Privatisation: Need of the Hour? By Nasir Khan

As Pakistan accumulates more debt than it can handle, it is still in dire need of billions of dollars. The burning question on many minds, is if the new government should move towards privatisation? Privatisation is a neoliberal and imperialistic plan; spurred by widespread dissatisfaction with the performance of public enterprises and the need to cut government expenditures. Privatisation refers to the sale of all or parts of government equity in state owned enterprise, to the private sector or to the placing of state owned enterprises, under private management through leases and contracts.
Pakistan has previously followed the path of a “mixed economy” which thrives on the co?existence of public and private sectors. Today when our economy is in transition there is need to make a fresh assessment of the joint sectors. The basic idea underlying the concept is a combination of joint ownership, joint control and professional management.
This approach to development is based on an economic system in which the private business sector is able to function relatively free of government intervention, while the state focuses on the facilitation of private sector economic growth and provides social services such as education and healthcare to the populace. Pakistan has been facing economic crises for the last many decades. This is the real and most practical challenge for the new government. Privatisation is an option which the new government can avail. But it would be a very difficult and unpopular decision.
In wealthier countries it is easy to treat privatisation purely as a question of domestic policy. But where the likely buyers are foreign — as in the developing world — privatisation of state-owned enterprises often means denationalisation. Since state ownership, originally came about in an act of national self-assertion, privatisation appears to be a retreat in the face of international pressure. However, even in the United States, privatisation would be understood rather differently if public assets are up for sale or contracts up for bid, were likely to be taken over by the Russians or the Japanese. The more dependent a nation is on foreign investment, the greater the likelihood that privatisation will raise the prospect of diminished sovereignty and excite the passions of nationalism. Where privatisation raises such issues, it is often blocked, or citizens and domestic firms are reserved exclusive rights to publicly offered assets, shares, or contracts.
Privatisation may dilute government control and accountability without eliminating them. Where governments pay for privately produced services, they must continue to collect taxes. Privatisation in this sense diminishes the operational but not the fiscal or functional sphere of government action. By putting the delivery of services into the hands of a third party, governments may divert claims and complaints to private organisations, but they also risk seeing those third parties become powerful claimants themselves. Whether this sort of partial privatisation achieves any reduction in government spending or deficits must necessarily be a practical, empirical question.
Where the likely buyers are foreign — as in the developing world — privatisation of state-owned enterprises often means denationalisation
Yet another perspective sees privatisation as a political strategy for diverting demands away from the state and thereby reducing government overload. Privatisation attracts support not only from economists with a disinterested belief in liberalised markets, but also from a lobby consisting of investment banking firms, government contractors, and other corporations whose businesses stand to benefit if the public sector cedes ground.
Generally speaking privatisation is a way of altering the relationship between the state and the private sector to enhance the role of the private sector in the functioning of the national economy as a whole.
Many countries like China with state controlled economies have gone far enough to open the doors of economies, to achieve faster growth rate.
In a country like Pakistan, privatisation is seen as a means of increasing output, improving quality, reducing unit costs, curbing public spending and raising cash to reduce public debt. Privatisation also helps in keeping the consumer as the top priority, it helps the governments pay their debts, it helps in increasing long-term jobs, promotes competitive efficiency and open market economy. In an economy like Pakistan’s there is a need for the government, to realign its priorities in mobilising the skills and resources of the private sector in the larger developmental scheme.
On the contrary, the concept of welfare state may be defeated by said process of privatisation. Private sectors would not care about the society as its main objective is to earn profits. In case privatisation happens, it will result in fewer funds for societal needs, because private companies have no obligation to perform social work.
Conclusively, while privatisation would seem like a realistic option for Pakistan, it should only be for five to ten years. Moreover only public firms, who have been facing extreme losses, such as PIA, Pak Steel Mills and Railway should undergo the process.
The writer is PhD Scholar, Media and Crime and author of different books on International Relations, Criminology and Gender Studies. He can be reached at
Published in Daily Times, August 9th 2018.

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