tate owned enterprises are a crucial part of Pakistan’s economy. The 204 SOEs operating in strategic sectors of economy, including energy and transportation, they can be both valuable assets and significant liabilities.

Over the years, the SOEs have racked up massive financial losses. The worst offenders include Pakistan International Airlines, Pakistan Steel Mills and Pakistan Railways. By 2020, the combined losses of these enterprises exceeded 2 percent of the country’s GDP. This made change inevitable.

Efforts to restructure the SOEs have been highlighted since 2019. Several legislative and policy changes have been proposed to create a more efficient and transparent system. However, the path to reform is still riddled with challenges.

It is vital for the general public to understand the importance of SOE reform. The performance of these enterprises directly affects essential services like energy supply, transport and infrastructure — the services people rely on every day. When SOEs are mismanaged, it leads to unreliable electricity, crumbling railway systems and poor public utilities.

These failures increase the operating costs and waste public money that could be better spent on healthcare, education or infrastructure. Reforming SOEs can make public services more reliable and affordable and improve the quality of life for everyone. There can be fewer blackouts, better public transport and a more assured access to essential services.

Reforming SOEs isn’t just a technical issue; it’s a national cause. The inefficiencies of these enterprises directly affect the average citizen. When SOEs lose money, it’s the public who foot the bill. It is the money that could have been used to build schools, hospitals or roads. This is why citizens need to understand SOE reform and why it matters. By calling for greater accountability, better governance and more transparency, the public can drive real, meaningful change.

A turning point in the reform process came in January 2020, with a diagnostic review of the SOE landscape. The review highlighted several inefficiencies. It was found that many of these enterprises had conflicting mandates — both commercial and non-commercial — that affected their performance. Political interference and weak accountability made things worse.

Adding to the problem, there was no centralised system to monitor some of these SOEs, with ownership scattered across 20 ministries. The lack of a comprehensive legal framework further complicated the governance of these enterprises. One key issue was the absence of a formal framework for public service obligations (PSOs). Many SOEs were tasked with providing public services but weren’t compensated for those. This weakened their financial health. Unfunded mandates, combined with poor governance, made it clear that a thorough reform agenda was necessary.

There was no centralised system to monitor these SOEs. The ownership was scattered across 20 ministries. The lack of a comprehensive legal framework further complicated the governance of these enterprises.

The SOE (Governance and Operations) Act, 2023, and the accompanying SOE Policy, mark a major step in this reform effort. These provide a strong framework for improving the governance and efficiency of SOEs, nudging them towards greater transparency and alignment with the country’s economic goals.

These strengthen oversight, set clear performance benchmarks, and promote competitive neutrality, reshaping how SOEs are managed. Key entities like the National Highway Authority and the Pakistan National Shipping Corporation have also seen amendments to their legal frameworks to align them with the SOE Act, ensuring consistency in governance.

One of the most significant changes has been the creation of the Central Monitoring Unit. Previously, oversight of the SOEs was fragmented across line ministries, leading to conflicts of interest and weak governance. The CMU is a central body for collecting data, analysing SOE performance and implementing the SOE Act.

The introduction of a new electronic database has also supported the CMU by enabling real-time performance monitoring of SOEs and ensuring compliance with the SOE Act.

A key focus of the reform effort has been fiscal risk management. A fiscal risk analysis in 2023 found that SOEs posed significant fiscal risks due to unfunded PSOs and inefficiencies. The report called for structural reforms in entities like Pakistan Railways and the NHA, focusing on improving their organisation and financial management.

The director training programme (DTP), launched in 2024, is also part of the reform process. This programme aims to train SOE directors in compliance with the SOE Act, the Companies Act, 2017, and other laws. The focus is on professionalising SOE boards by bringing in independent directors. Steps like transparent performance evaluations and improved financial reporting are designed to create a culture of accountability within SOEs.

A communication plan was also introduced to ensure that concerned citizens understand these reforms and stays engaged with the process, helping build momentum for ongoing reform efforts.

Looking forward, the government plans to continue its reform agenda with support from its development partners, focusing on improving compliance with the SOE Act, operationalising the CMU, and accelerating the transformation of key SOEs. The NHA, Pakistan Railways and two power distribution companies (HESCO, PESCO) have been identified for restructuring. The NHA requires the most urgent attention due to its fiscal impact.

Public awareness and support will be key to making these reforms stick. Citizens who understand the stakes can demand better performance and accountability, ensuring that the benefits of reform translate into real improvements in governance and service delivery. A more efficient SOE sector means better public services for everyone and less of a financial burden on the government.

The writer is a public policy professional based in Lahore with a keen interest in SOE reform. She holds a LUMS degree in politics and economics