The total liabilities of the state-owned enterprises (SOEs) that made a loss in three out of the five past years are about 8 to 12 per cent of GDP in recent years, several times quite the country’s public spending on education in 2019-20.
Describing the share liabilities to GDP as ‘remarkably high’, the planet Bank report, “Hidden Debt: Solutions to Avert subsequent Financial Crisis in South Asia” points out that Pakistan’s SOE sector also shows a bent toward rapidly declining profitability in recent years, with its net dropping at an annual rate of 57pc on the average from 2014 to 2017. South Asian SOEs are concentrated in energy, utilities, transport, and telecommunications. This concentration is most stark within the case of Pakistan, where the energy and transport sectors together account for 95 percent of SOE revenues.
South Asia is more exposed to the danger of “hidden debt” from state-owned commercial banks (SOCBs), state-owned enterprises (SOEs), and public-private partnerships (PPPs) due to its greater reliance on them compared to other regions.
Governments often promise SOEs subsidies to run programs like advancing access to electricity to underserved populations and little enterprises. The SOCBs are asked to run government programs to market financial inclusion or lend to under-served or riskier small and medium enterprises, often without compensation for losses that non-public markets avoid.
The SOE sector in both India and Pakistan is quite twice as large because of the international benchmark, controlling for the size of the economy. Overall, India and Pakistan are among the most important users of public agents like SOEs, SOCBs, and PPPs.
Non-financial state-owned enterprises have an outsized footprint in South Asia. Total SOE revenues amount to just about 8pc of GDP in Sri Lanka, 12pc in Pakistan, and 19pc in India. the entire number of the SOEs exceeds 200 in Pakistan, 400 in Sri Lanka, and 1,300 in India. Although present in nearly all sectors of the economy, they concentrate on the energy, transport, utilities, and trading sectors.
