It should not be used to gain political mileage
There are no two opinions about the fact that the nationalisation policy of the first PPP regime proved an economic disaster for the country, as the decision was taken on purely political considerations rather than taking into account the economic realities and its likely impact on the future health of the economy. The result is that over the years the state owned enterprises (SOEs) have become a burden on the economy instead of contributing to its health and progress. It is estimated that (SOEs) are collectively incurring an annual loss of between Rs400-500 billion, more than 25% of the total revenue receipts of the government in a fiscal year. Keeping them afloat therefore constitutes a huge drain on our precious national resources which could have been invested in vitally needed projects of socio-economic development.
The government, presently, is running 126 such entities including big money guzzlers like Pakistan Steel Mills (PSM), Pakistan International Airline (PIA), Pakistan State Oil (PSO) and Pakistan Railways Corporation (PRC) among others. PSM alone suffered losses to the tune of Rs200 billion during the last five years and the government had to give four bail-out packages amounting to Rs40 billion to keep it on the ventilator. There are no two opinions about the fact that these entities owe the current state of affairs to inefficient management, corruption, political interference by successive regimes and recruitment of excessive personnel on the basis of political affiliations rather than actual needs of the organisations.
No developing country like Pakistan faced with a perennial scarcity of resources could afford the luxury of feeding these white elephants indefinitely. Therefore, their privatisation is an economic necessity as well as the best option available to the government. In the 1990s when the PM-N government was in power, an initiative was taken to disinvest the sick units and sell them to the private sector. Over the years some progress was made in certain areas but it could not be accelerated due to a number of factors including political opposition to such a move.
Privatisation of some of the major loss incurring units and restructuring of others to turn them into profitable entities is an integral part of the economic agenda of the present PML-N government. It has already decided to privatise 31 SOEs in three years, including PSM, PSO and a number of power producing and distribution companies. Minister of State for Privatisation Muhammad Zubair told an international investment conference held in Islamabad on 28th October that the government would privatise more than a dozen enterprises during the current financial year which would generate approximately US$4.5 billion for the national exchequer. The government is also contemplating to divest OGDCL shares worth US$ 800 during November this year, the decision which provoked protest rallies by the employees of the Corporation and boycott of the National Assembly proceeding by the Opposition including PPP. He further revealed that by the end of 2015, PIA and PSM would also be privatised.
The political parties including PPP who are opposing the privatisation of the SOEs are doing it on purely political grounds rather than looking at it from a realistic perspective rooted in economic considerations. Their apprehensions that these units would be privatised at throwaway prices in a non-transparent manner and that the government would be able to privatise only profitable units and would still remain burdened with loss-accruing enterprises, do not carry much weight in view of the declared privatisation policy of the government. According to Chairman, Board of Investment (BOI), the policy of privatisation of SOEs is aimed at reducing state losses and attracting foreign investment in the crucial sectors of the economy. The successful implementation of the policy of privatisation and restructuring, he believes, would reduce national losses by Rs500 billion. It is worth noting that the government is not simply handing over these units to the private sector for only raising money but is trying to ensure improvement in the services of these entities through public-private partnership.
As is evident, the government is not contemplating to privatise all the SOEs. It is only going to privatise the sick and non-profitable units while there are plans to restructure those entities which can be revived and made profitable. Further the privatisation is being done through a board of directors in a transparent manner. Move to revive Railways is a vivid example of restructuring some of the strategically important state owned enterprises. Railways, which incurred losses of Rs35 billion during the financial year 2012 and due to the paucity of funds and the dilapidated conditions of its locomotives, perforce had to discontinue a number of trains including goods trains — the most profitable of its operations — and had to seek a bailout package from the government, has finally started showing signs of revival.
According to the Railway authorities 6.12 million passengers travelled on trains during August to October as compared 4.63 million during the corresponding period last year. The revenues earned during this period amounted to Rs5.319 billion as compared to Rs3.954 billion during the same period last year. The trend is really encouraging as more and more people are now coming back to travel by train. The improvement in standard of the services, public facilitation and punctuality of trains is also quite visible.
The truth is that it is not the job of the governments to run commercial concerns except those of strategic importance and public-welfare oriented units. It only has a regulatory role to ensure that there prevails a healthy competition in the market. Many other countries including Britain have taken such decisions to rectify the economic maladies and improving the health of the economy. The decision to privatise the non-profitable SOEs is economically prudent and would contribute tremendously to the process of revival of the economy. However the government must make sure that the concerns expressed by the opponents are properly addressed, utmost transparency is observed and seen in the privatisation process and the rights of the employees of the privatised units are protected to avoid any political and social backlash.