Privatisation debate

November 17, 2019

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FOR a political party that did not highlight privatisation as a priority in its detailed election manifesto, and largely opposed all attempts at the same by previous governments, it is somewhat puzzling to see the energy with which the PTI is pursuing the matter now. We have heard the finance adviser talk repeatedly about the importance of privatising the LNG-based power plants; the prime minister himself has underscored the importance of accelerating the privatisation of the steel mill; and now the Cabinet Committee on Privatisation has given directions for the privatisation of the SME Bank and PIA Investments. The urgency is such that the government is willing to disrupt the entire LNG supply chain just so that it can rip the two large power plants they wish to privatise out of their power purchase commitments. Moreover, the government has not only readily written privatisation into the IMF plan, but also programmed the funds to be received from it as ‘revenue’ rather than as a financing item, which would be the proper treatment to give to proceeds from privatisation.

All this runs against the grain of what the PTI has always argued, and, indeed, embarked upon once it came to power. All last year, we constantly heard about a holding company under which all state-owned enterprises would be placed, and how the government would ensure that they would be shielded from political influence. The idea was to turn these units around, but retain them as government-owned entities. Suddenly, all that is gone, and the speed and urgency with which privatisation is being advanced today is striking. The little accounting gimmick that allows the proceeds of privatisation to be counted as revenue rather than financing might provide a clue. The government has steep targets to meet for the collection of foreign exchange reserves as well as federal revenue by the end of this fiscal year. Without proceeds from privatisation, it is unlikely it will be able to do this. It is increasingly becoming clear that the only priority driving the privatisation agenda in the country is money, and if they are treated as a financing item, as required by the law, and not as revenue, then the proceeds will do little to help meet the targets. There is a greater need to debate the merits of privatisation in the case of the entities that are on the list.

Published in Dawn, November 17th, 2019