Testing Times for Government | Farhat Ali

The year 2016 started with some tough rides for the federal government in power. The first one being the unprecedented strike by unions at PIA, which paralysed the aviation sector of the country and unnerved the government to the extent that it opted to suspend PIA privatisation process by six months. The second tough one is the emergence of the might of the otherwise a subservient National Accountability Bureau (NAB) of Pakistan which prompted Prime Minister Nawaz Sharif to announce the urgency for ‘Taming of the NAB’.

There are creditable reports that now with so much of opposition by opposition political parties, trade unions’ resistance and a renewed media focus the government may not be able to proceed with its original scheme of PIA privatisation. There could be deviations to choose a path of least resistance for the privatisation of PIA, if any.

In fact, the PIA turmoil appears to have shied the government away from the whole of the privatisation process well under way. There is creditable evidence that tough privatisations such as PIA, Pakistan Steels and the power distribution companies are put on hold.

This is a mistake and the nation will pay a heavy price for it. All of these organisations in the public sector are afflicted by scourge of gross corruption, nepotism and the poorest possible level of governance. Five years of the previous government and nearly three years of present one have failed to manage State-Owned Enterprises (SOEs) despite repeated infusions of public money. Things only got worse and accumulated losses swelled. Neither of the said two governments possessed the skills and competence nor the mind set to accomplish the herculean task of turning around sick public sector enterprises.

Never before has any government prepared itself for privatisation and spent so much time and money in the process. Financial Advisors to conduct privatisation are since long in place to prepare the public entities for privatisation and many are at the tail-end of closing in. Many of these Financial Advisors have reputed foreign associates. An abrupt suspension or winding up of the privatisation process will send a negative signal to global markets. Many of theses are un-likely to return back should the government at some time attempt to restart the privatisation process. When Karachi Electric Supply Corp (KESC) was first put up for privatisation in the mid-1990s an expression of interest came from eight world reputed entities but the privatisation was soon aborted. Again when KESC was put for privatisation ten years later in 2005 only two made bids for it, namely, Al-Jumia group of Saudi Arabia and Hasan Associates of Pakistan.

The sell-off of KESC has largely done a lot of good to the consumers of Karachi in providing them relief from power cuts, accurate billing, well-managed preventive maintenance and fault repair response schedules. The new management, soon after it took over, managed to ably retrench a surplus manpower of over 5000 employees in a politically charged city like Karachi. It is reported that KESC (now KE) is in black financial figures since the last three years and has substantially invested in power generation and in transmission and distribution network.

Pakistan’s commitment to sell its stakes in about 40 public-sector loss-making entities was one of the key conditions set for securing an IMF loan. Pakistan’s likely default on this count may have consequences, though the severity of which is unclear at the moment.

Although, Prime Minister Nawaz Sharif strongly believes that government has no reason to be in business and privatisation is the way forward, there appears to be a strong political lobby within the government that fears workers’ backlash which could cause a dent on their vote bank. But a greater exploitation from the opposition parties may crop up if the government fails in its privatisation programme, as turn-around of economy, providing relief to public from energy crises and getting rid of loss-making public enterprises constitute key elements of PML-N’s manifesto. It needs to show some achievement in one of the three. Privatisation appears to be the only quantitative one within its reach in the remaining little over two years of its tenure provided it is carried out transparently and in public interest.

Pakistan’s economy is blighted by an over Rs 19 trillion in foreign and domestic debt. The accumulated loss incurred by business entities in the public sector has soared to over Rs 1 trillion and an ever-swelling circular debt in the power sector. All these constitute a wake-up call for the government and cannot be ignored for long.

The censure of NAB by prime minister has been explained; according to which, NAB harassment is a deterrent to investment and the government functionaries are reluctant to take decisions. While NAB’s political and vested interest-driven acts cannot be ruled out, it is a fact that investments flourish in countries that are corruption-free. Pakistan’s global ranking of ease of doing business has dropped from 65th position in 2007 to 139th position in 2016 among around 189 countries which is also reflected in a sharp decline of foreign and domestic investment over the said period. One reason is a sharp decline in the level of governance from 2007 to 2016. Somehow this trend has to reverse and some regulatory entity has to make this happen.

(The writer is former President OICCI Pakistan)

Source: http://www.brecorder.com/articles-a-letters/187:articles/20413:testing-times-for-government/?date=2016-02-27