Reducing losses of SOEs
Tuesday, 22 July 2008
THE state owned enterprises (SOEs) under various sector corporations of the government have been a source of continuing drain of public resources . The losses have been rising, ebbing somewhat and rising again over the years. On the whole, the losses have been climbing steadily since the last thirty-seven years. But the point of concern is the sudden cumulative rise of the SOE losses by 131 per cent in the period of only one year, from the financial year (FY) 2006-7 to FY 2007-8. Total losses of 44 SOEs in this period have been estimated at Tk. 52.76 billion in FY 2007-8 in contrast Tk. 22.76 billion in FY 2006-7. Thus, this whopping jump in SOE losses in a single year is indeed one that ought to cause deep concern among top managers of the country's economy. The SOEs have been bleeding but bleeding at this rate, if it continues, would be unsustainable. The losses must be brought down substantially through very well planned activities starting immediately.
The losses of the SOEs are very clearly linked to extraordinary rise in the price of imported fuel oils. The Bangladesh Petroleum Corporation (BPC) was the highest loss-making organisation with its losses climbing to Tk. 58.82 billion in the just ended financial year compared to Tk. 26.29 billion in the previous one. Government had to subsidise the sale operations of its imported fuel oils with a great deal of additional resources that showed up in its losses. But these losses would be considerably checked in the present year after readjustment of fuel oil prices domestically. But that would again depend on the behavioural of prices in the global market. Meanwhile, the government is expected to also undertake a range of measures to reduce the net import requirements of fuel oils. Finding and using new gas reserves on the highest priority basis, simultaneous increase in facilities for conversion of transporters to use compressed natural gas (CNG), expansion of the capacities of Eastern Refinery (ERL) for refining crude to reduce direct import of refined petroleum products, introduction of alternatives to fuel oils etc., can lead to a net contraction in the bill for higher priced energy. The same would also address the biggest area in SOE losses. Government, therefore, should embark on a short term plan to achieve these goals at the fastest.
As for the other two big loss-making SOE organisations -- the Bangladesh Biman Corporation (BBC) and the Bangladesh Power Development Board (BPDB), the reasons for their mounting losses need to probed hard and appropriate policies will have to be set in motion to reduce these losses. After corporatisation, the BBC should have improved its efficiency and cut down its losses, if the much-needed improvements in its operational management are ensured. Such improvements would call for an assessment of its state of affairs, to be followed up with swift steps to cure the lingering ailments. The same will have to be done in respect of the BPDB. Furthermore, vigorous efforts will have to be made to run all other SOEs with more operational and management efficiency with a view to reducing their losses or to increase their profits where such profits are being made.
The reduction of the leaping-up losses of the SOEs is extremely important for the health of the macro economy. Government in Bangladesh is under severe pressures to balance its budget and maintain a reasonable balance of payments position under the worsening externalities. The budget deficit is already high and pushing the economy into high risk areas and this development is considerably due to bearing the losses of the SOEs though other factors are also much involved. In this situation, it is imperative to take all out measures under a comprehensive policy framework to ensure efficient running of the SOEs with the purpose of bringing down their losses or increasing their profits respectively.
The losses of the SOEs are very clearly linked to extraordinary rise in the price of imported fuel oils. The Bangladesh Petroleum Corporation (BPC) was the highest loss-making organisation with its losses climbing to Tk. 58.82 billion in the just ended financial year compared to Tk. 26.29 billion in the previous one. Government had to subsidise the sale operations of its imported fuel oils with a great deal of additional resources that showed up in its losses. But these losses would be considerably checked in the present year after readjustment of fuel oil prices domestically. But that would again depend on the behavioural of prices in the global market. Meanwhile, the government is expected to also undertake a range of measures to reduce the net import requirements of fuel oils. Finding and using new gas reserves on the highest priority basis, simultaneous increase in facilities for conversion of transporters to use compressed natural gas (CNG), expansion of the capacities of Eastern Refinery (ERL) for refining crude to reduce direct import of refined petroleum products, introduction of alternatives to fuel oils etc., can lead to a net contraction in the bill for higher priced energy. The same would also address the biggest area in SOE losses. Government, therefore, should embark on a short term plan to achieve these goals at the fastest.
As for the other two big loss-making SOE organisations -- the Bangladesh Biman Corporation (BBC) and the Bangladesh Power Development Board (BPDB), the reasons for their mounting losses need to probed hard and appropriate policies will have to be set in motion to reduce these losses. After corporatisation, the BBC should have improved its efficiency and cut down its losses, if the much-needed improvements in its operational management are ensured. Such improvements would call for an assessment of its state of affairs, to be followed up with swift steps to cure the lingering ailments. The same will have to be done in respect of the BPDB. Furthermore, vigorous efforts will have to be made to run all other SOEs with more operational and management efficiency with a view to reducing their losses or to increase their profits where such profits are being made.
The reduction of the leaping-up losses of the SOEs is extremely important for the health of the macro economy. Government in Bangladesh is under severe pressures to balance its budget and maintain a reasonable balance of payments position under the worsening externalities. The budget deficit is already high and pushing the economy into high risk areas and this development is considerably due to bearing the losses of the SOEs though other factors are also much involved. In this situation, it is imperative to take all out measures under a comprehensive policy framework to ensure efficient running of the SOEs with the purpose of bringing down their losses or increasing their profits respectively.