Roadmap developed to get rid of circular debt

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ISLAMABAD - Terming the circular debt a ‘major challenge’, the Finance Minister Saleem H Manviwalla on Friday said that incumbent government would leave comprehensive roadmap for next government to get rid of the circular debt problem and improve performance of Public Sector Companies (PSCs) on sustainable basis, as these two are main economic challenges of the country. Rejecting the reports regarding provision of Rs 100 billion to Pakistan International Airlines, Saleem H Manviwalla said that government has only provided Rs 46 million to PIA to buy new aircrafts. In his address, Finance Minister expressed that the government has made historic changes in legislation in order to improve economic governance including Arbitration Bill, Special Economic Zones (SEZs) Act and recent move of CGR among others. Finance Minister Saleem H Manviwalla presided the ceremony and accorded approval of Corporate Governance Rules (CGR) for issuance by Securities and Exchange Commission of Pakistan. Saleem H Mandviwala has said that the Public Sector Companies (Corporate Governance) Rules, 2013, are expected to bring about more transparency in the operational matters of the Public Sector Companies and plug their huge losses.

He further said that the government took the initiative to turn around the public sector companies and constituted a cabinet committee on restructuring of public sector enterprises. He mentioned that the rules for public sector companies were also the outcome of efforts of cabinet committee on restructuring.

In accordance with the reforms programme, the government has successfully constituted a new board of directors of public sector companies in a transparent way and also enhanced their autonomy and independence, he said. The reconstitution of board of directors and appointment of chief executive officers on merit had already minimized political interference in the management of such companies.

The Finance Minister asked the SECP Chairman and DG, ERU, to formulate a strategy to monitor and ensure the successful implementation of the Corporate Governance Rules.

Speaking on the occasion, Chairman Securities and Exchange Commission of Pakistan Muhammad Ali gave detailed presentation on the Corporate Governance Rules 2013 and expressed the hope that the rules will have far-reaching effect in reviving the PSCs in Pakistan.

According to official estimates, the eight major PSCs are receiving more than Rs300 billion in annual support and bailouts from the federal government, thereby draining fiscal resources which may otherwise be used for improving public services.

The SECP Chairman, Muhammad Ali, said that a major challenge before us is that the PSCs operate in various legal forms and shapes. The companies and entities governed under special enactments, statutory corporations, directorates, departmental undertakings, cooperatives and trusts, etc. non-corporate PSCs, e.g., NHA, Pakistan Railways, etc., shall be incorporated first as limited liability companies under the Companies Ordinance since the company law framework itself takes care of most of the governance issues and problems faced by such entities.

The corporatization process of state-owned enterprises or state-controlled entities created by special statutes also needs to be considered on a priority basis. This harmonization of legal status would allow a leveling of the playing field with private competitors. Further, the fragmented ownership of the government in various PSCs, operating in different forms, also needs to be controlled through a centralized mechanism.

The corporate governance rules, specifically designed by the a task force constituted by the Cabinet Committee on restructuring of public sector entities to improve the governance of PSCs, include strengthening the internal control mechanism, augmenting the disclosure and transparency requirements, and undertaking periodic performance evaluation of the board members.

While highlighting the salient features of the Corporate Governance Rules, 2013, Moin Fudda, Country Director, CIPE, said that the Task Force held a number of group meetings and three roundtables in Islamabad, Lahore and Karachi to complete the process of consultation. He informed the audience that more than 500 stakeholders participated in the deliberations and thereafter the draft rules were placed on the SECP official website for 60 days for feedback. After incorporating necessary input received from the stakeholders, the taskforce presented a consensus report in the SECP policy board for approval. The SECP policy board approved the Corporate Governance Rules Draft report, 2013, and presented it for the approval of federal government.

Dr Khaqan Hassan Najeeb, Director General, Economic Reforms Unit (ERU), Asad Ali Shah, Convener of the Task Force, and other senior officials of finance division, FBR and the SECP attended the event.

Country Directors of World Bank and Asian Development Bank appreciated the Government for effort to revitalize Corporate governance Rules. They expressed that corporatization approach involves improving managerial incentives and clarifying budget constraints on public enterprises so their performance improves without the government relinquishing ownership.

They hoped that these rules will help improve state of affairs in PSEs. Country Director, World Bank extended his support for compliance of these rules through capacity development initiatives of the World Bank.

Country heads of various international organizations, representatives of business community, civil society, government officials, academia and a broad spectrum of society attended ceremony.


Courtesy: The Nation

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