Intriguing it may seem to learn that the state-owned enterprises' (SOEs) loan has hit an all time high at Tk 926.01 billion. A FE report the other day expressed fear that in the time of current inflationary pressure the loan burden of these enterprises might soar further. According to the report, SOEs' debt burden, following a 25-per cent surge in their loans backed by government guarantees, has adverse financial implications for the state coffer. The borrowings involve mainly guarantees provided for 18 large project guarantees for power generating projects, according to sources.
The government issues sovereign guarantees to the SOEs to help them borrow funds to run and expand their operations, as the organisations cannot arrange loans themselves because of their poor financial state. Both local and international financiers seek such guarantees from the government to extend loans. At home, it is the state-owned banks which provide the loan. Among the international organisations which need such guarantees are financial institutions, mostly banks. In the wake of the soaring loans, the question that automatically comes to mind is-- what good the guarantees are for, if the loans thus obtained keep ballooning with no return?
The fact that the SOEs are not doing well is no news to be taken aback. It has been a grim reality for decades, a burden that the successive governments have only halfheartedly attempted to address. The situation in respect of all the SOEs is more or less similar. Losing concerns as they are, it is often believed that utter neglect has been mainly instrumental in rendering them what they are now-- inefficient and wasteful. One of the ways to revamp them could be modernisation so as to make them competitive in both local and foreign markets. Makeshift efforts in the past with no effective recovery plan backed by adequate funds have done nothing but increase government's liability for decades. The other solution, perhaps the only one, according to many, under the circumstances is to gradually let the enterprises go to private hands. The process of changing hands, that is privatisation, has been in place for quite sometime, but an appraisal of privatisation clearly shows that besides being time consuming, it has been an cumbersome procedure fraught with obstacles that cannot be remedied by lackluster moves. There are cases where the sale process has been bogged down in litigation concerning assets, land valuation, title deeds and various claims by the parent ministry after acceptance of a tender offer. There are also cases of conflict of interest involving the parent ministries which would like to retain control of the SOEs. Coupled with these are political interferences, causing not only inordinate delay but frustration among the private parties willing to take over. But if the government is firm in its decision, it can make things happen.
Given the state of things, is it not sensible to find a way out to part with the undesirable liability? According to observers, it is high time the government realised that spending huge amounts only to keep these entities alive, albeit in life support, makes no sense.