KARACHI: With an ill-equipped, ineffective almost non-existent regulatory and legal environment, the privatization of utility services seems to be an impending nightmare for all of us and especially for traders and businessmen whose reliance on these services is absolutely crucial.
The Governor of the State Bank of Pakistan, Dr Ishrat Husain, in one of his speeches stressed that “private sector ownership and efficient functioning of market mechanism requires certain legal and regulatory institutions. In the absence of these institutions, private monopolies or oligarchies can surface, market distortions can accentuate and markets can be rigged for the benefit of a few.
In his speech, before the alumni of the overseas universities in mid-August, Dr Ishrat Husain declared in clear terms that private monopolies and oligarchies were worse than public sector monopolies.
Let’s have look around to feel the sense and substance of Dr Ishrat Husain’s words. Hardly half a dozen auto assemblers have been exploiting customers for the last three years and taking advantage of increasing demand. This consumer trend is based on generous loans from banks and leasing companies.
The cement barons remain totally indifferent to criticism from the general public and media for continual price hikes. That the cement cartel includes a public sector corporation, State Cement, adds salt to the injury. A consumer could not have felt as helpless as when Prime Minister Shaukat Aziz said in a statement that he was not aware if the Oil Companies Advisory Committee (OCAC) is without any government representation. The Pakistan State Oil is a government entity that has the biggest market share and earns most from the periodical price increases in petroleum products.
One wonders what would happen to the helpless consumers if the generation, transmission and distribution of electricity, water and gas supply comes under the ownership and management control of private sector.
Not that these utilities — electricity, water, and gas, under the control of a corrupt and inefficient civil-military bureaucracy — has given us all the comforts that we deserved as citizens of a free country in the last 50 plus years. Thick skinned as we are, we have learnt to live with these ill-run and badly managed utilities. We live with contaminated water supply, if at all, and frequent electricity breakdowns. We do protest a bit, but pay the inflated bills nevertheless.
Traders and industrialists have worked out a peculiar equation with the managers of these utilities. The terms on which these equations are based keep corrupt and inefficient utility managers happy and give enough margin to traders and industrialists to fleece their consumers. So as citizens and consumers we cope with dual difficulty — corrupt bureaucrats and grasping businessmen.
How the two — managers of these utilities and entrepreneurs — do business with each other was amply explained by the late Malik Shahid Hamid, former managing director, KESC, at a press conference days before he was shot down by unknown killers in front of his residence in the Defence Housing Authority in 1997. He had exposed the relationship between industrialists and KESC engineers and staff. He bluntly accused industrialists, traders and residents of the Karachi DHA and those of Clifton of pilfering electricity and tampering with meters. “A poor man uses kunda (illegal connection) to keep on one or two bulbs and a fan but the rich man either tampers with the meter or pilfers electricity to keep his factory running and his house illuminated and cool”.
The Karachi businessmen were not too happy with the KESC being offered to a Saudi investors group. It was first offered in February to Kanooz Al Watan who for some unexplained reasons backed out and now Hasan Associates with a Riyadh-based Al Jomaih Holding Company is being given an opportunity to invest in acquiring 73 per cent shares of the KESC.
In September, the Privatization Minister Dr Abdul Hafeez Sheikh was asked by a former president of the Karachi Chamber of Commerce and Industry to explain as to why the KESC was being offered to a Saudi investors group and why Karachi businessmen were not given a chance. Otherwise soft spoken, Dr Sheikh snubbed the Karachi business leader and reminded him that he had advised them some time back to get together and pool their money to buy KESC. “You are too quick with your tongue, but too slow when asked to put your hands in you pocket,” the minister remarked.
“The government never allowed businessmen to grow so that they could participate in the privatization process,” Aziz Memon, a leading garment exporter, comments. He believes that privatization of utilities will lead to improvement in efficiency and it will take care of tariff.
“These utilities cannot become worse than they are now,” Majyd Aziz, a former chairman of the SITE Association of Industry, offers as a cynical comment when asked how he would react if all utilities were disinvested and given to the private sector.
Mirza Ikhtiar Baig, chairman of SITE Association of Industry, says that about 300 industrial units in SITE have installed electric generators to beat the frequent power breakdowns.
The privatization process of the utility is still in process. But electricity and telecom have substantially been privatized. Now that tap water is unsafe, water bottling industry is growing and sales are expanding. Generators are being installed in offices, shops and residences. Cellphone owners now have outgrown line phones. It was a quieter privatization version driven by market forces. And since there are competitors, the price level and quality remains under scrutiny.
Three days from August 12 to 14, 1992 will remain an unforgettable nightmare in the memories of Karachiites. Heavy rains lashed the city on August 12 in the after noon. The duration was a few hours, but inflicted such a blow that the city remained paralyzed for three days till late August 14. Many parts of the city remained without electricity. Power breakdown affected water supplies and the tanker mafia made quick money out of the miseries of people. Telecommunication system became dead.
