KARACHI, June 1: Privatization has met with both successes and failures. The privatization policy has not been an unqualified success.

If privatization of MCB has been a success, that of ABL has been a disaster. Similarly, industrial units like Zeal Pak Cement or Metropolitan Steel show a devastating performance after privatization.

A few examples of failures expose the simplistic approach of policymakers towards highly complex issues and how political patronage gives, a good programme, a bad name.

For all practical purposes, the ABL is back under state control, of course, with much bigger liabilities and is again on the agenda for privatization.

Similarly, the management of Metropolitan is under the control of a consortium of nationalized banks, which has called a bid for sale of over 87 per cent of the company stakes. The firm had an accumulated liability of Rs1.6 billion at the end of June 2001.

When Steel Mills was run by the original sponsors, before nationalization in 1971, it was all a success story. Even after nationalization, the unit received a certificate of excellence in performance from the government in 1988-89.

The fortunes of the company changed for worse, after it was sold on May 9, 1992, when a private party acquired 50.93 per cent of the total MSC shares for Rs168.68 million. In November 1994, the MSC ownership was transferred to Metro Management (Pvt) Ltd. Now, it is controlled by NCBs.

Once again, Metropolitan would be re-sold in what is labelled by the bank officials as open bid, in a transparent manner, to the highest bidder, but perhaps, with its future as uncertain, as unveiled by the past. The consortium of banks with huge stakes in the company are at it. The second bid for sale was invited in January.

The issue at stake is whether this merry-go-round would continue with the simplistic sell-off policy or the mistakes of the past, would be avoided in the future.

In retrospective, it would appear that privatization was done in haste and too rapidly. Profitable state enterprises that contributed handsome revenues were sold off, to cronies at the cost of national exchequer, inflating budget deficits. Private funds that could have gone into the new investments were diverted to purchase existing new units. The process of industrialization slowed down.

Besides, some of these units have been ruined by ill-conceived policies of privatization, making their contribution to the national economy shrink, contrary to the anticipated outcome.

While transparency and the highest price offer are important criteria for sale of any state enterprise. These cannot constitute the exclusive factor that should be considered at the time of the sell-off. There is sufficient evidence to show that banks and the government, which continue to be stake-holders after the sale, would continue to do so at a great financial risks to themselves. After all, the privatized ABL and Metropolitan are back in their court with massive liabilities added to those companies.

According to the official policy, the banks are not handed over to the highest bidder, if he cannot be trusted with the public deposits, either on grounds of integrity or professionalism. Things that were concealed in the employees takeover of ABL, should have been factored in the sell-off decision.

In case of industry, much care has not been taken on the entrepreneurial ability to secure the future of the companies on privatization agenda. No less important is the consideration as to how a sick unit can be revived. For that, the best rehabilitation plan and the required investments must be a precondition to a sale. Such a policy has become inevitable also to halt the process of de-industrialization.

The Metropolitan Steel is located on a plot of sixty acres. It is a prime land in the heart of the industrial area. The highest bid could perhaps come from a real estate developer in collusion with a scrap dealer. The consortium of banks has not handed over the unit to CIRC for auction and liquidation. It has hopes for its revival. So, the unit should be handed over to those who can revive it.

The Fancy group, once among the top 22 business families, who sponsored the Metropolitan Steel (originally SCOP) and turned it into a top quality steel producer with a major share in the market, has shown interest in buying back a unit that originally belonged to it and Shaukat Amir Fancy, would have inherited it.

Shaukat Fancy is trying to add another dimension to the deal. He says that he is the rightful owner and should be given the first opportunity to buy the unit after everybody, who mattered, has made a mess of the enterprise after nationalization.

Inspired by creation of Pakistan, his father, Amir Ali Fancy migrated from Africa to help industrialize an agricultural economy. The family exhibited great entrepreneurship and built an industrial empire, some of which, had stakes of well-known European companies.

If Shaukat Fancy is able to successfully compete for MSC and gets it, he told Dawn it would send a “feel good factor” to the investors who now suffer from the lack of business confidence. A family that lost much of its fortune in nationalization, is once gain scouting greener pastures, undeterred by sour nationalization experience. The consortium is also looking at his proposals.