At a time when the state in the developed countries is playing a leading role in stabilising economies by nationalising or buying stakes in the major industries and financial bodies which are in trouble, Pakistan is showing anxiety to sell its national assets cheap.

In fact, the global downturn is forcing several countries in the Third World to put on hold their privatisation programmes. Indonesia, for instance, has dropped its stake sale plans of 37 state firms and South Korea and Thailand have postponed privatisation of banks.

On November 7, Prime Minister Gilani gave a go-ahead to the cabinet committee on privatisation, which he presided, to initiate the process for the privatisation of 37 per cent shares of Oil & Gas Development Company’s Qadirpur gasfield along with transfer of operational control. The bidding of Heavy Electrical Complex and Small & Medium Enterprises (SME) Bank (divestment of 93.88 per cent shares along with management control) was also allowed. But worth noting is his directive to the commission to ensure that concerns of all were addressed before the privatisation, that all stakeholders were taken on board and utmost transparency was exercised at all levels. This was not followed by the commission nor the ministry concerned .

As a result, the government has been facing stiff opposition from its political rivals in parliament and trade unions and civil society in the streets over its decision to privatise Qadirpur gasfields which is the country’s second biggest field in terms of output and whose transfer to private sector can result in making gas too costly for the consumers. The sale would be a losing bargain even in terms of revenue. Critics pointed out that gas is, in fact, Pakistan economy’s mainstay and the sector is doing well in all respects. Ultimately, the PM made a retreat on November 14 and announced in parliament the suspension of the questionable sale along with the process of the Steel Mills privatisation until there is a consensus on the matter among legislators.

The government began pushing up the long-planned privatisation of several public sector units – in the month of August when the signs of going to the IMF, as the ultimate option, became amply clear. This gave an impression as if it was being pursued at the behest of the Fund to meet a conditionality in advance, in addition to withdrawal of several subsidies already put into effect, to become eligible for the Stand-By emergency assistance package.

But whether it is one of the conditions or not of the $7.6 billion cash loan the IMF has agreed to provide will only be known when the details are made public. No doubt, privatisation has been an essential element of the IMF assistance programmes in the past and the borrowers were forced to sell their family silver. But the current huge crisis which has set in recession in the West has not only discredited the free market ideology but also forced the IMF to change its ways for most of its new clients happen to be from the northern hemisphere.

The ruling Pakistan People’s Party which has been critical of Musharraf’s privatisation policy has now owned it. On November 4, privatisation minister Syed Naveed Qamar stated that the privatisation would remain a corner stone of his government’s economic agenda.

The private sector, he said, has the capability, expertise and resources to run the businesses while the government should focus on policy matters. It seems the minister and his government still subscribe to the virtues of the neo-liberal theology which its western protagonists find themselves uncomfortable to practise in the current environment.

It is interesting to note that the privatisation of state-run units in Pakistan began in 1989 on the advice of the IMF-World Bank when Ms Benazir Bhutto was in power. The massive nationalisation of industries was launched by his father, Zulfikar Ali Bhutto in early 1970s. In fact, the 1990s saw an orgy of privatisation as thousands of public enterprises worth $900 billion were sold off to private owners in more than 100 countries. Of these, telecom companies accounted for a third of all rich-country privatisations, peaking at $42 billion in 1997. By October 4, 2003, Pakistan had completed or approved 133 transactions at gross proceeds of Rs102 billion.

If the IMF is not the cause, the other motive could be raising hard cash which the country badly needs to shore up its reserves to meet debt obligations and import bills (in case IMF loan was avoided).

But the Third World experience shows it has been a faulty policy for the value of the units put on auction always exceed the actual sale proceeds. When 51 per cent shares of Habib Bank were sold in December 2004 for only Rs22 billion, its total assets were worth more than Rs570 billion. And, similarly the United Bank was sold for only Rs13 billion, a throwaway price. The PTCL hand-over to Dubai-based Eitesalat did not bring in the

asset’s worth. The new owner demanded major concessions which was agreed to and the payment was made in instalments.

It was the same case with the Steel Mills. Now its privatisation has once again been included in the list of units, about 47, to be sold. The list includes all major establishments of strategic importance. Only a few days back the production minister has categorically said that it was not being privatised. After the historic Supreme Court decision declaring its privatisation invalid on March 26, 2006, there has emerged a consensus in the country against its sale.

Under the given circumstances, when even the IMF negotiators are not ready to come to Pakistan to work out the proposed agreement details, obviously for security reasons, no foreign investor would visit the country to have a look at the establishment he wants to buy. Second, foreign firms of repute are more concerned about setting their house in order rather than go for shopping in developing countries. And the global credit crunch

would not make financing of such transactions any easier for the intending buyer. Citigroup has decided to cut 53,000 jobs to meets the effects of the economic crisis.

During the first four months of the current fiscal year, foreign investment inflows to Pakistan have fallen by 30 per cent. Probably, any sale of national assets in such a situation would fetch peanuts. Pakistani investors themselves are disinterested and are thinking of taking their capital to Malaysia, Dubai and even Indonesia. It is the attitude of domestic private sector and a high growth rate that attracts foreign investment.

Another reason for privatisation can be efficiency factor. It is also a myth that a public sector unit functions more efficiently when managed by a private company. KESC did not become efficient when it went into private management despite tariff increases and government subsidies, nor had the PTCL become a better institution even for the minority shareholders.

The 1996 privatisation of British Rail gave birth to an inefficient and accident-prone system supported by massive subsidies. Passengers wait on stations for trains that are frequently late and overcrowded. In 2001, the number of train cancellations reached a record 165,000.

Similarly, public sector water companies in the Netherlands, Japan and the US look more efficient than private companies in France and England. Privatisation, it is said, merely changes ownership without an increase in the stock of capital and output. Though there is an instant receipt of substantial amount in foreign exchange, it also becomes a drain on foreign exchange reserves when profits are repatriated every year.