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The privatisation of public enterprises is a continuity of the 1980’s era. Since then, each successive government contributed its part in the process. However, selling public assets took off in the PML-N’s first tenure from 1990 to 1993.
Profitable government enterprises were sold to local and foreign investors over the past 30 years under pressure from international financial institutions and local business elites. Sold out public entities included banks, a telecommunication company, and energy generators and distributors.
After assuming power in May last year, the PML-N government is working to sell remaining public enterprises.The PIA, OGDC and Pakistan Steel Mills are in the sale-cart. The government is confident that by selling these national assets, it would be able to stop their ‘financial bleeding’ and generate enough money for meeting the IMF’s demand of narrowing down the budgetary deficit.
The irony of history is that we do not learn from it. The irrational and illogical privatisation of government assets would bring ruthless capitalism in the country, as the ‘Thatcher Plan’ inflicted on the UK in the 1980’s.
Despite the fact that the ‘Thatcher Plan’ was implemented by the country considered as the flag bearer of capitalism, the ‘Plan’ disturbed the living conditions of a majority of Britons and led to a decline in social conditions, industry and the economy as a whole.
Contrary to the ‘Thatcher Plan,’ we can find the American example for coming out of the economic crisis of the 1930’s, when increased investment was pumped into the economy through construction of road networks, dams, bridges and public enterprises. This served the social policy agenda and national strategic objectives by proliferating employment opportunities and linking entire states practically as one nation.
The purpose of citing this example is not to repeat the policy of nationalisation, but to highlight the importance of a balanced economy for Pakistan that would discourage the concentration of wealth in a few hands and create jobs for the masses.
No one can ignore the ‘financial bleeding’ of public enterprises over the past many years. But the real issue is to stop their financial losses and make them into profitable enterprises. The key issue is: has the rationale of selling and retaining public assets been assessed from sound public policy and national security angles?
Privatisation would be harmful from both perspectives for the state and the people. From the national security perspective, privatisation of a strategic enterprise transfers control to the buyers. In this way, the state loses a measure of social order as well as its sovereignty, especially when shareholders in strategic organisations, such as those in communications, and producers of essential items are foreigners.
A vital point which needs due consideration is that large enterprises, such as railways, postal services, telecommunications, power generation and distribution, and airlines operate all over the country, and they are binding elements of national integration.
The arguments in favour of selling these assets are that ‘they are not creating surpluses’ or that ‘they are a financial burden on the state’. In fact, such arguments are truly business world jargon.
The state’s priority is not to create financial surpluses; rather it is to do everything to preserve the social order by protecting the people’s life and property and facilitating their economic activities for increased employment. In return for providing these facilities, it collects taxes.
But even from a business perspective, evidence is not in favour of privatisation, as privatised entities in the past became profitable only after having transactional changes by the new owners.
So the question is, why were public enterprises like MCB, PTCL and KESC unfeasible businesses when they were managed by the state, and how did they become profitable when their ownership and management changed?
How come smaller Indian steel mills, with lower turnover than those in Pakistan, and airlines in Sri Lanka that cover relatively smaller routes, become profitable? The answers to these questions need to be pondered over not by presenting counterarguments for self defence, but in the national interest.
In Pakistan, the real problems can be traced to the symptomatic bad law and order condition, as a majority of the population is suffering from under-employment and its inability to meet the ever rising cost of basic necessities of daily life.
This has led to increased corruption and lawlessness. The state’s inability to ensure timely availability and maintenance of essential reserves of certain important commodities and their costs has added to the woes of the people.
National wealth is not equitably distributed, and the gap between the haves and the haves-not will further widen as a result of privatisation of national assets. If the trend of concentration of wealth continues, we will ultimately be creating a deprived and chaotic society.
In order to avoid political and social chaos in the near future, can we find some other ways to come out of the financial crisis? People are hoping that the finance minister and his team must also be looking for other options to come out of this situation. While having brainstorming sessions with economists, he did come out with option of public private partnership for major ailing state enterprises.
Being in the field as a market force, the state will be in a better position to regulate the supply and demand of basic necessities and job creation.
The writer is a Professor of Management Sciences at SZABIST, Karachi.
