Budgetary Practices in Selected Public Enterprises of Bangladesh: An Evaluation of their Effectiveness

Abstract

Public Enterprises are dominant agents in the production sector of Bangladesh. After independence, from 1972 these enterprises or corporations were sole manufacturing firms in the leading Public Sector of the country. From the beginning of 1980s, Public Enterprises were also important in the competitive scenario of Public and Private sectors of the country. Public Enterprises were the members of total economy of the pre-impendence period and were sole agents in the post-independence period. Till now these holds dominant share of the industrial and financial sectors of the economy. The financial performances of the Public Enterprises were not satisfactory from the very beginning. In most of the cases, they are continuously subsidized from the national exchequer to meet their losses. For social and political reasons, disinvestment and denationalization of those enterprises failed in the 1980s and in the 1990s. To streamline national economy, the financial performances of the Public Enterprises need to be addressed to improve with adequate research. The major determinants of the financial performances of the Public Enterprises are budgeting and budgetary control. This study was launched to explore the current budgetary practices and analysis of its effectiveness of the public enterprises in Bangladesh. This study was completed by reference to expectancy theory and institutional theory, using qualitative and quantitative methods to investigate, and collecting both primary and secondary data to reach to objectives. The main purposes of this study were set to see the regulatory framework and other guidelines for preparing the budget, its implementation by the selected public enterprises of Bangladesh, efficiency of the budgeting system followed, bottlenecks in the current budgetary practices, ways and means of removing those bottlenecks, analyse the internal and external sources of ix funds, and application process in the public enterprises of Bangladesh, budget variances and deficits of public enterprises and ways of overcoming those. This study reveals that all the selected public firms have regulatory framework and guidelines framed by the relevant authorities, both efficient and inefficient budgeting practices in public firms, managing ways of bottlenecks, uses of both internal and external sources of funds efficiently, and all the firms efficiently manages the budget variances and deficits. This study also confirms that all findings support at least one theory either institutional theory or expectancy theory. This study will help the practitioners and academicians to understand the current budgeting practices of public enterprises in Bangladesh and their effectiveness. In this study I have formulated eight (8) null hypotheses and corresponding alternative hypotheses. On the basis of questionnaire survey, focus group discussion and opinion survey all null hypotheses were not true but all alternative hypotheses were proven true. Bangladesh is an emerging Asian economy which grew at an accelerated rate of 8% in recent years. Per capita income in nominal US $ (dollars) increased from $ 576 in 2009 to $ 2,765 in 2024. Bangladesh is out performing India in health and human capital development. She achieved record in reducing economic vulnerability in the last decade. Public enterprises are playing very important role in the sustainable development process of Bangladesh. There are 46 government-owned enterprises operating successfully in Bangladesh. In my study I have selected 7 public enterprises and 3 private organizations to study the effectiveness of their budgetary practices. Both primary and secondary data sources have been used. I have conducted semi-structured interview with the CFO and other two officers at each public enterprise selected for the study. This data has been summarized and analyzed through content analysis. For studying the budgetary practice effectiveness, I have conducted opinion x survey with 30 officers, and senior officers of selected public enterprises and 3 private organizations. I have got 100% response from the respondents. The answer of these respondents was analyzed by using descriptive statistics, such as frequencies, average value, maximum and minimum value of their responses. Their feedback or opinion has been evaluated or assessed by using 5-point Likert Scale. There are twenty statements which have been presented before them (30 respondents), who then have expressed their opinions on these 20 statements. Then I have analyzed these by using SPSS. I have also collected the budget data and actual figures and calculated the variance of the selected 7 public enterprises and 3 private organizations in Bangladesh. The findings of the study of all 7 public enterprises have effective and efficient budgetary practices. Three (3), private organizations also have effective budgetary practices. But for private organizations these is no legal framework for monitoring the effectiveness of budgetary practices. They have budget calendar, budget committee, due approval process in all 7 selected public enterprises in Bangladesh. Since the development process is accelerated through the activities of 46 public enterprises in Bangladesh, their budgetary practices are quite effective. All organizations are playing an important role in the developing process. Budget is a quantitative expression of plan. It is a tool for future planning. Budgeting is the tool of management for performance measurement and standard for control. Modern budgetary practices also recognize the human behavior aspects of budget through participatory approach model of budgeting. This study explores the current budgetary practice of seven (7) public enterprises and Three (3) private enterprises in Bangladesh based on expectancy theory and institutional theory. xi The study used both quantitative data and qualitative data from both primary source and secondary sources. They use both internal and external sources of funds for financing budget deficit. The study also confirms that all findings support at least one theory. The budget variance analysis reveals the favorable and unfavorable variance of the selected 7 enterprises. The study would help the practitioners and academicians to understand the current budgeting practices of public as well as private enterprises in Bangladesh. After analyzing the quantitative and qualitative data I have found that the budgetary practices are quite effective for both public and private enterprises in Bangladesh but it is more effective for private enterprises.