporation have been framed. • General reforms such as implementation of rules for regulating public procurement of goods, services, and works by the Public Procurement Regulatory Authority have been introduced. • The role of the Competition Commission of Pakistan in providing a level playing field has been strengthened through a separate Act. P a k i s t a n P o l i c y N o t e — R e f o r m i n g S t a t e - O w n e d E n t e rpr i s e s and weak corporate governance practices at yet this is fundamental to effective corporate the SOE level. governance, particularly when minority share‑ holdings or multiple shareholding interests are The government has made little progress in separat- at stake (World Bank 2005). ing these roles as in most cases they are with the line ministries, which vary in capacity but do not act as Good corporate governance begins with appointing informed and active owners. Little effort is made and empowering an independent board of directors. by line ministries to ensure that SOE gover‑ It is inadvisable to include current civil servants 6 nance is carried out transparently, accountably, or ministers on the board, which is common professionally, and effectively. No formal moni‑ practice in Pakistan. The directors are gener‑ toring mechanism is in place to gauge SOE ally not aware of their fiduciary responsibilities, performance. There are no regular checks and the board structures are underdeveloped, on managerial performance as the boards set with limited effectiveness of board committees neither targets nor performance indicators and processes. Finding competent independent for management. And there is also no clearly directors can also be quite challenging (World defined board nominations policy that ensures Bank 2005). The Corporate Governance Rules that the best possible directors are nominated approved by the government in March 2013 are independently and transparently to serve on a good first step, but the real test lies in their SOE boards. implementation. Further, the SOEs listed on stock exchanges are already mandated to abide Pakistan has examples of institutional governance by the 2012 Code of Corporate Governance for working well—and not so well. The country can listed companies.6 be proud of institutions like the State Bank of Pakistan, but PEPCO—a company set up for Of particular importance in Pakistan is the appoint- two years to facilitate corporatization of power ment and role of the CEO. Identifying and sector entities—outlived its useful life and con‑ selecting a professional CEO of an SOE, inde‑ tinued operations for more than 14 years, and pendent of government interference, is a chal‑ with limited effect. PEPCO failed because of lenging but critical factor for any SOE reform. a lack of political will in government, policies Measures or protection are needed to ensure incentivizing high-cost production, insufficient that only qualified and nonconflicted direc‑ autonomy, dependency on legacy staff to imple‑ tors and CEOs are appointed. Moreover, CEOs ment reforms, and lack of accountability and should be appointed by the board rather than clear lines of authority, among others (USAID by the government. Such measures could be and World Bank 2012). part of the implementation mechanism for the new Corporate Governance Rules. Weak corporate governance standards Weak disclosure practices and poor control frameworks The corporate governance Report on Observance of are two significant corporate governance weaknesses. Standards and Codes 2005 found that corporate gov- The disclosure refers to both financial and ernance was making progress, despite generally low nonfinancial practices while the poor control awareness of its importance.5 This was exacerbated mechanism relates to risk management, inter‑ by a preponderance of family-owned private nal controls and internal audit frameworks. companies that tended to avoid modern cor‑ porate governance practices. Such a finding is Policy Recommendations not unusual in emerging markets and typically requires enforcement interventions (regulatory Efforts to reform SOEs have stalled in Pakistan capacity, legislative protection, and disclosure for almost five years—contributing to steep fiscal requirements) as well as capability building losses and to worsening and cost-ineffective services. among directors themselves. For SOEs there Urgent policy measures are needed to improve was no distinction between the ownership role the efficiency and effectiveness of SOEs, now (referred to above) and the role of directors, discussed under three areas. Enhance financial discipline and assessment of the sector, including fiscal issues, strengthen legal framework legal/regulatory framework, current corpo‑ rate governance practices, key issues, menu of The government has to identify enterprises that need reform options, and preliminary recommenda‑ to be privatized and ensure completion of the privati- tions. Based on this assessment, a road map/ zation process within the assigned timeframe. Corpo‑ action plan can be prepared by the govern‑ rate governance reforms are no substitute for ment for SOE reform. privatization but do improve the prospects of the entity to be privatized. To build public con‑ It is crucial to have a legal and regulatory framework 7 fidence, privatization needs to be transparent. for SOEs. The new Corporate Governance Rules are the right step, but an SOE Act or equivalent To bring down fiscal costs, it is important to continue law is needed to provide the framework for how the reform process initiated by the government through the state, as owner, governs its SOEs. Typically restructuring boards and managing key SOEs. This such an Act requires SOEs to be commercially step should be followed by corporatization oriented; SOEs to be forbidden to expand or where the SOEs are not already in a corporate contract the scope of their activities without structure. The SOEs should be required to pre‑ government approval;7 SOE obligations to pro‑ pare business plans. Restructuring will reduce vide timely financial and management informa‑ fiscal costs if the newly appointed boards and tion; guidance on dividends; clarity on which management are effective and if corporatiza‑ activities of government should be turned over tion brings the entities under the same law (the to SOEs and those that should not; clear delin‑ Companies Ordinance) and under one regula‑ eation of the roles and responsibilities of the tor (the SECP), thus ensuring a level playing government, boards, and management; and field for the private sector. These measures are processes for appointing boards of directors. in line with OECD guidelines recommending The legislation may also include hard budget that governments simplify and streamline the constraints that incentivize the SOEs to run operational practices and legal form under profitably. In parallel, the government takes on which SOEs operate. the obligation to compensate in a timely man‑ ner the SOE when it contractually agrees on Graduating to the next stage—­ commercialization— services from the SOE—nothing breaks down will take more time and a substantial commitment of SOE reform discipline faster than nonpayment resources. Commercialization, after the conver‑ of debts owed by other government agencies.8 sion of an enterprise to a company, typically A core question for Pakistan’s authorities is includes identifying noncommercial activi‑ whether they need the equivalent of an SOE ties, separating them from the enterprise, Act. A lesser option would be to issue an owner‑ and financing them separately; cleaning up ship policy that defines the overall objectives of the balance sheet and establishing appropri‑ state ownership, the state’s role in the corpo‑ ate staff levels through financial and opera‑ rate governance of SOEs, and how it will imple‑ tional restructuring; establishing modern ment its ownership policy. systems of professional management (infor‑ mation, human resources); upgrading human Professionalize the role of resources; and changing the culture. Commer‑ government as owner cialization will probably lead to a rethinking of efficiency and profitability at these SOEs, It is imperative to separate the government’s role as highlighting the question of retrenchment. owner from its role as policy maker, coordinator, The government needs to ensure that the right and regulator. The government should refrain mechanisms are in place to manage, retrain, or from getting involved in day-to-day manage‑ compensate staff. ment and should allow SOEs full operational autonomy to achieve their objectives by pro‑ It is important to move forward coherently. The fessionalizing SOE boards and holding them first step could be to undertake a diagnostic accountable through the development of a P a k i s t a n P o l i c y N o t e — R e f o r m i n g S t a t e - O w n e d E n t e rpr i s e s proper performance monitoring and evalua‑ of the legal framework and the institutional tion system. The government should replicate context. past models that succeeded but were unfortu‑ nately discontinued.9 Irrespective of the option selected, regular monitoring of financial and managerial performance is extremely Appointing and monitoring the boards is integral to important and needs to be prioritized. The govern‑ monitoring ownership. As the owner, the govern‑ ment should ensure that each SOE has a strat‑ ment is accountable to Parliament, and it needs egy, clarifying commercial and noncommercial to appoint directors capable of meeting the strategic objectives. Also there should be a set 8 owner’s expectations, following a skills-based of clearly defined key performance indicators appointment process. Anything less—such as in a memorandum of understanding that is patronage or representation—diminishes the tracked regularly by the government. To intro‑ skills on the board. There should be a well- duce more transparency into the SOE port‑ structured and transparent board-nomination folio, the government should start an annual process. The boards, once appointed, should SOE publication, which highlights financial be allowed to exercise their responsibilities performance and information such as key per‑ independently. Centralized reporting systems formance indicators and board composition. should be put in place to allow regular moni‑ toring and assessment of SOE performance. Improve corporate governance and accountability The ownership function of SOEs in Pakistan lies with the concerned line ministry. Several countries have Effective corporate governance of SOEs can have moved toward creating a centralized ownership a positive impact on an economy, especially for a entity charged with SOE oversight. Ownership country with many SOEs. The benefits of bet‑ models can be grouped in three broad types ter governance include improved SOE finan‑ (World Bank 2012): cial performance, better service delivery, and • The decentralized model, where ownership greater access to capital markets. The Republic responsibilities are dispersed among differ‑ of Korea and Singapore are two notable suc‑ ent line ministries. cess stories of strong corporate governance and • The dual/hybrid model, where, in addition well-run SOEs. In Pakistan, most of the SOEs to line ministries, a second ministry, such as listed on the Karachi Stock Exchange and that the Ministry of Finance, may also have cer‑ follow the exchange’s corporate governance tain responsibilities like approving annual requirements are profitable. But listing on the budgets, subsidies, and transactions and Exchange does not mean that SOEs will be free monitoring financial performance. of political influence and continue to be com‑ • The centralized model, where ownership mercially viable.10 For corporate governance responsibilities are consolidated in an entity framework to succeed for SOEs in Pakistan, that is independent or under the authority the government must not interfere in the enter‑ of one ministry. prise’s operations. The SOEs should have an There is no one-size-fits-all solution for own‑ autonomous board of directors accountable to ership models. But Pakistan can shift from the the government for results and performance. current decentralized model to either a dual/ The CEO should appointed transparently by hybrid model or a centralized model. A central‑ the board. ized model can take various forms like an advi‑ sory/coordinating body (India, New Zealand, The approval of the Corporate Governance Rules Norway, South Africa, Sweden), ownership for SOEs is a good first step, but the real test lies in agencies (China, France, Indonesia), or hold‑ effective implementation. Also important will be ing/investment companies (Gulf countries, workshops and training sessions to build aware‑ Hungary, Malaysia, Singapore). Determining ness and understanding of the Rules. Develop‑ which model is most feasible in Pakistan needs ing an implementation plan that clearly lays to be based on a more detailed assessment down the roles and responsibilities of the line ministries, Ministry of Finance, and SECP is and Utility Stores Corporation—private important. The government should also extend companies; and Pakistan Agricultural the requirements of the Rules to SOEs that are Storage and Services Corporation—a pub‑ not in corporate structure until all SOEs are lic company. corporatized. 4. For more information, see Government of Pakistan (2011). Internal and external accountability mechanisms are 5. World Bank 2005. This report is based on a function of formal relationships and disclosure. the OECD principles of good governance. Accountability and disclosure to the Parlia‑ 6. The 2002 Code of Corporate Governance 9 ment through an annual report on SOEs that was revamped and brought in line with includes financial and operational report‑ international practices. The 2012 Code ing for each enterprise can be a start. The was implemented in April 2012. Annual Report of the State Ownership Steer‑ 7. While the memorandum of association ing Department in the Prime Minister’s Office somewhat limits the scope of activity of of Finland is a benchmark of accountability to a corporatized SOE, this issue is rarely the National Assembly (Government of Fin‑ monitored. land 2011). The financial statements of SOEs 8. This is often referred to as circular debt. should follow international financial reporting 9. Policy, regulatory powers, and ownership standards and should be placed on the SOEs’ of assets were separated in the Ministry of websites. The performance of the senior man‑ Petroleum and Natural Resources, until agement on the targets (for example, key per‑ 2008 when it was reversed. formance indicators) should be evaluated by 10. The two relatively well-performing com‑ the board and should be linked to remunera‑ panies (Sui Southern Gas Company and tion. A transparent mechanism should be put Sui Northern Gas Pipelines) listed on the in place to evaluate the performance of the Karachi Stock Exchange for quite some Board. time are now overstaffed and face serious liquidity and recovery problems with unac‑ Notes counted for gas losses hitting double dig‑ 1. Kot Addu Power Company Limited was its, up from 3–4 percent previously. privatized in 1993 and Muslim Com‑ mercial Bank in 1991. Sui Southern Gas References Company and Sui Northern Gas Pipelines ADB (Asian Development Bank). 2012. Asian Limited were corporatized in 1990s and Development Outlook 2012: Confronting Ris- shares sold on the stock market. ing Inequality in Asia. Mandaluyong City, 2. Circular debt in the energy sector of Paki‑ Philippines. stan refers to the increasing receivables in Economic Reforms Unit. 2012. “Meetings with the power supply chain among refineries, World Bank South Asia Financial & Pri‑ marketing companies, power producers, vate Sector Development Unit.� Ministry of distribution companies, and end users. Finance, Islamabad. Overall circular debt was estimated at PRs Government of Finland. 2011. 2010 Annual 382.5 billion in July 2012 (State Bank of Report of the Ownership Steering Department in Pakistan 2012). the Prime Minister’s Office. Ownership Steer‑ 3. These were the National Highway Author‑ ing Department, Prime Minister’s Office, ity and Pakistan Railways—established Helsinki. under the relevant enactments; Pakistan Government of Pakistan. 2010. “Budget in Brief International Airlines Corporation—a 2010–11.� Ministry of Finance, Islamabad. listed company under section 503 of the www.finance.gov.pk/budget/Budget_in_ Companies Ordinance 1984 (the section Brief_2010_11.pdf. applies to listed companies governed by ———. 2011. “Privatization Commission Year special enactment); Pakistan Steel Mills, Book 2010–2011.� Privatization Commission, Trading Corporation of Pakistan, PEPCO, Ministry of Privatization, Islamabad. www. P a k i s t a n P o l i c y N o t e — R e f o r m i n g S t a t e - O w n e d E n t e rpr i s e s privatisation.gov.pk/Year%20Book/Year%20 of State-Owned Enterprises in Asia, Kuala Book%202010-2011.pdf. Lumpur, May 24–25. ———. 2012a. “Budget in Brief 2012–13.� Min‑ Speakman, John. 2012. “SOE Reform: Time istry of Finance, Islamabad. www.finance.gov. for Serious Corporate Governance.� Policy pk/budget/Budget_in_Brief_2012_13.pdf. Paper Series on Pakistan PK 04/12. World ———. 2012b. “Economic Survey of Pakistan Bank, Washington, DC. 2011–12.� Ministry of Finance, Islamabad. State Bank of Pakistan. 2012. Annual Report Ministry of Finance. 2013. Debt Policy Statement 2011–2012: The State of Pakistan’s Economy. 10 2012–13. Islamabad: Debt Policy Coordina‑ Karachi. tion Office. USAID (United States Agency for International ———. Various years. Debt Policy Statement. Development) and World Bank. 2012. “Paki‑ Islamabad: Debt Policy Coordination Office. stan’s Power Sector Enterprises—A Case for ———. Various years. Fiscal Policy Statement. Reform.� CASA-1000 Joint Working Group Islamabad: Debt Policy Coordination Office. Meeting between USAID and World Bank, OECD (Organisation for Economic Co-opera‑ October 4, Almaty, Kazakhstan. tion and Development). 2010. “Corporate World Bank. 2005. Report on Observance of Stan- Governance of State-Owned Enterprises in dards and Codes: Pakistan. Washington, DC. Asia: Recommendations for Reform.� Pol‑ ———. 2012. SOE Corporate Governance Toolkit. icy Brief presented at 5th meeting of the Washington, DC. OECD Network on Corporate Governance © 2013 The International Bank for Reconstruction and Development/THE WORLD BANK 1818 H Street NW Washington, DC 20433 USA All rights reserved This report was prepared by the staff of the South Asia Region. The findings, interpretations, and conclusions expressed herein are those of the authors and do not necessarily reflect the views of the World Bank’s Board of Executive Directors or the countries they represent. The report was designed, edited, and typeset by Communications Development Incorporated, Washington, DC.