Telecom Industry Warns Government Contracts Could Produce More Loss-Making SOEs

The Pakistan Telecommunication Access Providers Association (PTAPA) has raised concerns over the increasing use of direct government-to-government contracts, warning that the practice could hurt private businesses and contribute to the creation of more financially troubled state-owned organizations.

PTAPA, which represents 26 telecom and technology companies, including Cybernet, Nayatel, PTCL, Wateen and Multinet, has formally highlighted the issue with Finance Minister Muhammad Aurangzeb, Planning Minister Ahsan Iqbal, and IT and Telecom Minister Shaza Fatima Khawaja.

The association is calling for the removal of Clause 42(f) from the Public Procurement Rules 2004. The provision allows government-owned organizations and state-owned enterprises (SOEs) to obtain contracts from other government entities without going through an open competitive bidding process.

According to PTAPA, this mechanism has contributed to a significant increase in the number of IT and telecom projects being awarded to SOEs over the last five years.

The association argues that private-sector telecom companies have spent decades building infrastructure and developing digital services across Pakistan. However, it believes the growing preference for direct contracts between government entities is creating an unfair competitive environment for privately owned companies.

PTAPA President Dr Shahid Farooq said state-backed organizations may enjoy several advantages that are generally unavailable to private-sector businesses. These can include government support, regulatory benefits and preferential treatment when competing for public-sector work.

The association believes that reducing competition could eventually have wider consequences for the technology and telecom industries. With less competitive pressure, companies may have fewer incentives to improve their operations, introduce new technologies or increase spending on research and development.

PTAPA further warned that organizations operating without strong market competition can become inefficient over time and may eventually require financial support from the government.

The association cited Pakistan International Airlines (PIA), Pakistan Steel Mills and electricity distribution companies as examples of state-owned entities that have faced significant financial and operational challenges.

Another concern raised by PTAPA is the alleged practice of SOEs winning government projects and later outsourcing or subcontracting parts of that work to private companies without conducting competitive procurement.

To address these concerns, the association has urged the government to ensure that state-owned and private companies compete under the same rules when bidding for publicly funded IT, telecommunications and digital-sector projects.

PTAPA said greater transparency and open competition would create a healthier business environment, protect private-sector investment and encourage companies to innovate.

The association also argued that maintaining a competitive market would help prevent excessive government involvement in areas where private businesses are already investing, creating jobs and contributing tax revenue to the national economy.