State-owned enterprises (SOEs) play a major role in many developing countries, where governments use them to achieve economic, social, and political objectives. Even in Western market economies, the state plays a role in service delivery, competing with private and non-governmental organisations. If properly functioning, SOEs are the best option to deliver and extend access to services, fill gaps in markets, develop key sectors or regions, and provide employment. It is important to ensure they contribute to competitiveness, economic resilience and sustainable development through the active and positive role of SOEs. SOEs play important roles in many economies, often providing public goods and services.
SOEs are instruments for government responses to economic crises and natural disasters, given the degree of direct government control. Some are essentially an arm of the government, whereas others have a mix of public and private owners (mixed ownership) and a greater commercial focus. In some countries like Bangladesh, the SOEs are not performing well, and the government is unable to finance them to survive in the market.
Many SOEs are no longer wholly owned by the government. Among the largest SOEs in the world, almost 60 percent have a mix of public and private sector owners. Today, many of the largest SOEs are also multinationals (state-owned multinational enterprises, or SOMNEs), several with mixed ownership. In 2018, half of the top 10 (as measured by revenue) nonfinancial firms globally were SOMNEs. Subsequently, privatisation has also been successful in a range of contexts and in some countries. However, privatisation may not always be the best solution for a particular SOE.
SOEs provide electricity, water, gas, and telecommunications – aiming to ensure public access and affordable pricing, though they often face challenges with efficiency, financial transparency, and bureaucratic delays. At the same time, many governments struggle to manage SOEs effectively. Widespread concerns exist that many SOEs are inefficient, involve significant risks to government budgets, and are a conduit for corruption. Governments often provide support to SOEs to compensate them for pursuing policy goals. This support can be in the form of budget compensation such as subsidies or capital transfers, but can also include cheap debt and equity financing, special tax and regulatory provisions, a privileged market position, superior access to information, and rescues from bankruptcy.
Unfortunately, SOEs failed to deliver appropriate services due to inefficiency and corruption, particularly in developing countries like Bangladesh. The Bangladesh government operates 49 SOEs for utilities, services, transport and communications, trade, agriculture and fisheries, manufacturing, construction and others. Among these, state-owned enterprises are profitable only in sectors where they are monopoly businesses, such as energy import and distribution, submarine cables and utilities. A persisting trend of losses incurred by many state-owned organisations, including transport service providers like BRTC, Biman and Bangladesh Railway, and manufacturers like BTMC, BJMC and BSFIC.
Moreover, these monopoly sectors now enjoy cash subsidies to survive and pay salaries to the employees. These subsidies are budgetary allocations from the national exchequer. SOEs operating in key sectors such as power, energy, transport, construction, telecommunications, water supply, healthcare, and agriculture are facing serious structural and financial challenges. The Finance Division’s recent assessment found that 81 percent of the country’s state-owned enterprises (SOEs) are currently exposed to moderate to very high levels of financial risk. According to budget documents, Tk89,538 crore has been earmarked for subsidies and Tk32,955 crore for incentives in budget of 2026-27.
Another risk is debt burden of SOEs. About nineteen state-owned enterprises (SOEs) have now been identified as posing ‘very high financial risk’, carrying liabilities of more than Tk2.22 trillion. These financially distressed public corporations represent a fiscal burden the country can no longer afford to ignore. Other contingent liabilities amount to over Tk345 billion through sovereign guarantees extended by the government. These guarantees may not immediately appear in the fiscal accounts, but they represent latent risks. Should any of the borrowing entities fail to service their debts, the government would have little option but to shoulder the repayment burden.
For decades, governments have privatised state-owned enterprises to improve their performance and lower fiscal risk and allowed private and foreign investment in telecommunication, power sector in limited scale. In a recent move, power distribution and petroleum import are set to be privatised under sweeping reforms in Bangladesh’s hard-up energy sector as the new government aims to cut subsidies and bring efficiency in the vital field. The proposed privatisation means the opening of the sector for private sector investment side by side with SOEs.
Bangladesh’s annual fuel oil demand is about 74 lakh tonnes, according to BPC data. In fiscal 2024-25, BPC imported 46.1 lakh tonnes of refined petroleum products. According to Energy and Mineral Resources Division sources, four group of companies have approached the government for permission to import and market fuel oil privately. Three groups have proposed setting up refineries to import crude oil, refine it locally and sell the products, while Bashundhara Group has sought permission to import refined fuel oil directly.
A mixed policy of players of SOEs and private sector may face the challenge of unfair state aid due to existing subsidies offered to SOEs. If subsidies continue, the government must determine whether private operators will also receive them and under what mechanism or whether the government will withdraw subsidies from SOEs in phases. This will be a great relief of the burden of subsidies for the national exchequer.
Experts argued that the government should strengthen state institutions responsible for fuel imports and distribution instead of relying only on private companies, warning that greater dependence on private importers could concentrate control of fuel supplies in the hands of a few large business groups. They also said any liberalisation should be preceded by transparent regulations, clear accountability mechanisms and effective oversight to ensure fair competition and protect Bangladesh’s long-term energy security.
The views expressed in this article are solely those of the author
The writer is the CEO of Bangla Chemical and a legal economist. E-mail: [email protected]
