Problems with privatisation | Pakistan Today

Problems with privatisation

Wrong way of doing the right thing

One day Mullah Nasruddin lost his ring in his house; he went out on the street and started looking for it there.

Somebody passing by stopped and inquired: “What are you looking for, Mullah Nasruddin? Have you lost something?”

“Yes, I’ve lost my ring.”

That man started helping him. They both could not find after a long search in the street. Then the passerby asked Mullah “where did you lose the ring?” Mullah replied: “I lost my ring in the basement of my house!”Then the surprised passerby asked the Mullah “But Mullah Nasruddin, why don’t you look for it down in the basement where you have lost it?”

Mullah replied: “Don’t be silly, man! How do you expect me to find anything in that darkness? It’s light in the street so it’s better to search for the ring here instead of searching for it in the darkness.”

It’s not merely an anecdote. It’s fraught with a piece of wisdom. I apply this anecdote on the PIA saga.

Commenting on the issue political commentator Saqlain Imam said that the poor performance of PIA is monumental evidence of the poor performance of the government because it’s the government that has been interfering in PIA affairs.

“The government brought Shujaat Azeem, brother of Musharraf-inducted politician Tariq Azeem, as the boss of the country’s aviation sector. He had no purpose but to pave the way for smooth privatisation of the PIA,” he said.

“So why blame PIA for its poor performance? If privatisation is a solution for poor performance of a state enterprise then the government should be privatised.”

Imam said PIA should not be punished for the crimes of the government. Has Pakistan forgotten what happen to earlier privatisation attempts? Did they reduce the burden? Did citizens get any benefits? What happened to the scandalous privatisation of PTCL?

Government’s letter to IMF

The government wrote a letter informing IMF that it had held a meeting of the Council of Common Interest (CCI) to privatise PIA.

“Can anybody give the date when the CCI meeting was held for this purpose?” Imam asked, adding that there is no known document when PIA issue was approved for privatisation by the CCI.

Agreeing with Imam, former MNA Nosheen Saeed said that the corporate cadres at the International Monetary Fund and the World Bank have been forcing vulnerable and in-debt countries to bow down before the magic of the market and reform their systems by privatising.

Why are we entertaining asset sale privatisation only, why not share issue privatisation which is selling shares on the stock market or voucher privatisation in which shares of ownership are distributed to all citizens, usually at a very low price, she asked.

Journalist Kunwar Khuldune Shahid shared that Pakistan has a commitment to IMF and hence the privatisation will go ahead, if not in six months’ time – the latest deadline – then next year.

But the government has failed to reach political consensus over the privatisation process in almost three years, despite repeated IMF reminders.

Privatisation commission ordinance 2000

However, columnist Yasser Latif Hamdani was of the opinion that section 2 (i) of the Privatisation Commission Ordinance 2000 includes in the definition of privatisation the change of management.

“This is why divestiture or sale of 26 per cent shares with management control to the buyer will be considered privatisation under the law as it stands,” he said.

Therefore the government’s attempt to draw a distinction between privatisation and 26 per cent share transfer to a “strategic partner” is not legally sound.

When the finance minister promises that nobody will be fired, he is being economical with the truth. With a 780 employees to an aircraft, PIA has one of the highest employee to plane ratios in the world.

And there is nothing to show for it. PIA’s planes are not the best maintained nor is the quality of services aboard PIA anywhere near the airlines that matter today.

“Is he perhaps suggesting that PIA would rapidly double the number of its plane to drastically bring down the ratio?” Hamdani asked.

The government should be forthright about its policy and communication strategy when approaching privatisation. It has to effectively counter the “strategic asset” argument.

In the kind of nascent democracy we are with our history of politics, a state enterprise inevitably becomes the low hanging fruit for politicians looking to ingratiate their followers or supporters. The writing was on the wall therefore vis-à-vis PIA. Obviously populist political parties would seek to employ their supporters in such an enterprise.

Hamdani said that it is an axiomatic truth that states cannot and should not run businesses and that modern states do not own airlines at least in this century — there are exceptions of course like Singapore but the efficiency of a city state run on corporate lines cannot be replicated in a large state like Pakistan.

Alas PIA privatisation

While talking exclusively to DNA, PIA’s former GM Works and Projects Lt Col (R) Akhtar Lateef said that looking back to the 60s one wonders as to how the prestigious PIA and torch bearer of Pakistan can have such a sharp dip in its reputation and standards. The main core of any airline is its dealing with the passengers which starts right from the ticket purchase till disembarking from the plane and exiting the airport. This process, although seems simple, involves many agencies and personnel, most of them work behind the scene, to achieve the desired standards and results.

He added that in the initial days the corporation was commanded by leaders who had gone through tough times and were not materialistic in their approach.

PIA’s downfall

Lateef opined that on the time graph the downfall started when the first PPP government came into being in the 90s, when mass induction was done on political basis setting aside all merit. An airline survives on its personnel and the ratio of the air craft to personnel is about 250 at maximum, but here it almost doubled.

The next injection of decline was transmitted in second tenure of the PPP government in 2008.

“Again the staff was inducted on mass scale without any merit or standard. So much so that all the lucrative appointments were also made on political basis, the union system was put in place which further deteriorated the system. Imagine the state of affairs of an organisation which is headed by a pilot, whose experience is zero in administration and ethically also it is not right for him to command the airline where he is flying,” Lateef said.

Nosheen opined that today on the expenditure side there is a bad equilibrium; levels of lavish and uncalled for spending.

The UN’s Human Development Report warned in the mid-nineties: “Selling assets to meet current liabilities is mortgaging the options for future generations.”

The red tape-ism, the negative bureaucratic mindset, the loot mentality, political bullying and the undesirable nexus of vested interests, operating at all levels, have played a pivotal role in damaging the efficiency of public sector concerns.

They were never allowed to make a profit because professionals and competent people were replaced by political nincompoops and people with reference and an able and committed government should accept the challenging task of turning around sick concerns into profitable ones, instead of calling assets white elephants and selling them off cheaply.

Saeed said that the Steel Mills, PIA and other public concerns are not making a profit because of political appointments and interference.

However, journalist Kunwar Khuldune Shahid was of the opinion that while privatising PIA has its merits, considering the bottomless pit it has become in terms of losses, the PML-N government is clearly inept at dealing with natural backlash that accompanies initiatives that are going to affect scores of lives.

But there can’t be a firing spree and any solution would need PIA union leaders to be taken on board. Before that the PIA privatisation policy would need to be made more transparent, with the input of opposition parties and other stakeholders.

How to make PIA viable?

Finally, to make PIA viable and competitive, it would have to attract foreign travellers. Karachi is an ideal location for a connecting transit airport given that it is equidistant to destinations of note in east and west. But foreign travellers do not want to come to Karachi and not all of it has to do with security. Travellers like to travel in a comfortable airline. They also like to transit in locations where they can sit down in a comfortable lounge or buy wine or whiskey from duty free. Karachi and PIA do not offer this. PIA cannot because it is the national carrier of an Islamic country (though one wonders if we are more Islamic than Arab states like UAE). I do not understand why Karachi’s Jinnah International cannot be exempt from religiously inspired laws of Pakistan? After all an international airport beyond the check in point is akin to international zone. Pakistan should learn from Islamic countries like UAE and Maldives in how to balance their domestic religious laws with international realities of trade, commerce and travel.