How to make state units viable

Published January 17, 2005

The proposed sale of the Karachi Shipyard and Engineering Works (KSEW) should serve as an eye-opener. Incorporated as a public limited company as way back as in 1957, the KESC is now up for sale.

It has accumulated losses of over a billion because it stood deprived of professional management.

Whatever one may say, the fact remains that the state enterprises (SOEs), including many utilities, are a drag and need to be brought back to health. Insight into the situation reveals that the public sector faces a plethora of problems right from the initial fixing of the mission statement and defining objectives.

The SOEs are in a fix about the route to be taken or the processes to be adopted. Thereafter, comes the issue of creativity and inventiveness which also includes the capability of adaptability in a given situation.

A huge number of variables affect the day to day working of different entities. Similar are variations in the expectations of the clients or customers being served.

Sometimes extraneous factors can also require the organization to change midway or change the spots all together. This can be in face of sudden or better competition or a change in clientele etc.

This is the time when the corporate structure would need to be changed or at least re-engineering to be undertaken. Another normal happening is the availability of newer technologies and systems. These under-friendly new sciences can easily be adaptable for economical production.

Another logical requirement would be in face of more clientele/sales or the other way around due to a dip in demand. It would also be apt to expect the SOE in question to be able to implement larger national policies without loosing the core- responsibilities and profitability.

The management should be able to understand the evolution of the SOE, it's production line, the technologies being used and the processes for change management etc.

In this era of specialization, the best management would be a specific one with no space for the generalist. Here, it may be argued that sometimes a novice would appear on the horizon and force a turn about- history has some interesting episodes to tell.

And indeed some generalists are able to adapt quickly and have also been instrumental in re-floating many a loss making unit in the past, but the fact of the matter remains that exceptions do not make or break the rule. The rule is that only a specified professional can lead the way.

On the basis of historical data, it is seen that predominantly SOEs have been managed by the competitioners up to late 1950s and as it was a low-tech era then, these gentlemen did quite well.

However, the SOEs then could not be put under minute scrutiny because the initial years of any organizations are always fairly good and the drag starts manifesting itself after some time has elapsed.

The 1960s started off with the first handing over of the state owned enter prizes to the serving and retired senior officers. This experiment too did well in the eyes of the public, but was probably the period when a long term stagnation set-in due to non-induction of new technologies and processes.

Then Bhutto's ill-fated nationalization sealed the fate of SOEs. The newly expanded public sector was handed over to petty but party faithful, so-called technocrats.

The results are there for all to see. This was followed by huge closures, expanded labour forces with no relevance to the needs and eventual handing over of the SOEs again to serving and retired army officers- that these were not the best.

It all would have continued, had it not been for the IMF/ WB, which tied up it's aid with reforms. These reforms entailed corporatization of the SOEs- indeed an appreciable step and in fact a call for professional management to take control from the generalist, the bureaucrat or the army. This was during the 1988 to 1998 decade.

Unfortunately, the pressures from within and without did not allow the things to improve with the reform hitting it's nadir when Wapda- the biggest of all the SOEs, was handed over to a purely non- professional group.

This was a step backwards and five years of such operations and stupendous losses ensured that this utility be broken-up or un-bundled without ever the professional management trying it's prowess or luck to correct things. Had Wapda been handed over to the professionals in 1998, things would have improved.

During the brief periods a semblance of professional management's was put in place only to suffer the same ignominy as the generalist faced. This was the period when, under extraneous pressure and due to little understanding of the issue, a mixed bag was introduced. An apt example was the placement of Army's engineering corps officers to manage technical areas.

As the areas of operations were totally different with no equation with each other, the new incumbents spent a great time in the learning phase and the rest following the cadre- as it was belatedly found that the later was correct and surely knew more than the new entrants.

As a consequence, we saw that it all led to a stagnation of experience as the outside semi-professionals possessed altogether different experiences while the cadre was left to rot at the most up-to the mid-senior level. The fiasco in Wapda during 1998-2003 is a good example to quote.

We also need to consider the old boys network in operation which excludes the professional from the management. The ability to reach various tiers of government on the basis of networking is considered as professional expertise, where as it is nothing but near nepotism.

Professionals have been continuously kept away from corridors of power, their lesser access to the same is considered as inaptitude and a negative trait. Through this exclusion Pakistan is unable to progress or join the comity of developed nations.

Another issue that needs consideration is the continued hegemony and bias of bureaucrats against the professionals and the opinion that the latter may not be bale to manage well.

It is incorrect perception but also true because of reasons beyond the sway of the professional. Actually, Human Resource Development HRD) - a continuous process is denied to the professional and indeed, in some cases he is not fit to his assignment.

A brief study of higher HRD activity reveals that the bureaucrats responsible for arranging for training of professionals end up being trained themselves and in areas with no relevance to their areas of operations. We see some gentlemen garnering Phds in musicology and toxicology when such adventures are not needed at all.

Low HRD activity is also hurting Pakistan. The generalist and the professional are breeds apart, which needs to be understood in its totality. And thus the expert's prescription for Pakistan would be the handing over of the SOEs to the professionals.

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