Transcript Bangladesh :Transforming Public Enterprises

Welcome
Bangladesh :Transforming Public Enterprises
A. B. M. Khorshed Alam
Additional Secretary
Ministry of Industries
Government of Bangladesh
Bangladesh
•Surrounded by India, Myanmar and The Bay of Bengal
3
Bangladesh at a Glance

Population
:
150 million (appx)

Area
:
147,570 sq. km

Density
:
993/sq. km.

Average HH size
 Annual growth rate of population
 Literacy Rate
 Primary School Enrollment
 Per Capita Income
 Total GDP
: 4.8 persons
: 1.38%
: 68%
: 96%
: 780 US$
: 101.22 bn US$

:
GDP growth rate
6.24%
Bangladesh at a Glance

Foreign Exchange Reserve
:

Annual Export
: 16.20 bn. US$

Annual Import
: 23.74 bn. US$

Remittance (Expatriate Bangladeshis)
: 14.0 bil. US$

FDI in Flow
:
913 mil. US$

Exchange Rate(Taka/US$)
:
74.69 Taka

Peak Hour Power Demand
:
5,800 MW

Max. Power Generation
:
4,600 MW

Access to electricity
Per capita generation
:
:
47%
220 KW hr

11.0 bn. US$
Categories of PSEs in Bangladesh

100% Government owned companies

Up to 49% share off loaded companies and managed by
public sector.

More than 51% share off loaded companies and managed
by private sector.
* National companies
* Foreign companies including multinationals
PSEs in Bangladesh at a Glance

No. of PSEs
: 236 units

PSEs contribution to GDP
:

No. of PSEs listed in Stock Market
: 27 units
 Market
 Total
capitalization of PSEs
Market Capitalization
2%
: 10.30%
: 49.86 bn US$

PSEs Employment out of total employment : 7%

Total Employment PSEs
: 240 thousand

PSEs Privatized through outright sale
: 54 Units

More PSEs will be listed in stock market :
5 Units
Legal Instruments of PSEs in Bangladesh

General Government Orders / Instructions

Relevant Statutory Acts, Rules and Regulations for State
Owned Sector Corporation.

Bangladesh Bank Order 1972

Banking Companies Act 1991

Financial Institutions Act 1993

Securities and Exchange Commission Act 1993

Company’s Act 1994

Bankruptcy Act 1997
Public Sector Enterprises (PSEs)

Financial Sectors: Commercial Banks & Financial
Institutes.

Manufacturing Sectors: Jute Industries, Textile
Industries, Engineering Industries, Chemical
Industries, Sugar & Food Industries, Forest
Industries, Power, gas & water, Medicine etc,

Transport & Communication Sectors: Road transport,
Water transport and Aviation.

Trade Sectors: Energy and Commodities.

Agriculture Sectors: Fertilizer distribution, Fisheries.

Construction Sectors: Urban development & Housing
Authority.

Service Sectors: SME development, Tourism,
Regulatory bodies etc.
Rationale of PSEs Function

Historically inherited large industrial entities.

Monitor and guide financial sector through commercial
banks and financial institutions.

Huge capital intensive nationally important project like
power plant, fertilizer factory etc.

Commercial entities required to protect public interest e.g.
Sugar mills, Commodities distribution co. etc.

Ensure basic necessities for the citizens, like water supply,
sanitation, urban transportation etc.
A Policy Shift on PSEs

Employment must be considered before privatizing any
public sector enterprise. Alternative employment of
existing workforce has to be ensured.

PSEs will be encouraged to function as a supplementary
and competitor of the private sector. In this regard,
establishing public private partnership (PPP) and running
industries through private management will be given
priority.

Local and international entrepreneurs will be invited to
invest in the PSEs for its technological and managerial
development.

If privatization could bring benefits to officials, employees
and workers, it will be given special importance.
Reform Strategies of Public Sector Enterprises

Private Sector shall be the key role player in the
development of industrialization

Govt. will examine the probable ways to make PSEs
profitable before going for privatization Attempts to be
taken for managerial development in public enterprises &
Shares to be offloaded to clear the way for creating Public
Ltd. Co. under the Company Act, 1994.

Govt. will conduct survey on technical & financial aspects
of privatized enterprises to pulse their visible & invisible
impact on national economy, and do the needful to address
the problem if any.
Public-Private Partnership (PPP)

Priority to be given to encourage establishing enterprises
under Public Private Partnership (PPP) & running industries
under private sector.

Infrastructural Project like CETP, electricity, gas, port
facility, road & railway transportation, telecommunications
etc. in economic zones & industrial parks will get priority
under PPP initiatives.
Organization of the State Ownership Function for
PSEs
Cabinet of Ministers
Respective Ministry
Corporation Board
Enterprise Board
Enterprise Management
Institute exercising state authorities
No central authority exist. As many as 19 ministries own
the PSEs in Bangladesh.
 Performance is monitored by the holding corporation.
 The budget is controlled by the Ministry of Finance.
 Appointment of CEO and Directors of Holding Corporation
is controlled by Ministry of Human Resources.
 Appointment of CEO and top management of enterprise is
controlled by Holding Corporation or Enterprise Board.
 Pay structure of PSEs workers is determined by Wage
Commission under Ministry of Labour and Employment.
 Company Law is controlled by the Ministry of Commerce.
 Capital
expenditure for expansion, modernization,
renovation etc. through Govt. financing is controlled by
Ministry of Planning.
 Overall administration of PSEs and Holding Corporations
are vested with the respective Ministry.

Performance Evaluation Systems of PSEs

Target setting and performance evaluation by Enterprise
Board.

Internal auditing by Holding Corporation.

Auditing by the government commercial audit department
under Comptroller and Auditor General of Bangladesh.

External auditing by qualified chartered accounting firm.

Capital expenditure if funded by government is monitor and
evaluated by Implementation, Monitoring and Evaluation
Division of Ministry of Planning.
PSEs Board in Bangladesh: Practices

Nomination of directors: No specific rules or policy guidelines.
Administrative ministries appoint the bureaucrats, professional,
business leaders and members of civil society. Political consideration
is a usual practice.

Conduct of the directors: Company Act, SEC guideline and
Bangladesh Bank’s regulation generally provides a framework without
any specific instruction to the govt. nominated directors.

Powers of the Board: Statute spell out the powers, but sometimes
influenced by the respective Ministry .

Board Composition: 7-13 members (average) .

Selection of CEO and top managers: appointed from civil service on
deputation, or on contract, or as political affiliation.

Remuneration: Except a few, almost majority follows government pay
scales. Non-executive directors only get fee for attending the board
meeting.

Absence of Performance Evaluation of the Board.
PSEs Board in Bangladesh: Key Reform Measures


Re-constitution of the PSEs board including State-Owned
Commercial Banks (SCBs)
Provision made for independent directors in listed
company board.

Corporatization of the SCBs

Terms limit on board duration and limits to the size of the
boards

Implementation of BASEL II Framework from January 2010.

Separate Banking Division under the Ministry of Finance.

Separate pay scale for the SCBs and Bangladesh Bank
(BB)-(Proposed).

Banking Reform Law (proposed).
Financial Reporting Council 2008 (in process).

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