KARACHI, Aug 12: The State Bank Governor Dr Ishrat Hussain has estimated the worth of business enterprise being owned and run by the three armed services at 3.5 per cent of the total assets of all the listed companies on the stock exchange. He was asked to elaborate on the role and financial position of the business owned and run by Fauji Foundation, Army Welfare Trust and all such allied organizations. “I know there is a strong popular perception on the role of these business enterprises,” he remarked while noticing a big applause on the question.
At a joint gathering of Overseas Universities Alumni Club (OUAC) and 21st Century Business and Economics Club (21st CBEC) on Friday evening Dr Ishrat spoke on “why privatization is necessary for economic growth in Pakistan?”
“Private monopolies and oligarchies are worse than public sector monopolies,” warned the Governor while stressing the need for setting in place “certain legal and regulatory institutions” to monitor and check private ownership and market mechanism.
He endorsed the observation of a retired banker who quoted from a book to illustrate the creation of monopolies and cartels in Russia and in a few African countries. In absence of legal and regulatory institutions, Dr Ishrat warned that market distortions can accentuate and markets can be rigged for the benefit of a few.
The State Bank governor claimed a national consensus on the privatization as both the PPP and PML (N) supported this programme. The programme was initiated in 1991 by Nawaz Sharif government.
A big part of the speech was devoted to justify the recent privatization of the PTCL — considered a rich cash cow to meet fiscal needs rather than a business enterprise. The governor said that the compulsions of extracting as much profits and cash for meeting fiscal deficits will always predominate and the imperatives of expanding the network, the infrastructure and services through retained earnings will be neglected.
He questioned the alarm of employment losses after privatization calling it unjustified and pointed out that after privatisation the telecom sector would generate hundreds of thousands of new jobs through public call offices, calling cards, pre-paid card companies, internet service providers, mobile phone companies, broad band services and other value-added services. “As the penetration ratios in Pakistan are still quite low, there is going to be large expansion in the telecom sector,” he assured.
Dr Ishrat said that in 1997 when the restructuring, downsizing and privatisation of the nationalised commercial banks picked up there were 105,000 employees working in the financial sector. After privatisation was completed the banking industry has expanded the work force to 114,000.
He reminded the audience in more than 50 years under control of the government hardly 300,000 telephone connections were given as against 500,000 to 600,000 new telephone connections given in a single year of 2004.
The State Bank governor referred to the nationalization during the decade of seventies in Pakistan done on the pretext of benefiting the poor. Two decades later it turned out that these assertions and assumptions were unrealistic and flawed and the consequences were quite reverse. Pakistan’s public enterprises including banks became a drain on the country’s finances through continuous haemorrhaging and leakages. A sum of Rs 100 billion a year were spend outside the budget every year to plug the losses of many of these enterprises.
In another context he India also started implementation of the economic reforms in 1991 and since then its per capita income has increased at the rate of 4 per cent a year as against one per cent a year in last 45 years.