The dividend contribution of state-owned companies has come down significantly in the last four years, although subsidies from the government exchequer have gone up more than four times, according to the International Monetary Fund (IMF).
The IMF linked the fall in profits and dividends with lack of proper monitoring and governance.
The IMF prepared the draft of a technical report titled "Bangladesh: Managing Fiscal Risks from Public Private Partnership and Public Corporations," after a 14-day visit of an IMF mission in Bangladesh.
The final report along with some recommendations for state-owned companies and projects under public-private partnership will be sent to several ministries and divisions.
The report said subsidies from the government fund to public corporations rose by more than 400 percent from Tk826.5 crore in the 2015-16 fiscal year to Tk3513.5 crore in the 2018-19 fiscal year.
Despite getting huge subsidies from the government, the dividends of these companies dropped by about 45 percent to Tk1,111.8 crore in the 2018-19 fiscal year from Tk2,003.4 crore in the previous fiscal year.
According to the report, the government has no complete list of state-owned enterprises, no comprehensive role to monitor companies, and no proper guideline to allocate budgetary support for them.
During the visit, the IMF delegation found that there are 325 public enterprises in Bangladesh, but the corporate monitoring cell of the finance division has been overseeing only 49.
"The cell should take an initiative to develop all state-owned corporations, categorise them by considering risk factors, and supervise them closely," the report recommended.
The report also expressed concern over the rising number of non-performing loans in public corporations, and the government guarantee for them.
The report said about half of the government's loans to public corporations are still unpaid, which is about 5 percent of the GDP. And the guarantee to public corporations is about 2.5 percent of the GDP.
Dr Ahsan H Mansur, economist and executive director of the Policy Research Institute (PRI), told The Business Standard that state-owned companies have been facing a crisis from the inception of Bangladesh because of a lack of good management and transparency.
Mansur said, "Most companies are maintaining their existence with financial support from the government, and that is irrational."
He suggested privatising all state-owned companies except for the ones that provide goods and services that the private sector cannot.
According to the IMF, the total amount of bank loans to all public corporations increased by 15 percent to Tk33,454.3 crore in the 2017-18 fiscal year from Tk29,142.5 crore in the 2015-16 fiscal year.
During the same time, non-performing loans to public corporations increased by 83.50 percent to Tk321 crore in the 2017-2018 fiscal year from Tk175 crore in the 2015-16 fiscal year.
The report said that despite playing a significant role in shaping the economic development of Bangladesh, public corporations are a significant fiscal risk.
There is no comprehensive list of public corporations in Bangladesh and no clear overarching framework which defines the mandate of the government over public corporations, its ownership, functions and its corporate governance role.
Most state-owned enterprises are dependent on the budget transfer of the government, but there is no comprehensive process to determine the best form to provide the budgetary support to them.
IMF recommends enhancing portion of the government's fund in PPP
The IMF is confused about the government's decision to implement 30 percent of development projects through the public-private partnership (PPP) under the current circumstance.
The IMF said the private sector will not invest under the PPP projects if there is no possibility of getting returns.
As the government is intending to implement many projects under PPP, the portfolio in this sector is now about 2.4 percent of the GDP.
The government has selected 75 projects under the PPP.
To encourage private sector investment, the report recommended that the government should increase its contribution in PPP projects. The government presently contributes 40 percent of the total cost.
To accelerate the PPP mechanism, the IMF emphasised the need to select a project properly through a pre-feasibility study and a feasibility study.
"The government should establish a gateway process for approving PPP projects to manage fiscal cost and risks," said the report.
The report urged the finance division and the cabinet committee on economic affairs to take responsibility of all PPP projects.
The mission, led by Sandeep Saxena, senior economist of the Fiscal Affairs Department of the IMF, was in Bangladesh from November 13 to 26, and met Finance Secretary Abdur Rauf Talukder, Comptroller and Account General Md Moslem Uddin and other officials of several ministries and divisions.