Privatisation of Public-Sector Assets | Farhat Ali

For attaining higher growth and boosting economy the government will have to go for mass-scale privatisation despite fierce opposition. This policy statement was made last weekend by the Chairman of the Privatisation Commission of Pakistan while addressing the Federation of Pakistan Chamber of Commerce & Industry (FPCCI). He is reported to have disclosed that by 2018 the Privatisation Commission will dispose of Pakistan Steel Mills, PIA, State-Life, SME Banks and 30 other state-owned companies, including power utility companies.

The Chairman is correct in his assessment and appears sincere and competent in his deeds. But, will he be able to deliver on the government’s commitments in less than three years? Probably not. The Chairman has opposition and feet dragging from his peers, the opposition and others. The other question: Is it really doable in the current tenure of the PML-N government. The answer is ‘yes’; it is doable within this timeframe. Financial Advisors, appointed through a competitive bidding process, to facilitate privatisation are on the job and on the track. Apart from bureaucratic feet dragging, which has now become a routine part of the system, the main bottleneck is the political set-up on the treasury and opposition benches alike. If this segment of the elite responds well towards public interest then the task becomes doable.

For politicians, business entities in the public sector are an attractive channel to seek undue employment for their loyalists and personal benefits for themselves and their cronies. Through these organisations they develop a political workforce, at state’s expense, to gain political mileage. Nearly all the trade unions are affiliated with one political party or the other. Politicians do not want this opportunity to move out of their fold.

All previous attempts towards privatisation of major sick entities were much frustrated. But dynamics are now changing and the game changer is an un-diluted pressure from the IMF on the government to privatise the loss-making public-sector enterprises under a given timeframe. Also, the government needs money to fund its mega projects. These two are compelling drivers difficult to be set aside. All of the public sector business entities are making losses and are riddled with incompetence and corruption. There are only few exceptions.

The accumulated losses of PIA stand at Rs 226 billion. PIA is a national flag carrier with international exposure. There are some strong voices, underscoring the need for pumping money into PIA to bring it to mark. PIA, however, is a dead horse that can never rise.

The accumulated losses of Pakistan Steel Mills are Rs 200 billion with productivity for 2014-15 standing at 20 percent. All subsidies paid in the past to improve its lot have gone waste. There are again some schools of thoughts, driven by vested interests, urging injecting money into Pakistan Steel to help revive it. It is not going to happen but may provide more time to some to exploit it a little longer. The transfer of Pakistan Steel to Sindh government, as under discussion, will be a bigger disaster.

The accumulated losses of the nine power distribution companies in public sector are to the tune of Rs 400 billion. The accumulated losses of Pakistan Railways stand at Rs 125 billion. For years, it has been drawing subsidies. Then there are other commercial organisations such as State Life Insurance Corporation, National Insurance Corporation – same loss trend and same story of pathetic governance.

The total accumulated losses of public sector entities stand well above Rs 1000 billion or US $10 billion. For any developing nation this is a huge figure of waste. For Pakistan, which is under the fold of the IMF, this is indeed a figure to be ashamed of. It casts doubts on the sincerity of our elected representatives elected to safeguard public interest and questions the competence of our bureaucracy entrusted to make things happen. It also reflects poorly on the civil society not doing enough to arrest this waste of public money which could have been utilised on education, healthcare and better job opportunities based on merit than on incompetence and political considerations.

Sustaining the sick units in the hope that they will get better is no longer an option. While privatisation appears to be the only option available to plug the losses but at the same time it needs to be understood that reckless privatisation could give birth to issues of different natures such as cartelisation and monopolies and favouritism. So far, in the present regime, there is one reported bad case which is the privatisation of Heavy Electrical Complex, Taxila .It had to be aborted due to favouritism. We hope there are no more of such cases. The privatisation of public assets has to be transparent and in public interest in letter, sprit and deed

(The writer is Chairman Avant Ventures and former President OICCI & ABB Pakistan)


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