Finance ministry to get power to merge, dissolve loss-making state entities

The government is formulating a new law to empower the finance ministry to privatise any state-owned enterprise and merge or dissolve multiple state-owned entities, according to sources within the ministry.

Officials from the ministry say some state-owned enterprises have become a burden for the government due to consistent losses. Despite numerous decisions aimed at stopping the wastage of public funds, their implementation has not been possible.

To address the issue, the new law is being formulated with the support of the World Bank, they say.

The ministry has already drafted the law, titled State-Owned Enterprises (Management and Coordination) Act, 2025, a copy of which has been obtained by TBS.

Officials say after preparing the initial draft, the ministry's monitoring cell organised a workshop, bringing together officials from various government ministries and agencies. Based on the recommendations from the workshop, the first draft was revised to create a second draft.

The draft law also grants the finance ministry the authority to appoint independent directors at any state-owned financial institution at any time.

It also proposes a restriction on the voluntary retirement of top officials of state-owned enterprises in cases of ongoing investigations related to corruption or criminal allegations against them until the matter is resolved.

Finance ministry officials say the law will apply to all state-owned banks, oil and gas companies, as well as all financial, non-financial, commercial and service-oriented enterprises under government ownership. However, the Bangladesh Bank will not fall under its jurisdiction.

Legal requirements

State-owned companies, corporations and autonomous institutions are established under separate laws. However, there is no specific law for their privatisation, dissolution or merger. As a result, shutting down or dissolving any government entity requires enacting a separate law and having it passed by parliament.

Experts view the government's decision to enact new law in this regard positively, stating that if it is implemented, it will make it easier for the government to decide on the privatisation of loss-making state-owned enterprises.

Experts favour dissolution of loss-making orgs

Dr Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), told TBS that loss-making government enterprises can be dissolved or privatised where the private sector is strong.

She, however, argues that some essential services must remain under government control.

"For this, service providers must improve their service quality. Unfortunately, the service concept has never worked in government institutions. Merging similar service-providing entities would reduce government waste," she said.

The government currently oversees 131 financial and 56 non-financial institutions, employing over 1.3 lakh people, many of which continue to incur losses.

For FY25, state-owned enterprises are expected to generate over Tk4.01 lakh crore in revenue. However, with an estimated expenditure of around Tk4.3 lakh crore, they are projected to face a net loss of over Tk28,000 crore.

Towfiqul Islam Khan, CPD's senior research fellow, said, "There is no need to keep running state-owned enterprises at a loss for years unless they hold strategic importance.

"While Biman Bangladesh Airlines and Bangladesh Railway may have strategic significance despite incurring losses, it is unclear why the government continues to operate sugar mills."

Former finance and commerce secretary Mahbub Ahmed told TBS that simply enacting a law is unlikely to bring significant change as the problems with state-owned enterprises run deep.

"These entities require strong management for proper operations, and privatisation or dissolution demands bold political decisions," he said.

Analysing the assets and income and expenditure data of state-owned enterprises, it can be seen that the assets of the industrial sector enterprises are as high as their liabilities and losses. Although most manufacturing enterprises have been closed for years, the government is spending a huge amount of money from the budget every year to support their manpower. The assets of these enterprises are nothing more than a huge amount of land.

The total assets of the state-owned jute mills are Tk15,674 crore, and the debt of these enterprises is 11 times more than the capital. The net loss of the jute mills has been estimated at Tk247 crore in the current fiscal year's budget.

The assets of the companies under the Sugar and Food Industries Corporation are Tk7,660 crore, almost all of which is land. The net loss of these enterprises has been estimated at Tk290 crore in FY25 budget while their debt is two and a half times more than the capital.

Former finance secretary Mahbub Ahmed told TBS that then finance minister AMA Muhith wrote to the industries ministry to close these loss-making factories, but to no avail.

"Many such initiatives have been taken to close these loss-making factories, but none of them have been successful. When I was finance secretary, I calculated that at that time, the cost of importing sugar per kilogram was Tk20, and the cost of producing sugar per kilogram in government sugar mills was Tk80-90. But the sugar mills have not been closed," he said.

Except for a few urea fertiliser factories under the Bangladesh Chemical Industries Corporation (BCIC), all the others have been closed for many years. The assets of these factories are worth Tk16,866 crore. Despite having such a huge amount of assets, the debt of these companies is over 13 times the capital. The finance ministry has estimated that the net loss of these companies in the current fiscal year will be Tk1,335 crore.

Steering committee to recommend decisions

The proposed law states that the relevant ministries will oversee the operations of state-owned enterprises, while the finance ministry will be responsible for overall coordination. A steering committee will be formed to supervise and monitor the activities of these entities.

Chaired by an additional secretary of the finance division, the committee will include joint secretary-level officials from various ministries. It will have the authority to recommend the privatisation, merger or dissolution of state-owned enterprises to the government.

Based on the steering committee's recommendations, the finance ministry, in consultation with the relevant ministries, will have the authority to decide on the privatisation, merger or dissolution of any state-owned entity, according to the draft law.

Addressing loss-making state-owned enterprises

Finance ministry officials say while state-owned enterprises operate under various ministries, their funding primarily comes from the finance ministry. Therefore, the proposed law grants the ministry the authority to shut down loss-making enterprises that have no prospect of becoming profitable, following a specified process.

In 2000, during the Awami League government's tenure, a privatisation commission was formed to privatise loss-making state-owned enterprises. However, in 2014, then prime minister Sheikh Hasina announced that no further state-owned enterprises would be privatised.

Following this announcement, the government dissolved the privatisation commission and merged it with the Board of Investment to establish the Bangladesh Investment Development Authority (Bida).

Since then, no state-owned enterprises have been privatised, although the government shut down state-owned jute mills through a special law.

The finance minister at the time, Abul Maal Abdul Muhith, urged then-Industry Minister Amir Hossain Amu in a letter to shut down the loss-making sugar mills, but the industry ministry took no action on the request.

Finance ministry can appoint directors

The draft law will give the finance ministry the authority to appoint independent directors at any financial institution at any time. It states that the finance ministry can appoint one or more independent directors or other suitable officials at any state-owned financial institution whenever necessary.

Enterprises must publish data

The draft law stipulates that, in accordance with the Right to Information Act, each state-owned enterprise will publish business objectives, management plans, the current status of transactions, customer satisfaction survey results, case-related information and medium- and long-term financial management plans on its website.

If any enterprise fails to publish this information or provides false data, the government will take action against the responsible individuals, as per the draft law.

Restriction on voluntary retirement

Section 40 of the draft law states that if any top official of a state-owned enterprise, including the chairman, managing director, chief executive officer, chief financial officer, company secretary or other senior officials, is involved in an ongoing criminal case, he or she will not be allowed to voluntarily retire.

Additionally, if the official is under investigation by any agency or audit committee for misconduct, or has been referred to the relevant disciplinary committee for disciplinary action, he or she will also be prohibited from retiring voluntarily. This restriction will remain in place until the matter is fully resolved.

A finance ministry official said that during the previous Awami League government, influential individuals appointed on political considerations were given the opportunity to retire voluntarily, allowing serious financial corruption in various institutions to be covered up despite concrete evidence being there.

To prevent such incidents in the future, the new law is being made to impose a restriction on voluntary retirement until the individual is proven innocent, said the official, who requested to remain anonymous.

According to the official, after the Hallmark loan scandal at Sonali Bank, the then-chairman and managing director of the bank were relieved of their duties and arrangements were made for their escape. After intense criticism of former National Board of Revenue member Matiur Rahman's involvement in the "goat scam", the Internal Revenue Division allowed him to voluntarily retire while an investigation into his corruption case was ongoing.

The new law will prevent such corrupt individuals from voluntarily retiring and fleeing abroad, the official said.

Praising the initiative, former senior finance secretary Mahbub Ahmed told TBS that according to government service laws, if a government employee is involved in an ongoing case, he or she cannot retire or receive a pension until the case is resolved.

However, most state-owned enterprises are established under their own laws, which do not include such provisions. Therefore, it is logical to enact similar provisions for them as well, he said.

"No one should be able to engage in corruption and then have the opportunity to voluntarily retire, receive pension benefits or flee abroad. If one owes anything to the government, arrangements must be made to recover it," he added.