The technicalities present a different picture
No, ‘I said so’, and reiterating being completely apolitical, I must say that before the 2013 elections, late Ahsan Rashid sahib and Dr Farid Malik on behalf of Imran Khan, consulted me to draw up a plan to resurrect the sagging Pakistan economy, which I did terming it the ERP (Economic Recovery Plan) and also Sartaj Aziz sahib asked for my input on PML-N’s economic manifesto, which again I provided with equal sincerity. One of the main points being to avoid launching hurried and indiscriminate privatisation drives and instead concentrate on revival plans, so as to come across as being a caring government and lead a revival of corporate excellence in the country — perhaps the suggestion got ‘Umared-out’ in both camps! This, not because I am not a believer in the entrepreneurial skills of the private sector or in the operational efficiencies it drives, but simply because privatisation in developing countries is a very complex subject and unless the people undertaking it have deep knowledge and understanding of what needs to be achieved, the exercise can turn out to be counterproductive and controversial. One only has to go as far back as the British Parliamentary Research Report on Privatisation in Developing Economies, mainly Africa, released in 2002 and then in 2005, to ascertain that in most cases selling-off state enterprises in developing economies failed to achieve the underlying objectives: profitability, protecting the rights of the existing employees, an end to rent-seeking, consumer safeguard, and last but not least organisational growth leading to enhanced job creation. In fact, despite a lot of kudos to Thatchernomics on privatisation and taming the coal mining unions, the reality is that majority of Brits today lament the privatisation of British Rail where they say the fares and accident rates are amongst the highest in Europe, whereas, the service not even a shadow of the state-run German railway network.
The PIA case in particular is a story of mismanagement, exploitation, deceit and erosion of trust. It is all very well to claim that its losses have crossed 300 billion rupees and that it loses nearly 80 million rupees per day, but then who is responsible? Over time it has been exploited by nearly all political parties in using it for political ends. Even today, ex-union members, having checkered history for working against the real interest of the organisation, hold important positions within these political parties. Most managerial level employees can be found guilty of currying political favours and being complicit in sabotaging airline’s interests either for self-gain or for obliging the powerful. Merit has been absent – incompetent cum subservient boards and lately government’s aviation consultant are glaring examples. In short the airline has literally been used as a private fiefdom of the ruling VVIP: diversion and delaying of flights at will, breaking rules vis-à-vis ticketing and revenue, usage of its planes for foreign tours, starting flight operations on non-profitable routes to fulfill election time promises, obliging foreign friends in agreeing to skewed open-skies policy, imprudent purchase/leasing of aircrafts, disposing good-time real estate assets at throw away prices, etc; the list is endless. Factor this history into the organisational culture and you have a mindset on part of the employees that an inherent injustice is being committed against them by no other than their own partners in crime.
A perception further compounded by the feeling that this exercise is being conducted by privatisation managers who lack credibility. Public opinion perceives them as being guilty of depriving the country of its perfectly solid and profitable (probably irreplaceable) financial portfolios, needlessly selling them at less than their potential market value; entertaining tainted transactional bids, failing to truthfully take the very people into confidence whose assets they are selling. Even with PIA the games have been nerve wrecking: oscillating from privatisation to strategic partnership to breaking it up in two (core and non-core) companies to government assuming or not assuming existing liabilities before its sale and to preferring a local or a foreign buyer/partner. As a business case, the idea of breaking-up PIA in two companies not only sounds absurd but also appears malafide. Anyone, familiar with airlines turnaround stories will be quick to pick up that almost all revolved around re-motivating employees to self-correct internal deficiencies and supplementing core operations with profits from non-core activities. Delta, which at one time seemed doomed (had filed for Chapter 11) was turned around by its 70 years old ex-board member who principally rallied around its employees to invest in Delta to show their commitment and by capitalising on its non-core business of oil supplies and gas stations. Needless to say that in the corporate world it is credibility that matters most; take it away and even the most well meaning initiatives turn controversial; not that one is in anyway endorsing this rather murky proposal for PIA’s sale.
This brings us to some commonly asked questions: What really should be the mandate of the privatisation commission in a country like ours? Should it be focusing on turning around public sector enterprises (PSE) or just bringing them under the hammer? Should it endeavour to establish the right public-private mix in an economy and in key sectors or simply work towards minimising government’s footprint? Is privatisation merely limited to selling PSE in their entirety or does it also encompass intra-organisational privatisation to improve competitiveness? Given that our ethnic diaspora is truly diverse and our demographic population clusters significantly unequal and this in a market environment where business ethics (in general) are weak and corporate governance/oversight historically poor, the state run enterprises have an important role to play.
Run properly, they tend to perform the critical function of enabling the government to: maintain market equilibrium in different sectors; regulate anti-trust activities; control prices; assume development responsibilities in sectors and geographical areas where private businessmen are reluctant to enter; shoulder national security functions; and importantly, keep the nation jelled together by providing a sense of national pride cum identity. Any national airline (including PIA) invariably falls in this category. Little wonder, when national carriers stumble, most countries strive to themselves resurrect them (albeit, sometimes under a different name for debt restructuring purposes) rather than selling them off or outsourcing to others. Examples being: Indian Airlines across the border, Al-Italia (three attempts already), Korean Air, Swiss Air, etc; essentially all revival plans are home grown and initiated by home governments.
Back to PIA, if the government thinks its success lies in stamping its authority, forcing its employees into subjugation and ignoring voices of dissent, it would be committing yet another blunder. In fact, the fiasco of PIA should serve as a wake-up call for it to rethink its privatisation mandate and strategise to establish a corporate governance framework that instead strengthens PSE. One just has to look at comparable economies to realise that if we have to make our presence felt in the corporate world, then we also have to learn to blend private sector entrepreneurial skills with the might and resources of the state to develop world class competitors. And this requires corporate governance structures that drive these institutions through independent and competent boards, in-turn placed under an independent apex board consisting of people with impeccable track record (reporting directly to the Prime Minister). Time and again, I have been told that since the malaise of corruption and conflict of interest is by now so embedded in our PSEs, perhaps the only way is to sell them to save national exchequer from recurring losses — ‘running businesses is not government’s business’. My response: In management’s book, ownership and management need not be mutually inclusive.