Sick MoF SOEs have to be turned around or they may be shut down: Finance Secretary

With the Acting Secretary of the the Ministry of Finance, Leki Wangmo making it clear there is no special funds in the budget to give a 50 percent pay hike to MoF State Owned Enterprises unless they can afford it, the weak financial status of these SOEs come into light again.

This is following the Economic and Finance Committee of the National Assembly also raising concerns on the health of the SOEs and in fact recommending to shut down four of them.

The Bhutan SOE Annual Report 2021 under reforms says as mandated by the Public Finance Act, the ministry will review those SOEs under MoF and DHI who have overlapping mandates and assess for amalgamation of these SOEs.

One of the arguments made by those wanting a pay hike for the MoF SOEs is that while DHI can afford to give a hike due to the companies being profitable in the first place the MoF SOEs due to their very nature and structure are not profitable.

The Acting Secretary Leki Wangmo said, “I know this has always been the argument but when DHI was conceived all these companies were transferred to DHI and all the companies left with MoF were very minimal. The transition was that gradually as DHI is able to come up with the proper systems to run the commercially viable companies then my own understanding is that perhaps they were also supposed to take up the not so profitable ones and then turn it into viable companies.”

“But the thing that happened is that on the MoF side the numbers of SOEs kept proliferating and that became the root cause of the problem and for DHI they are the commercial arm of the government and they have to be efficient. And so you can’t take all the non profit making companies and all those smaller and not so important and strategic companies and transfer them to DHI and that diverts the attention and so we have the potential of losing as a country,” she added.

The Acting Secretary said it did not help that more companies came into being and all these companies were thinly capitalized as obviously the government did not have much money to give them.

So these companies were established with a small amount of capital and there was no clear business model.

“They say social objective but there is a lot of kidu culture in these organizations which does not bode well for the country’s future. So the only way forward is the clean up and turn them around within a certain time frame and if we do not see them turning around then perhaps we have to take the hard decision of shutting them down,” said the Secretary.

She said the Parliamentary committee said some SOEs have to be shut down but to immediately shut them down would put people’s livelihood at stake especially in this kind of an economic environment.

“You want to see if there is any scope for revival and you want to see whether with a certain kind of private participation etc in it we will be able to turn around. We are trying to explore various options to see how we can take them forward but obviously aware that we do not have a lot of time in our hands to keep things going the way it is,” she said.

She said that even in the civil service with the pay increase what was done by five people now three people should be able to do it.

“We should be able to see efficiency coming into the system and we should be able to cut down on redundancies,” she added.

She said that some of the processes do not value add and they need to rethink to see where they can cut redundancies so that they are efficient.

There are 13 SOEs under the MoF.

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