SoEs' divestment through stock market
Wednesday, 21 November 2007
BARRING a few, most state-owned enterprises (SoEs) have been a major source of trouble for the government because of their poor financial performance. Volumes have been said and written about the high level of inefficiency, corruption and mismanagement in these enterprises. But the annual loss of the SoEs combined has been rising despite the fact that a good number of units under the control of the SoEs have either been closed down or divested by the successive governments since 1975. In the last financial year, the SoE losses reached the all-time high of over Tk. 42 billion. However, substantial increase in the loss incurred by the Bangladesh Petroleum Corporation (BPC) had contributed to the hike in the total SoE losses. Besides, most SoEs have substantial amount of bank liabilities-nearly Tk. 20 billion-in arrear, particularly with the public sector banks. The reluctant public sector banks are, at times, pressurised by the government to extend loans to a number of delinquent SoE borrowers, leading to problems of liquidity, capital inadequacy, provisioning requirements etc., for the bank themselves.
The multilateral donors have time and again said that the Bangladesh economy cannot sustain the financial haemorrhage on account of the inefficient SoEs and insisted that those be divested. There were initial resistance from the vested quarters but over time it has weakened. What things have been holding back the divestment process are the bureaucratic delays and indecision on the part of the past political governments. However, the present interim administration is trying to expedite the process of partial divestment of both profit-earning and loss-making SoEs and help improve their performance. And, possibly, this is the best possible time to accomplish the task as investors in large numbers with huge funds under their command are eagerly waiting for new issues to subscribe. The level of over-subscription of initial public offerings in recent months has been unbelievably high-nearly 40 times in some cases.
A part of the government stakes in two petroleum marketing companies-Meghna and Jamuna-- and Titas Gas Transmission and Distribution Company are expected to be offered to the public through the bourses soon. A meeting chaired by the finance adviser Sunday last decided to offload a part of the government holdings in the telecom behemoth, the Bangladesh Telegraph and Telecom Board and its cell phone subsidiary, the Teletalk, by the month of April next. Besides, decision to make available more shares held by the government in the owning companies of the Hotel Sheraton and the Hotel Pan Pacific Sonargaon to the general investors was taken at the meeting.
Bringing some money to the government coffer, the offloading of shares of these SoEs is expected to make a difference in their management. Once listed with the bourses, the management of the partially divested units would be subject to scrutiny by the general shareholders who would, naturally, want return on their investments. Thus, divestment of the SoEs through the stock market offers a unique opportunity for both the government and the investors to ensure accountability and transparency in their operations. Neither the government nor the investors should consider the process as mere change in partial ownership. The investors should consciously try to send competent people as their representatives to the boards so that the latter can contribute to the efficient operations of the largely state-owned entities.
The multilateral donors have time and again said that the Bangladesh economy cannot sustain the financial haemorrhage on account of the inefficient SoEs and insisted that those be divested. There were initial resistance from the vested quarters but over time it has weakened. What things have been holding back the divestment process are the bureaucratic delays and indecision on the part of the past political governments. However, the present interim administration is trying to expedite the process of partial divestment of both profit-earning and loss-making SoEs and help improve their performance. And, possibly, this is the best possible time to accomplish the task as investors in large numbers with huge funds under their command are eagerly waiting for new issues to subscribe. The level of over-subscription of initial public offerings in recent months has been unbelievably high-nearly 40 times in some cases.
A part of the government stakes in two petroleum marketing companies-Meghna and Jamuna-- and Titas Gas Transmission and Distribution Company are expected to be offered to the public through the bourses soon. A meeting chaired by the finance adviser Sunday last decided to offload a part of the government holdings in the telecom behemoth, the Bangladesh Telegraph and Telecom Board and its cell phone subsidiary, the Teletalk, by the month of April next. Besides, decision to make available more shares held by the government in the owning companies of the Hotel Sheraton and the Hotel Pan Pacific Sonargaon to the general investors was taken at the meeting.
Bringing some money to the government coffer, the offloading of shares of these SoEs is expected to make a difference in their management. Once listed with the bourses, the management of the partially divested units would be subject to scrutiny by the general shareholders who would, naturally, want return on their investments. Thus, divestment of the SoEs through the stock market offers a unique opportunity for both the government and the investors to ensure accountability and transparency in their operations. Neither the government nor the investors should consider the process as mere change in partial ownership. The investors should consciously try to send competent people as their representatives to the boards so that the latter can contribute to the efficient operations of the largely state-owned entities.