WB suggestion for SMEs reforms needed to redirect funds for development
It is distressing that state-owned enterprises (SOEs) in Bangladesh bleed thousands of crores of taka annually due to weak corporate governance, politically motivated investments, and reliance on outdated technology.
Operating amidst sluggish revenue collection and currency depreciation, entities like the Bangladesh Power Development Board (BPDB) and the Trading Corporation of Bangladesh (TCB) cost the exchequer over Tk 88,200 crore in net fiscal transfers
According to a World Bank (WB) study report, Bangladesh’s SOEs drained about Tk 88,200 crore from the national exchequer in a single year, emerging as one of the country’s biggest fiscal risks.
The study recommended closing down of the TCB, which is a budget guzzler and its effectiveness in reaching out to the poorest of the poor is debatable.
This organization was created in 1972 to provide essential food items owing to the war-ravaged economy, inadequacy of domestic production and weakness of private sector-based supply chains
The study, prepared with the support of Policy Research Institute (PRI), mentioned that after 53 years of independence and a flourishing private sector, the need for a TCB is not obvious.
It cannot be a substitute for a strong and vibrant social protection programme.
It can be provided through a larger number of social protection programmes, including food distribution, income transfers and employment guarantee schemes.
The study further mentioned that several SOEs like the Bangladesh Petroleum Corporation (BPC), the Chittagong Port Authority (CPA), the Bangladesh Telecom Regulatory Commission (BTRC) and the Civil Aviation Authority of Bangladesh (CAAB) earn modest profits, but most other enterprises either make very small profits or incur losses.
The energy sector is the biggest source of financial losses, with the Bangladesh Power Development Board (PDB), Petrobangla and the Bangladesh Rural Electrification Board (BREB) accounting for more than 90 percent of the losses.
It also highlighted deep corporate governance weaknesses within Bangladesh’s SOE structure.
It identified fragmented laws, bureaucratic control, weak oversight and lack of financial transparency as key reasons behind poor performance.
The SOEs that are purely regulatory in nature — like the BTRC and the Bangladesh Energy Regulatory — should be converted to fully autonomous regulatory bodies with full autonomy as a regulatory entity, with no government interference.
By aggressively pursuing the WB suggested reforms, Bangladesh can ease the burden on its constrained fiscal space, reduce non-performing loans within state-backed banks, and redirect funds toward vital social and infrastructure development.
Although the nation as a whole will benefit from these reforms, they are likely to face bureaucratic resistance, especially from groups who benefit from the existing “inefficiencies or malpractices”.
