Pakistan— For years, Pakistan’s state-owned enterprises have remained a persistent drain on public finances even as private firms, particularly small and medium enterprises continue to show resilience and profitability.
This contrast is no longer just an economic anomaly. It has become a structural fault line threatening fiscal stability, service delivery and long-term growth.
Recent figures once again highlight the scale of the problem. Dozens of major state-owned enterprises collectively posted losses running into hundreds of billions of rupees in the last fiscal year. These losses are not confined to one sector. Energy, transport, banking, and manufacturing entities have all struggled despite repeated bailout packages and reform announcements.
Meanwhile, private SMEs operating in the same economy, facing the same inflationary pressures and market risks continue to generate profits and expand operations.
The reasons behind this divergence are well known but poorly addressed. At the core lies governance failure. State enterprises operate under layered bureaucratic controls that slow decision-making and weaken accountability. Leadership positions are often filled through political considerations rather than professional competence, leaving organizations without clear commercial direction.
Overstaffing further compounds inefficiency, pushing wage bills far beyond sustainable levels.
Political interference has also distorted the commercial logic of SOEs. Pricing decisions are frequently influenced by short-term political calculations instead of cost recovery and long-term viability. Subsidies meant to protect consumers end up masking inefficiency, encouraging waste, and deepening fiscal deficits.
In sectors such as energy and transport, weak financial discipline has contributed to chronic circular debt forcing the government into repeated rescue cycles.
In contrast, private SMEs operate under market discipline. Lean management structures allow faster decisions. Competition forces innovation and cost control. Performance-based accountability limits corruption and inefficiency. These firms survive not because conditions are easy, but because failure carries consequences.
That discipline is largely absent in the public sector.
Pakistan can no longer afford to treat SOE reform as a cosmetic exercise. The choice is not between privatization and public ownership; it is between efficiency and collapse. Strategic sectors may remain under state control, but that control must be professional, transparent, and commercially grounded.
Independent boards, merit-based appointments, and measurable performance targets are essential first steps.
Financial reform is equally critical. Transparent accounting, credible audits, and an end to unchecked losses must replace bailout culture. Non-strategic, chronically loss-making entities should be opened to public-private partnerships or phased privatization. Workforce rationalization, though politically sensitive, is unavoidable if productivity is to improve.
The lesson from the private sector is clear.
Markets reward efficiency, innovation, and accountability. If Pakistan’s SOEs are to serve national interests rather than burden them, they must operate by the same principles. Without decisive action, public enterprises will continue to bleed, taxpayers will continue to pay and economic reform will remain stalled.
The window for gradual reform is closing. What is needed now is political resolve to protect public resources, restore institutional credibility, and align state enterprises with the realities of a modern economy.
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