Corporatisation of SoEs: Old wine in new bottle
Wednesday, 8 October 2008
Shamsul Huq Zahid
The government, of late, has converted a number of state-owned enterprises, including banks, into public limited companies (plcs) with a pious objective of infusing dynamism and efficiency into those entities.
Shares of some of the state-owned plcs have already been offloaded in the stock market, notwithstanding the fact that the government still owns the majority stakes in those companies. The government, according to its avowed policy, would gradually offload a part of its stakes in all the plcs in the stock market.
But looking at the state of affairs with the state-owned plcs, one has enough reasons to be confused. Why is the government converting the SOEs into plcs or offloading their shares in the stock market? Is it for earning some money through the sale of the shares or for appeasing the multilateral donors who have been pressing hard for corporatisation of the SoEs?
Some SoEs were profitable well before their corporatisation. But there has been no remarkable improvement in their performance after corporatisation or offloading of a part of their stocks in the capital market.
The Rupali Bank is a perfect example of failure. The government offloaded only 6.0 per cent share in the market, keeping almost full control over the management of the bank. Thus, despite becoming a plc the Rupali has continued to remain under government control. Corruption, mismanagement and inefficiency have been the hallmarks of the SoEs and the Rupali Bank even after its partial privatisation could never shed those vices and it has been in the red for years after years. But the opposite happened in the case of another nationalized bank, the Pubali Bank, which was fully privatized. The latter is now one of the leading private commercial banks earning handsome profit every year.
There are other examples too. The telecom sector is considered one of the most financially viable sectors in the today's world. With low level of tele-density, Bangladesh offers high growth potentials for telecom companies handling cell or land phones. All the private cell phone companies have recoded impressive growth in their capacity expansion and business growth in recent years. The government floated its own cell phone company named Teletalk a few years back and only recently made the land phone behemoth, the Bangladesh Telegraph and Telephone Board-BTTB-a public limited company. The emergence of the Teletalk had attracted strong response from the people but their enthusiasm soon evaporated because of poor service delivery and lack of promotional activity.
While all the private cell phone companies are in a cut-throat competition to grab the market share, nobody feels the presence of the Teletalk in the competition. It is the only mobile phone company which had a negative growth in business in last August. Mysteriously, there has been no promotional drive on the part of the Teletalk management to expand business. The quality of service rendered by the company has been poor and subscribers do often complain about frequent disruption in its network coverage. There prevails an opposite scenario in neighbouring India where the state-owned cell phone company, the BSNL, is the leading operator with all other private sector mobile phone operators trailing far behind. It offers the best price and the best coverage both in land and cell phone operations.
Then again the BTTB has recently been made a plc under a new name-the Bangladesh Telecom Company Ltd-BTCL. The company is expected to offload a part of its stake in the capital market which is expected to create quite an enthusiasm among the investors because of the company's past financial track record.
But it is now altogether a different ball game in the telecom sector. The monopoly of the erstwhile BTTB does no more exist with the entry a number of private land phone operators who have offered attractive packages to potential subscribers. The BTCL has already lowered its call rates, connection and other fees to unbelievable levels, which have scared many private operators. But there is no reason to be scared. With the current level of service delivery, many BTCL subscribers would soon look for alternatives and the private operators would have to exploit that opportunity.
Except for a change in its name and reduced tariffs, the BTCL is just a new version of the same old BTTB which was inefficient, corruption-ridden and non-responsive to subscribers' woes. There has been no change in the attitude of the officials and employees of the newly created BTCL. A visit to any of the offices, including the ones handling revenue matters, would be enough to support this view. One would come across all the glum faced officials and employees sitting behind the wooden tables ready to greet you with disgust as if one has committed a crime by seeking redress to some problems.
The BTCL management has come out with beautiful logo and well-organised website along with attractive call and other rates. But it is yet to make its officials and employees truly responsive to the needs of the subscribers who now have options to take the services of private land phone companies.
The problem with the government's corporatisation or privatisation programme has been that it continues to be dependent on a bureaucratic system for the management of the SoEs turned plcs. Such dependence can no way help achieve the objectives behind the corporatisation programme of the government. The government should hire efficient and dynamic people from the private sector offering them attractive compensation packages to manage its newly created plcs. It should also recast the boards of these companies getting rid of the government officials and taking private sector people with sufficient knowledge and expertise in areas the companies are operating.
The ongoing move to improve the level of efficiency and accountability on the part of the SoEs would produce no tangible results unless and until the government makes the right steps to reorganize the management with competent and efficient people from the private sector.
Zahidfe@yahoo.com
The government, of late, has converted a number of state-owned enterprises, including banks, into public limited companies (plcs) with a pious objective of infusing dynamism and efficiency into those entities.
Shares of some of the state-owned plcs have already been offloaded in the stock market, notwithstanding the fact that the government still owns the majority stakes in those companies. The government, according to its avowed policy, would gradually offload a part of its stakes in all the plcs in the stock market.
But looking at the state of affairs with the state-owned plcs, one has enough reasons to be confused. Why is the government converting the SOEs into plcs or offloading their shares in the stock market? Is it for earning some money through the sale of the shares or for appeasing the multilateral donors who have been pressing hard for corporatisation of the SoEs?
Some SoEs were profitable well before their corporatisation. But there has been no remarkable improvement in their performance after corporatisation or offloading of a part of their stocks in the capital market.
The Rupali Bank is a perfect example of failure. The government offloaded only 6.0 per cent share in the market, keeping almost full control over the management of the bank. Thus, despite becoming a plc the Rupali has continued to remain under government control. Corruption, mismanagement and inefficiency have been the hallmarks of the SoEs and the Rupali Bank even after its partial privatisation could never shed those vices and it has been in the red for years after years. But the opposite happened in the case of another nationalized bank, the Pubali Bank, which was fully privatized. The latter is now one of the leading private commercial banks earning handsome profit every year.
There are other examples too. The telecom sector is considered one of the most financially viable sectors in the today's world. With low level of tele-density, Bangladesh offers high growth potentials for telecom companies handling cell or land phones. All the private cell phone companies have recoded impressive growth in their capacity expansion and business growth in recent years. The government floated its own cell phone company named Teletalk a few years back and only recently made the land phone behemoth, the Bangladesh Telegraph and Telephone Board-BTTB-a public limited company. The emergence of the Teletalk had attracted strong response from the people but their enthusiasm soon evaporated because of poor service delivery and lack of promotional activity.
While all the private cell phone companies are in a cut-throat competition to grab the market share, nobody feels the presence of the Teletalk in the competition. It is the only mobile phone company which had a negative growth in business in last August. Mysteriously, there has been no promotional drive on the part of the Teletalk management to expand business. The quality of service rendered by the company has been poor and subscribers do often complain about frequent disruption in its network coverage. There prevails an opposite scenario in neighbouring India where the state-owned cell phone company, the BSNL, is the leading operator with all other private sector mobile phone operators trailing far behind. It offers the best price and the best coverage both in land and cell phone operations.
Then again the BTTB has recently been made a plc under a new name-the Bangladesh Telecom Company Ltd-BTCL. The company is expected to offload a part of its stake in the capital market which is expected to create quite an enthusiasm among the investors because of the company's past financial track record.
But it is now altogether a different ball game in the telecom sector. The monopoly of the erstwhile BTTB does no more exist with the entry a number of private land phone operators who have offered attractive packages to potential subscribers. The BTCL has already lowered its call rates, connection and other fees to unbelievable levels, which have scared many private operators. But there is no reason to be scared. With the current level of service delivery, many BTCL subscribers would soon look for alternatives and the private operators would have to exploit that opportunity.
Except for a change in its name and reduced tariffs, the BTCL is just a new version of the same old BTTB which was inefficient, corruption-ridden and non-responsive to subscribers' woes. There has been no change in the attitude of the officials and employees of the newly created BTCL. A visit to any of the offices, including the ones handling revenue matters, would be enough to support this view. One would come across all the glum faced officials and employees sitting behind the wooden tables ready to greet you with disgust as if one has committed a crime by seeking redress to some problems.
The BTCL management has come out with beautiful logo and well-organised website along with attractive call and other rates. But it is yet to make its officials and employees truly responsive to the needs of the subscribers who now have options to take the services of private land phone companies.
The problem with the government's corporatisation or privatisation programme has been that it continues to be dependent on a bureaucratic system for the management of the SoEs turned plcs. Such dependence can no way help achieve the objectives behind the corporatisation programme of the government. The government should hire efficient and dynamic people from the private sector offering them attractive compensation packages to manage its newly created plcs. It should also recast the boards of these companies getting rid of the government officials and taking private sector people with sufficient knowledge and expertise in areas the companies are operating.
The ongoing move to improve the level of efficiency and accountability on the part of the SoEs would produce no tangible results unless and until the government makes the right steps to reorganize the management with competent and efficient people from the private sector.
Zahidfe@yahoo.com