IS the campaign for massive privatization of the state sector launched about 25 years ago, following the initiative of Margaret Thatcher and Ronald Reagan being reversed in some of the countries outside the West?

The privatization that is being bolstered by the WTO with its strident free market philosophy is certainly not being reversed in the West. But it certainly is being halted or slowed down in the socialist bloc countries.

China is giving more attention to corporatization and making the corporations strong and helping them in expanding abroad as well. The newly created Chem China group for example has eight subsidiaries and five listed companies. The group is the dominant manufacturer of ‘ethylene’, which is used to make plastics in the fastest growing major economy in the world.

Chinese companies have taken over industrial units from Belgium to Australia while negotiating with more firms in other countries. Chinese companies are engaged in varied development activities in Pakistan.

Vladimir Putin in Russia is in no hurry to privatize the large state sector after seeing some of the ugly features of the Russian private sector. He wants to make full use of his country’s gas and energy resources for geo-political purpose as well, and wants to increase the leverage of the powerful Gasprom and its oil giant Rosneft.

And countries as varied as Singapore, Dubai and oil-rich Venezuela and some others in South America are practicing what is called ‘state capitalism’ by giving companies like Singapore Airlines, Sing Tel and Temasek considerable leverage in the Far East, while the state-owned Emirates Airlines enjoys as much freedom in the Gulf region.

Pakistan is making real headway with its privatization drive with many major state units like PTCL, KESC and Pakistan Steel already sold off. Other giants in the energy sector like OGDC, PSO, Sui Southern Gas Company and Sui Northern are earmarked for early sale.

There are protests against the sale of profit making companies in particular like the PSO and others in the energy sector with their high prices in the share market.

In Pakistan most of the companies were incorporatized before their sale and yet they were run by bureaucrats with their wasteful ways and tendency to become corrupt.

It is also argued that in Pakistan that many projects like KESC and Pakistan Steel were offered at prices far below their real worth and their potential, while the government says they were sold through open auction and to the highest bidder.

The fear in Pakistan has been that if some of the major profit making units were not disposed of now when they are profitable, bureaucratic corruption, political interference and maladministration may turn the firms into loss making units.

Prime minister Shaukat Aziz says it is not the business of the government to be in business which is the theme song of the advocates of privatization, but now a Newsweek article on state capitalism says “ the governments are getting back into the business of business” and talks of the state capitalist developments in socialist countries in particular lead by China and Russia.

When the external trade deficit of Pakistan is very large and may touch about $9 billion with imports at $27 billion against the export of $18 billion, the government may welcome the foreign direct investment, estimated atf $2.2 billion in the first nine months of the year. The year may end with a total FDI of $3 billion or more depending on which company is privatized within the next two months. The record FDI makes a jump of 180.6 per cent over the FDI in the same period last year. Along with that, the portfolio has jumped 276 per cent to from $467.4 million in the same period last year.

During 2004-05 total investment flow had risen to only $1.67 billion. In the current year the UAE is the biggest investor with $726 million followed by the US with an investment of $710 million. While the FDI is high in recent times, a 15-year total shows an investment of only $10 billion.

The increase in FDI is large now due to privatization particularly from the UAE and Saudi investors. While the money is welcome to the government, the fact is that privatization means only replacement of public capital with private capital or foreign capital.

Replacement of the capital alone is not enough. What matters far more is the expansion of the taken over units through large additional investment. That would mean higher production and larger employment, but that does not seem to be taking place where the Gulf capital is invested.

May be, it is stock taking time for the investors before they decide to invest more. But the customers of the KESC certainly expected quick results and rapid improvements in the distribution of power instead of the situation getting far worse than before.

Meanwhile, the prices of the shares of the companies taken over by the foreign investors have shot up as those of the United Bank Limited and the investors are delighted.

Pakistan Steel for example has to expand its production to three million tones of steel from one million tones to make it economic and more useful to the country. Additional investment has to be adequate and quick in KESC to produce enough power to meet the needs of the people. If not, the privatization of KESC will sorely disappoint its consumers. Frequent power failure or load shedding may lead to an outburst of violence and invite a campaign against privatization.

Meanwhile, the FDI has risen to $2.63 billion this year and the new minister for privatization and investment Zahid Hamid has declared he would speed up the process of privatization, which he has described as a corner stone of the economic policy of the government.

But while there is so much talk about the benefits of free economy, the American citizens are blaming president Bush for colluding with the big oil companies and keeping petrol at $3.5 a barrel. The consumers in the US think president Bush ought to initiate measures to reduce oil prices instead of helping big oil to make fabulous profits

In Pakistan too the demand has been to reduce the big profits of the oil companies whose shares are selling at peak prices instead of the government helping the oil companies make more and more money. The oil giants have not realized their obligation to their consumers who are hit hard by higher and higher prices.