Most blame the Covid pandemic for loss in revenue
A majority of the State-owned enterprises (SOEs) are struggling financially amid the Covid-19 pandemic hurting the government and shareholders, but have fulfilled their social mandates.
SOEs are not only a major source of revenue for the government but also play a strategic role in providing infrastructure and public service by operating in key strategic sectors.
However, many SOEs that are under the Ministry of Finance (MoF) said that they have incurred losses in the past two years.
A few of the SOEs had frozen recruitment of employees for financial reasons while some have resorted to cost-cutting measures to cope with the loss of revenue.
The social mandates and the public services, officials with SOE said, could suffer if their financial conditions deteriorate further. However, some SOEs like the Bhutan Lottery Corporation Limited are doing better than others.
The CEO of Royal Bhutan Helicopter Services Limited (RBHSL), Chewang Gyeltshen, said that although the revenue had improved the company still was running at a loss.
The company’s loss decreased to about Nu 35 million (M) in 2021 from Nu 60 million (M) in the previous year although the audited accounts are awaited, according to the CEO.
International tourists were one of the main sources of income for RBHSL. However, the CEO said that the company has reduced the helicopter fee from Nu 150,000 to Nu 100,000 per hour to attract Bhutanese.
“By attracting domestic clients, we have been able to offset some of the losses that we incurred due to the closure of tourism,” he said. RBHSL, he said, had not laid off employees although recruitment of new employees was frozen and the wasteful expenditure curbed.
Helicopter services were also affected during the lockdown.
One of the oldest SOEs, Food Corporation of Bhutan Limited (FCBL), has been able to reduce the loss recently amid increased operation costs, according to company officials.
FCBL’s CEO Naiten Wangchuk said that the company was still running at a loss although the financial performance had improved in 2021. He said trade volume had decreased as the regular auction system was affected.
The CEO said that the operation costs had increased three-fold mainly on account of the increase of labour and transportation costs, driven by the Covid pandemic.
However, FCBL had reduced stock of goods to prevent their shelf life from getting expired. The company, he said, had to dispose or sell expired goods at discounted rates to be fed to animals.
There are two media SOEs – Bhutan Broadcasting Service (BBS) and Kuensel Corporation Limited.
According to the BBS CEO, Kaka Tshering, the corporation has been severely affected by the pandemic both professionally and financially.
“Because of the pandemic and the lockdowns and travel restrictions, our producers and reporters both at the head office and the bureau offices had to remain in the office most of the time. They could not travel to places to collect news stories and footage and material for programme production.”
Most of the news and programmes, he said, became increasingly Thimphu-centric with the people, viewers and listeners complaining that people and issues in the districts do not seem to matter.
“As far as they are concerned only people in the capital and issues concerning them were highlighted on BBS. The pandemic prevented BBS from fulfilling its mandate of serving the Bhutanese public, mainly living in rural areas.”
The pandemic has also affected BBS’s commercial interests. As a SOE, the BBS is required to meet 50 percent of the current expenditure from the revenue it generates.
In 2019, BBS generated revenue of Nu 44.082M. In 2020, it managed to generate only Nu 28.673M.
In 2021, the BBS’s financial performance improved and generated Nu 44.950M.
Kuensel Corporation Limited has recorded a significant decrease in revenue in the past two years from declining advertising and printing revenue, the main source of revenue.
The company has adopted severe austerity measures to cut the high overhead cost.
Unlike other SOEs, the corporation does not receive subsidy from the government although its main mandate is to inform the nation.
The Paro-based National CSI Development Bank’s CEO, Kinzang, said that the company was facing delays in repayment of EMI (equated monthly Installment) by customers although the non-performing loan (NPL) situation had improved due to deferment of EMI.
However, the company did financially well in 2020 although its audited accounts for 2021 is awaited. Its revenue increased to Nu 47.98M in 2020 from Nu 15.14M in 2019 on account of an increase in the disbursement of funds and recovery strategies implemented by NCSIDBL in 2020, according to the CSI bank.
“We have fulfilled our social mandate as 70 percent of our clients are farmers,” CEO Kinzang said.
The Phuentsholing-based Bhutan Lottery Limited was one of the least affected SOEs in the country.
The company’s profit decreased in 2020 as the sale of paper lottery declined due to the pandemic. However, the company’s financial performance improved with the introduction of online lottery in 2021.
CEO Phenphay R Drukpa said that the introduction of online lottery products helped offset the loss incurred from the decrease in paper lottery sales. “Overall, the business hasn’t been affected so much,” he said.
When asked about its financial status, the Farm Machinery Corporation Limited (FMCL) CEO, Karma Thinley, said that the main mandate of the company was social service.
However, he added that there were delays in delivery of equipment due to the Covid protocol.
There are 16 SOEs under the Ministry of Finance, of which 12 are fully owned by the government. The government holds majority shares in two of the SOEs and minority shares in another two.
SOEs contributed taxes and dividends of Nu 245M to the government in 2017 and Nu 297M in 2018. But it decreased to Nu 176M in 2019.
MOF demands more
Finance Minister Namgay Tshering said that SOEs must come up with innovative ideas during these unprecedented times and reflect on lessons from the past.
He said that the SoEs have to restructure their mandates and visions and that they cannot depend on the government for all times to come.
SoEs, he said, should step up to offset the economic loss that has been incurred due to the impact of Covid-19 in the private sector. He said that the government has been providing subsidies to SoEs that have social mandates.
There has been some discussion about divesting shares to the public to maximise the value of the companies. However, the finance minister in an earlier interview said that the idea was at an initial stage.