In principle, this a seems reasonable approach, but in reality, the profits of state units may not be real or may have been achieved at a high cost to the public and the government.
Profits could be earned by making the public pay high prices for the product and services of such companies.
They could be achieved by levying heavy duties on the imports of such products by others, as in the case of products similar to those manufactured by Pakistan Steel. Such companies could be enjoying tax protection arguing that a public sector company should not be overtaxed.
The company could be availing large loan facilities by government banks as they were doing when all banks were under government control. Stripped of such protection, such public sector entities may not be able to enjoy the profitability they do now.
The fact is that when these units were initially privatised in 1972 or 1974, most of them were profit-making units, but later under bureaucratic mismanagement they became losing concerns. So a large number of such firms were sold. So, if some of the companies are profit-making entities now in a period of excessive profit- making , that does not mean they cannot soon become loss-making companies.
What matters now is how well they are regulated after becoming private entities and made to serve the people, while making fair profit for the owners, such as gas and electrical units.
Even otherwise it is not the business of the government to manage business houses— even in the west—, as the bureaucrats are not trained for that. If they cannot do the job for which are trained, they cannot manage business houses or industries properly.
If, in spite of that, they are asked to perform managerial duties, they will practice favouritism and nepotism in their domain and they may buy the silence of recalcitrant trade unions through doing special favours to them. So it is better that the privatisation goes ahead, but according to the criteria laid down and not in the clumsy or hasty manner in which Pakistan Steel was privatised.
Of the Rs395 billion collected through the privatisation so far, Rs241 billion has come from the banking sector, through the sale of seven banks like MCB, United Bank and Habib Bank and the shares of other banks like the UBL and NBP. Shares of more banks are to be sold now.
After the sale of 159 public units during the last 15 years, the government suffered a set back. The Supreme Court pronounced the privatisation of Pakistan Steel mill was done in “indecent haste” and overturned the sale.
The government is moving the Supreme Court to review its judgment and withdraw the adverse remarks against it.So has Arif Habib, a leading stock broker done to get his name cleared.
But the judgment is not to affect other privatisation moves which are of a major kind. Mr Zahid Hameed, minister for privatisation says after the total of $6.2 billion collected through privatisation so far, $5.3 billion came between 1999 and this date through the sale of 58 units, while $0.9 billion came through the sale of 102 units between 1991 and 1999.
The largest single unit sold was the PTCL which fetched Rs186 billion. The government claims that 90 per cent of the sale proceeds of the privatisation were spent on debt reduction and 10 per cent on poverty alleviation as laid down by the government. Only a proper audit can verify that claim.
With more of the units put on sale, going into the hands of Gulf investors, new problems have arisen. A few of them after winning the bid seek reduction in share prices. That happened in the case of Pakistan Steel when the price of the share was reduced from Rs1742 to Rs1618.
Financial concessions were given in respect of the sale of PTCL as well. Of the three bidders approved for the PSO, the Abu Dhabi group, a major UAE bidder, has just reaffirmed its bidding for PSO.
Large units in which bid investments have been made, are awaiting their sale now. They include the PSO, Sui Southern Gas Company, Sui Northern, PPL, State Life, the Heavy Mechanical Complex, the Heavy Electrical Complex and the Machine Tool Factory. The NIT management has also to change hands with its very large assets.
Who will take them over is watched with keen interest by the people awakened by the verdict of the Supreme court?
What matters is not only how much they will pay for such units, but also how much more they will invest on the development and expansion of such units, particularly for power production and distribution and what kind of new technology they bring to update such projects.
The government is determined to go ahead with the privatisation of the Pakistan Steel following its approval by the Council of Common Interests. What matters here is not only the price paid for the mills, but also the capacity of the buyer to raise the production of the mills to three million tones from 1.1 million tonnes . Otherwise, the mills will be meeting a small part of the national needs at a high cost.
How well such units serve the nation depends on how well they are regulated and how they follow the rules of the game. Strong regulators are needed for sustained efforts to ensure that such foreign investors do not gang up to maximise their own benefits and do not pay enough attention to the needs of the consumers.
The country should draw upon the experience of other countries which have gone through the process of privatisation during the last 15 years and avoid the mistakes they had committed. We need a more responsible private sector which looks beyond its own immediate interests and provides a fair deal to other stakeholders.