Privatisation considerations

December 09, 2015

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The privatisation of PIA is part of the agreement with the IMF.— AFP/File
The privatisation of PIA is part of the agreement with the IMF.— AFP/File

THE whole debate on the merits and pitfalls of privatisation is about to begin anew as the government moves to put PIA up for sale.

The start of the deal, which has been delayed at least three times already, has been marred by allegations of poor management as the government mysteriously chose to get the ball rolling with a presidential ordinance designed to convert airline corporate structure and prepare for strategic sale.

The choice of promulgating an ordinance to repeal the PIA Act of 1956 is somewhat puzzling, since ordinances are meant to be used largely in special circumstances.

Also read: PIAC converted into company

The privatisation of PIA has been part of the agreement with the IMF since 2013, but the government appears to be moving in haste now as the Fund has demanded a fresh commitment to advancing the process and completing it by March.

The opposition parties are right to argue that the use of the ordinance in such a large exercise is objectionable, and the government ought to explain why it is choosing to bypass parliament in making changes to a legislative act.

As the government moves the process along, the debate surrounding the entire exercise will surely grow.

Whereas the opposition parties are correct to object to bypassing parliament where required, one can only hope that the debate does not remain confined to the technicalities of the process. Important questions are at stake, and parliament must play its role to ensure that the transaction does not damage any public interest.

The airline badly needs to benefit from private-sector efficiencies and management acumen, and past experience with privatisations shows that these can sometimes come at the cost of public interest.

The banks are an example. Private management here has certainly streamlined operations and improved the balance sheet, but the central function of any bank — mediating between savers and investors — is sorely lacking as the private management of these banks prefers the easy money at minimal risk that comes from lending to government.

Likewise, K-Electric has successfully turned the city’s power utility around, but largely by diverting the city’s scarce electricity to its elites, leaving the rest to bear the burden of load-shedding.

As the government moves to deliver on its commitments to privatise the large behemoths that have been eating up the state’s scarce budgetary resources, the ensuing debate should avoid taking potshots and ask more specifically about what the public interest is in each case of privatisation, and how the government intends to safeguard it.

In the case of PIA, maintaining flights to underserved destinations is a clear example. Will a private party agree to continue flight operations to Quetta and Peshawar, Sukkur and Multan, Gilgit and Skardu?

The answer must be yes, and parliament must ensure that any deal safeguards this.

Published in Dawn, December 9th, 2015