ISLAMABAD, March 23: For restructuring and improving governance framework of the state-owned companies, the Securities and Exchange Commission of Pakistan has formulated a draft of Public Sector Companies (Corporate Governance) Regulations 2012.

“The inefficient public sector enterprises (PSEs) are draining the fiscal resources and choking the economy,” said an official of the finance ministry, adding that the reform in this area is essential and has to be necessitated in urgent manner.

The finance ministry has estimated that eight major PSEs are receiving more than Rs300 billion in annual support from the federal government, which is higher than the federal component of development budget for this fiscal year.

The finance ministry has suggested restructuring of PIA, Pakistan Steel, Pepco, Pakistan Railways, NHA, Passco, TCP and Utility Stores Corporation in first phase.The draft signifies the public sector enterprises operating in corporate form. The PSE are directly or indirectly owned and controlled by the government, both by the federal, provincial and some by the local governments.

The draft regulations have principally been based upon the Code of Corporate Governance, which has been customised in the context of public sector companies (PSCs) in the light of the recommendations contained in the OECD Guidelines on Corporate Governance of state owned enterprises.

“The draft regulations have been designed in view of the distinct governance challenges faced by the PSEs,” said an official of the SECP. “Unlike the private sector the PSEs have too many bureaucratic hurdles and even these are headed by people without relevant professional experience.”

In this regard the federal government had constituted a Cabinet Committee on Restructuring of Public Sector Enterprises in January 2010 to improve their overall corporate governance and service delivery.

While, a task force on corporate governance of PSEs was formed by federal government in October 2011, to examine the prospects of developing a regulatory mechanism to improve governance of PSEs.

“The way out is to enhance board effectiveness and its empowerment through various measures,” the SECP official said. “These measures have been envisaged in the draft regulations.”

The recommendations made in the draft regulations include measures to optimise the efficiency, enhance the transparency in operations, and provide a mechanism for accountability of the management.