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Ministry of Finance Recommends Share Privatization, Corporate Governance Reforms

The Ministry of Finance has proposed significant changes to Nepal’s corporate governance framework, including the privatization of state-owned enterprises and the adoption of new guidelines for their management.

Recommendations

According to the recommendations:

  • The ministry will hold a majority stake in state-owned enterprises and portfolio companies.
  • The Minister of Finance will be responsible for monitoring and reporting on their performance.
  • The ministry will ensure that these companies operate in line with their purpose and recommend changes to their articles of incorporation.

The new guidelines aim to promote transparency, accountability, and good governance practices among state-owned enterprises. Key provisions include:

  • Regular financial and non-financial reporting
  • Adoption of a performance evaluation framework
  • Establishment of clear remuneration guidelines for CEOs and other executives

Privatization

The ministry has also recommended the privatization of companies that are no longer viable or necessary, with the aim of reducing the government’s burden and promoting competition in the market. This could involve:

  • Sale of shares to private investors
  • Transfer of ownership to non-governmental entities

Reactions

The new guidelines have been widely welcomed by business leaders and experts, who believe they will improve the efficiency and effectiveness of state-owned enterprises. However, some critics have raised concerns about:

  • Potential impact on employment
  • Need for greater transparency in the privatization process

Implementation

Under the new guidelines, state-owned enterprises will be required to submit regular reports to the ministry, including financial statements and information on their governance practices. They will also be subject to performance evaluations and disciplinary action if they fail to meet certain standards.

The ministry plans to implement the new guidelines in a phased manner, with the aim of completing the process by the end of the year. In the meantime, state-owned enterprises are being encouraged to adopt best practices in corporate governance and work towards improving their performance.

Conclusion

The recommendations represent a major shift in Nepal’s approach to state-owned enterprises and could have significant implications for the economy and society as a whole.