Bangladesh's state-owned enterprises cost treasury Tk882b as losses mount: WB study

Bangladesh's state-owned enterprises (SOEs) drained nearly Tk882 billion from the national exchequer in a single year, emerging as one of the country's biggest fiscal risks, according to a World Bank study. 

The study report highlighted that the deteriorating financial condition of public enterprises has become "unsustainable" at a time when Bangladesh is already facing falling revenue collection, slower economic growth and mounting pressure on public finances, said a press release.

It said the growing losses of SOEs are consuming resources that could otherwise be invested in healthcare, education and social protection. 

The findings were presented today at a dissemination workshop on the report titled "Financial Performance and Fiscal Risk of SOEs in Bangladesh" held at Pan Pacific Sonargaon in the city. 

The study was conducted under the project on strengthening public financial management for better service (SPFMS), with the support of the Policy Research Institute (PRI) of Bangladesh.

According to the study, non-financial SOEs incurred a combined adjusted loss of Tk441 billion in FY2024, while total net fiscal transfers from the government, including subsidies and development funding, climbed to around Tk882 billion, equivalent to 1.7% of GDP. 

Tanvir Ghani, Investment and Capital Market Affairs Special Assistant to the prime minister, attended the workshop as the special guest.

Suraiya Zannath, Lead Governance Specialist, and team leader (SPFMS) WB, explained the context and objectives of the study and how the analysis will help frame policy and institutional reform. 

Hasan Khaled Foisal, Additional Secretary, FD, delivered a presentation on the overview of SOEs, debt management and the macro-fiscal scenario, while Rahima Begum, Additional Secretary, FD, made the opening presentation highlighting the Public Financial Management Reform Strategy 2025-2030 relating to SOEs.

Henri Fortin, Lead Public Sector Specialist, WB, discussed international experiences of SOE reform and Immanuel Frank Steinhilper, Senior Governance Specialist, WB, presented global trends relating to SOEs.

Khurshid Alam, Executive Director, PRI, delivered the keynote presentation on the financial performance and fiscal risks of Bangladesh's SOEs.

The session was conducted by Mohammad Atikuzzaman, Sr. FMS, while Nazmus Sadat Khan, Economist, WB, delivered the closing remarks. 

The study found that the energy and power sector accounted for the overwhelming majority of the losses.

The Bangladesh Power Development Board alone recorded losses exceeding Tk444 billion in FY2024 due to high power generation costs, costly capacity payments to private power producers and electricity tariffs kept below production costs. 

The report said politically influenced investment decisions, controversial contracts with independent power producers and weak corporate governance have severely undermined the sector's financial sustainability.

Other major loss-making entities include the Bangladesh Oil, Gas and Mineral Corporation, Bangladesh Rural Electrification Board, Trading Corporation of Bangladesh and several manufacturing corporations in the fertiliser, sugar and jute sectors.

The report observed that many manufacturing SOEs continue to incur persistent losses despite operating in competitive markets where private firms remain profitable. 

The report 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 report compared Bangladesh unfavourably with regional peers. While Bangladesh's SOEs posted a negative return on assets of 5.2% in FY2024, India's SOEs generated a positive return of 9.7%, and Vietnam's SOEs recorded around 11.9% in recent years. 

According to the study, Bangladesh could potentially mobilise more than Tk1.2 trillion in additional fiscal resources if SOEs achieved a 10% return on assets and reduced their dependence on subsidies. 

To address the crisis, the report recommended wide-ranging reforms, including restructuring commercially viable SOEs, introducing independent and professionally managed boards, strengthening financial disclosure requirements, reducing political interference and gradually opening monopoly sectors to competition. 

It also suggested eventual privatisation or closure of chronically loss-making enterprises that no longer serve strategic national purposes.