In light of what it says 'the evolving political realities', the government now wishes to partially close the loss-making SOEs and promises the World Bank (WB) to privatise those after the next parliamentary elections.

The WB, which has been professing privatisation of SOEs for years and offering financial assistance for that, also appears to be agreeable to the policy-change. It, however, wants the government to make the commitment for future privatisation clearly and in black and white.

Since coming in power in October 2001, the BNP-led alliance government has privatised only four SOEs, while shutting down about 30 and short-listing over 100 of them for privatisation by 2005. Since April last, it has been dilly-dallying in privatisation on various pretexts. It also marginalised the role of Privatisation Commission last year.

At last the government now has come out with a clear-cut policy and seems to almost convince the WB of its reasons for deferring privatisation.

A WB appraisal mission on enterprise growth and bank modernisation in a draft aide-memoire this month observes, "The government is moving its emphasis more towards partial closures... rather than their immediate full closure. This revision of policy has been driven by the political circumstances in Bangladesh in the lead up to the next election."

Referring to the government's earlier commitment for full closure of loss-making enterprises, the WB mission points out to the government the moral hazards involved in partial closures.

Explaining the government's move, the finance secretary told the bank that in pursuing partial closure now the government did not move away from its declared objective of privatisation and closure of loss-making SOEs. Partial closure along with suspension of new recruitment at these SOEs in the next two years will make their privatisation smoother, without creating any social problem for the retrenched staff, the secretary argued.

In this regard, the aide-memoire says, "The mission recognised the political difficulties faced by the government of Bangladesh and generally has found an overall commitment by the government to the ultimate full closure of all the loss making SOEs -- a total of 130 in all (including 28 which have already been closed in 2002/03)."

The mission, however, recommends that "there will be a definite need to obtain government's firm written commitment to 'a no revolving door strategy' and the subsequent early sell off of these downsized enterprises immediately after the elections."