Reforming State-Owned Enterprises: Is This the Right Approach?

It is an undeniable truth that entering a political position, whether in a state-owned enterprise (SOE) or a government institution, requires the constant awareness that job security is inherently fragile. However, after spending five years in opposition on the streets, the allure of a comfortable "slot" upon gaining power often leads many to forget this reality. Some individuals, despite earning a better income through fishing or private ventures, sought employment at Fenaka in their islands simply for the convenience of a stable salary with minimal physical effort. Similarly, others set aside their small businesses to secure a "slot" at MACL just to "rest." Consequently, thousands of such positions have been filled across various companies and ministries.

However, mid-term, following a significant setback in a public referendum, a profound fear has suddenly gripped these employees. It is the fear of losing jobs that were often obtained by bypassing many qualified and educated individuals. Recently, the Privatization and Corporatization Board (PCB), which oversees state companies, decided to reduce the workforce in SOEs by 33 percent. This mandate implies that every company must terminate 33 percent of its total staff.

Mandate to Reduce SOE Workforce

In addition to the downsizing, instructions were issued to strengthen recruitment systems by prioritizing educational qualifications, skills, and competence. Guidance was also provided to refine appointment procedures and ensure strict adherence to these new standards.

According to statistics released by the PCB for the first quarter of last year, there are over 37,900 employees across various government companies. Available data indicates that Fenaka Corporation has the highest number of employees among SOEs funded by the state budget. As of the second quarter of 2024, the company employed 7,045 people. Therefore, Fenaka alone is expected to terminate more than 2,324 employees.

The Need to Remove Political Appointees from Companies

The recent local council elections are not the only evidence of this trend. Over the past seven years, those in power have utilized state companies as "political hubs." Companies such as the Housing Development Corporation (HDC), Fenaka, Road Development Corporation (RDC), STELCO, and MTCC have been most frequently associated with these allegations. Under the current administration, MACL has also been added to this list.

Leading up to elections, entry-level positions are often opened, interviews are concluded within days, and jobs are distributed. According to a member of the PNC who spoke on the condition of anonymity, extensive lists were compiled, approved, and sent to companies during the last council elections alone.

This practice is a grave injustice to the many educated individuals seeking employment without political leverage. Furthermore, it serves as an insult to the long-term professional staff who have dedicated years to these companies.

Moreover, the influx of people hired to fulfill political promises imposes a massive financial burden on these SOEs. While these individuals may offer no technical output and focus solely on political activities, they receive substantial salaries and benefits, providing no tangible benefit to the company’s productivity.

Hence, it is imperative to remove those brought into companies through political "slots." The system, currently overwhelmed beyond its capacity, must be strengthened and restructured. Competent professionals capable of delivering immediate results should be appointed, and operations should be shaped by their expert advice.

Mass Layoffs: What Lies Ahead for the Affected?

The primary engine of a nation's economy is not its government institutions or public service companies, but rather the private sector—comprising small, medium, and large businesses. Operating in a competitive environment, these private enterprises are the essential economic pillars that drive national productivity and enhance public wealth.

However, the Maldives currently faces the adverse consequences of successive administrations using employment as a political tool. In many islands, there is a shortage of people engaged in fishing or farming. Local economies are suffering because small-scale trades, such as tailoring, have declined. Many who previously engaged in these productive activities are now on the payroll of Fenaka. The result is the erosion of self-employment and the disappearance of a competitive environment conducive to economic growth.

For those facing termination, the road ahead is arduous. They must reintegrate into the workforce, yet it remains questionable whether the Maldivian private sector can currently absorb such a large number of job seekers.

Furthermore, when the government enters sectors traditionally managed by individuals, such as taxi services, the opportunities for private income further diminish. Therefore, the fate of those being laid off, and the families who depend on them, remains a significant concern.

Is a Blanket 33 Percent Cut the Right Solution?

The Maldives has not been immune to the global economic challenges exacerbated by regional conflicts in the Middle East. As an import-dependent nation, the cost of essential goods has surged. For the state, the combination of political setbacks and economic shocks has necessitated "positive reforms" in high-expenditure sectors.

However, whether a blanket 33 percent staff reduction across all SOEs is a fair decision remains a subject of debate.

"Some companies are inherently labor-intensive. For instance, if STELCO is required to cut staff at the same rate as RDC, it may not be the most equitable approach. Decisions should be based on the specific nature of the work and the service requirements of each company," noted an economic analyst.

A blanket 33% staff layoff across all SOEs is madness.
Some SOEs are heavily overstaffed. Others are not as much and operationally critical. Reforms must be targeted and evidence based. Govt needs targeted restructuring of SOEs which includes:
- workforce audits
- process audits… https://t.co/tdrqWnhhHv

— Amr ???? (@HusenAmr) April 18, 2026

Additionally, Hussain Amr, the former Managing Director of STO, criticized the decision to apply a uniform 33 percent staff reduction across all SOEs as flawed.

Amr argued that while some companies are indeed overstaffed, others have operations where every employee is vital. He suggested that SOE reforms should be targeted and evidence-based, focusing on the specific needs of individual companies.

Amr proposed several key areas the government should focus on while restructuring:

• Workforce Audit: Conducting an audit to understand the exact number of employees and their roles.
• Process Audit and Benchmarking: Establishing standards to evaluate company processes and performance.
• Governance Reform: Implementing structural changes to the management systems of companies.
• Clear Mandates: Ensuring every company has a clearly defined scope of work and responsibility.

Reform is essential. It is certain that state-owned enterprises must be overhauled. Unless these companies, currently burdened by political weight, are restructured, the financial strain on the state will not ease, and the private sector will fail to thrive. However, as these reforms are implemented, there must also be a viable path forward for the employees being displaced.