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Hazards of privatisation

March 05, 2015

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THE government’s studied disinclination to answer criticism of its somewhat reckless policy to privatise national assets is posing a serious threat to the economy and the right to employment of a sizeable labour force.

It is no longer advisable to recall the Quaid-i-Azam’s pledge that the key industries in Pakistan would be in the public sector because his views on this issue, as in other matters, have been rendered irrelevant by time or by his more patriotic successors in authority. Also, little heard is the voice of economic experts who till recently argued that the public sector had a significant role in countries like Pakistan.

However, the official auctioneers of state-owned enterprises have not bothered to meet objections to their frenzied efforts to dispose of the family silver raised by experts who reject in principle the state’s involvement in economic or business undertakings.

Perhaps the first expert to question careless privatisation was Dr Akhtar Hasan Khan, a former secretary of the Planning Division, in his book The Impact of Privatisation in Pakistan. He exposed gross irregularities in the sale procedures, including the handing over of units to people who had no experience in the field, nor any serious intention of operating the enterprises handed over to them.

Last year, he returned to the subject and questioned the move to disinvest state holdings in the oil and gas sector (OGDC, SNGPL, PSO etc), and civil aviation, and asserted that “no developing country in the world associates the private sector with oil and gas discovered with public funds”.


The government cannot continue to disregard the countrywide protests of labour organisations.


In 1998, the Asian Development Bank evaluated the effect of privatisation and reported that only 22pc of state-owned enterprises were doing better in private hands and the number of units that had been closed down was quite high. This should have been enough to make the privatisation bosses rethink their policies but it obviously did not happen.

When the government decided last year to sell its shares in 32 enterprises, that included PIA, Steel Mills and the electricity distribution companies, the move was opposed by the PPP and the Pakistan Tehreek-i-Insaf, the two main opposition parties that have an incontestable right to be heard. Again, it was in vain.

The government’s scheme to sell its shares in UBL provoked former Planning Commission deputy chairman Nadeemul Haque and former State Bank governor Shahid Kardar, two staunch advocates of privatisation as a step towards “a more deregulated, open, market-based economy” into raising their voices in protest.

After laying down four guiding principles for proper privatisation — improved efficiency of the enterprise being sold, transparency in transaction and guarantee of no wealth transfer to the buyer, improved market competitiveness, and bar on the use of sale proceeds to fund current fiscal needs — they found “it very hard to understand the reasons for the fire sale of UBL”.

More recently, Dr Hafiz Pasha produced a paper for the Social Policy and Development Centre, in which he rejected the sale of shares in profitable companies with valuable assets (OGDC, PPL, etc) and pleaded for looking for strategic investors in 10 of the 20 units in the list agreed with the IMF. Blaming the government for the plight of the power sector, which reports 80pc of the losses, he considered it “unlikely that any private investor would like to rapidly take over a Genco or DISCO.” He also agreed with Dr Akhtar Hasan Khan on the adverse effect of privatisation on the employment situation.

Regardless of officialdom’s claims to a monopoly on wisdom and capacity to protect the national interest, the government has a duty to meet the informed experts’ objections to the sale of profitable enterprises and units that can be turned profitable with affordable investment; to none-too-conceded keenness to hand over enterprises to favourites; and to the sale of enterprises in a manner that neither a good investor is found nor any improvement in efficiency or competitiveness can be guaranteed.

In addition to listening to economic experts, the government cannot continue to disregard the countrywide protests labour organisations — especially the unions representing workers in the power sector — are undertaking. Their demand for abandoning the plans to privatise power-sector enterprises is based on solid arguments that cannot easily be refuted.

The most important argument is that privatisation of a public utility service offends against the basic concepts of a welfare state. The people simply cannot be left at the mercy of operators who must increase their profits regardless of the citizens’ capacity to pay or the quality of the service offered to them.

It has been vigorously argued many times that government policies, especially during the Zia period, denial of opportunities to expand power generation and repair transmission lines, and resistance by state institutions to pay its dues have played a significant role in Wapda’s fall from grace. And this fault can be remedied in the same way as the government provides increased funds to quite a few institutions that seldom justify their work or even their existence.

The tendency to ignore the serious implications of privatisation for the employees of enterprises put on the chopping block can only be denounced in the strongest of words. It has become fashionable to criticise public-sector bodies for keeping large numbers of workers on their payrolls. While the conduct of quite a few enterprises in this regard cannot be defended, the fact that the state has an obligation to provide work to its citizens cannot be casually brushed aside either. If the workers are taken into confidence and treated as responsible partners in productive processes, the problem of overstaffing and other drags on productivity can be sorted out.

The main issue is that the government must recognise its obligation to pay due heed to the views of independent experts and the labour force, both from the civil society, for nothing is a greater curse anywhere than an authority that refuses to listen to the people.

Published in Dawn March 5th , 2015

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