Promoting the idea of taking government-owned corporations public has been a long-standing proposition, believed to enhance corporate transparency and governance. Several such corporations in Bangladesh, including the likes of the Power Grid Company, Titas Gas, Padma Oil, Meghna Petroleum, and Jamuna Oil, are examples of successful listings. However, their listing status doesn’t inherently make them solid investment options. Initially, the belief was that market discipline would drive effective governance for these listed entities. However, there has been a lack of substantial efforts to compare their performance with other unlisted government enterprises.
More recently, a shift of narrative has been observed. The aim is now to introduce ‘exemplary corporations’ into the market to foster its growth. However, this argument loses its weight if the listed entities demonstrate mediocre returns and have weak governance structures. As a result, many practised investors find themselves gravitating away from these corporations, deeming them as unviable investment opportunities. There are three significant reasons that deter investors from these entities.
First, these listed entities are known to accumulate capital instead of disbursing acceptable dividends. They tend to funnel this capital into dubious financial organizations. Such practices are often motivated by the promise of internal incentives rather than the objective of fulfilling fiduciary responsibilities. Second, the negligence towards minority shareholders is prominent. Pricing and margins for these corporations are dictated by regulatory bodies like the Bangladesh Energy Regulatory Commission (BERC) without paying heed to their public shareholder status or the rights of minority stakeholders.
During public hearings, some stakeholders have openly voiced that these corporations should not aim to generate profits – an absurd proposition for entities with public shareholders. Lastly, the prevalent issue of incorrect capital raising tactics further tarnishes their image. For instance, the Bangladesh Submarine Cable Company raised funds from the government without quantifying a fair price, breaking governance norms.
The above discussion, however, does not mean that these issues are irrevocable. A combination of determined political decision-making and sound policy-making can fashion a reformative pathway for these mappings. Below mentioned are three practical steps that can pave the way for potential improvements and reforms.
One of the necessary steps is to institute a dividend policy applicable to all listed government corporations. These organizations should figure out and make public their clear dividend policies. Such a policy should clarify the surplus capital available after considering operational needs and capital expenditure requirements and mandate its subsequent distribution. This benefits both the government, which can incorporate this income into its budgetary frameworks, and the minority shareholders.
Secondly, the creation of a cohesive treasury policy is needed. Government corporations often do not possess the requisite know-how to control their extensive cash reserves effectively. Accordingly, a governmental treasury policy is prudent, outlining the wheres and hows of the corporations’ investments, whether in approved banks, treasury bills, or mutual funds, and fleshing out a transparent process of fund manager selection. Some initial restrictions could be relaxed gradually over time.
Lastly, it is integral to chalk out performance improvement strategies. All corporations – irrespective of their listing status – should be subjected to a comprehensive financial audit. This review must then lead accurately to benchmarking against global peers and determining feasible, chronology-oriented Key Performance Indicators (KPIs). Any reluctance to this reformation process – especially from those enterprises making losses – should prompt severe considerations towards potential privatization or even closure.
Embarking on these reformative measures with a select few successful models could garner the necessary thrust to bring about a sustainability-effective transformation in the entire sector. Absent such measures, the proposition of listing additional government corporations risks being not only ineffective but also harmful to the nation’s capital markets.
It is essential to approach this task with a sense of balance and responsibility, considering the stakes involved. Government corporations count as considerable contributors to national economies, and their effective functioning under the right regulations could be pivotal for economic growth and stability.
Ultimately, the process of listing government corporations needs rethinking and redesigning so that their true potential may be harnessed better. This will require the combined efforts of policy makers, market regulators, and the corporations themselves. Success in these endeavors could lead not only to individual corporate prosperity but also to the broader progress and development of the very market they operate in.