New SOE framework
THE government appears to have finally agreed upon some sort of framework for dealing with state-owned enterprises which have negatively impacted the economy both in terms of fiscal losses and poor, cost-ineffective service delivery. While the full details of the strategy formulated to handle SOEs are still awaited, it seems from what the prime minister’s adviser on institutional reforms, Dr Ishrat Husain, has said, that the government is moving towards a mixed ownership model, which has successfully been employed in several countries to manage large public enterprises.
The journey towards this model will begin with the division of SOEs such as the Pakistan Railways, PIA and Pakistan Steel Mills into smaller companies operating different businesses that are currently being managed by the parent entity. In some cases, the authorities have prepared financial restructuring plans to revive companies such as PIA. The “unbundling and financial restructuring” of these entities will be followed by retrenchments, or rightsizing, of employees — always a matter of concern — and the divestment of assets like excess land in the case of PSM. Additionally, the government plans to hire ‘competent’ individuals, most likely Pakistanis living abroad, for senior positions in the new entities.
Governments have attempted to take care of these enterprises since the 1980s with some success in certain sectors and total failure in others. Most large banks, and cement, fertiliser, telecom and other businesses were successfully deregulated and sold to the private sector as the initial emphasis of policymakers shifted from supporting public-sector enterprises to their privatisation in the 1990s and beyond. While the move proved successful in certain cases, the attempts to reform or sell power companies failed except in the case of the divestment of KESC. Likewise, repeated attempts to restructure and reform PIA, PR and PSM have also proved futile — in fact, affairs at these organisations have worsened.
Previously, we have seen various governments pursue different strategies and fail because of the absence of an overall policy and framework for managing SOEs. Past reforms and strategies to fix SOEs were based on the assumption that privatisation was the only solution to fix public-sector businesses. In reality, the SOEs are seen as an “essential element of most economies, including many more advanced economies … especially in strategic sectors such as energy, minerals, infrastructure … and … financial services”.
According to the OECD, public-sector organisations have come to constitute more than a fifth of the “world’s largest enterprises”. In Pakistan, had they been managed properly, these entities could have been the primary vehicle of fast-paced performance as seen in other countries. Instead, the burden of inefficient SOEs on the economy has become too large for any government to handle, and allowing the damage to fester will only exacerbate the challenge. But in countries like Pakistan, everything cannot be left to privatisation either — which is why a mixed ownership model merits serious discussion.
US SECRETARY of State Mike Pompeo’s recent farewell tour of a settlement in the occupied West Bank and the Israel-occupied Golan Heights in Syria encapsulates what the attitude of the Trump White House has been towards the Arab-Israeli conflict: embrace Tel Aviv — fully and without question — and offer the Arabs scraps from the table and term it the ‘deal of the century’. Observers have noted that this was the highest-level visit of an American official to an illegal Israeli settlement, as well as the occupied Golan. Most of the world community acknowledges the West Bank and Golan Heights as occupied territories, but on Donald Trump’s watch the official US position has shifted to ‘gifting’ these two areas to Israel. Furthermore, the decision to recognise the disputed city of Jerusalem as the capital of the Zionist state was another move by Mr Trump to deny the Palestinians their historical rights, and reward Israel’s decades of occupation and illegalities. Mr Pompeo also described the Boycott, Divestment and Sanctions movement, which seeks to “end international support for Israel’s oppression of Palestinians” as “anti-Semitic”. Moreover, while in the Golan, he had the gall to say that “this is a part of Israel”. Both the Palestinians and the Syrians have slammed the American official’s visit as provocative.
While the Trump administration did all it could to bury the dream of a Palestinian state forever, and ensure Israel was not reproached for its brutality, all eyes will be on how Joe Biden handles this sensitive file come January. For sure, both Mr Biden and his choice for vice president Kamala Harris are staunchly pro-Israel, as are most members of the American political class. While Mr Biden may reverse American recognition of illegal settlements, he has stated that he will not change his predecessor’s decision on Jerusalem. Unfortunately, this means that Palestinian hopes for justice from the new US administration will remain unrealised. What is more, one after the other the Palestinians’ Arab ‘brothers’ are joining the queue to recognise Israel, with or without a just settlement of the Palestinian question. Therefore, the outlook for the region does not look good. Deprived of justice, and confronting sustained Israeli brutalities, the Palestinians will continue to resist, while their detractors will wrongfully label them as ‘enemies of peace’ for rejecting inherently flawed and unjust ‘peace’ plans, and demanding the rights that were snatched from their forefathers over seven decades ago.
EVEN though it is no cause for jubilation, as Minister for Railways Sheikh Rashid Ahmed would have us believe, it is no reason for going into mourning either. It is a bit of good news, and encourages us to believe that our rulers can sometimes do good. On Thursday, some two frustrating decades after it was wound up, the Karachi Circular Railway chugged along its tracks for a modest — and basically symbolic — run to conform to a Supreme Court order and thus avoid contempt. ‘Circular’ by nomenclature, the KCR’s initial run is rather straight, with trains taking an excruciatingly long 90 minutes to travel between Pipri and City Station, a distance of 46 km. Though the ebullient minister reduced the fare from Rs50 to Rs30, it is doubtful if the KCR trains’ speed will attract commuters en masse. To be worth its name, an urban mass transit system should be comfortable and fast. The KCR has neither of these attributes. In fact, it is absurd to think of the KCR in terms of a mass transit system for a sprawling city of many millions like Karachi. Even when the loop is complete after the Frontier Works Organisation has done its job on bridges and underground passages, the KCR will be a mere adjunct to Karachi’s ambitious and idyllic mass transit plan, which for decades has continued to exist only on paper.
In theory, Pakistan’s biggest city will have four bus rapid transit lines running along 113 km of roads. However, such is the ‘progress’ on the BRT project that the Rs16bn Green Line, on which work began in 2016, is still incomplete, while the cost has shot up to Rs30bn. Awaiting attention are the yellow, orange and red lines. This means a modern rapid transit system is nowhere on the horizon. Given Pakistan’s political ecology, it is doubtful if Karachiites expect the full spectrum of the KCR-BRT system to be operational before at least a decade. What is lacking is political will.