Minister says PSEs eating up Rs600 billion every year; NAB investigation into MCB privatisation to send negative signal to investors; addresses ‘Breakfast with Jang’
ISLAMABAD: The federal government is going to take final nod from the Sindh government this month on the question whether the province is ready to buy Pakistan Steel Mills (PSM), otherwise the cabinet committee will give go-ahead to formal procedure of privatisation of this largest state-run steel entity.
Besides, the government is also in final negotiations with the Etisalat for settling the issue of remaining $800 million in Pakistan Telecommunication Company Ltd (PTCL) privatisation transaction. The company owes this amount to the government since 2008. Etisalat is the UAE-based telecom company which holds management control along with 26 percent shares of the PTCL, after its privatisation in 2006 by signing a deal of $2.6 billion.
“The federal government is going to meet on June 10 with the representatives of the Sindh government, if it wants to buy the Steel Mills otherwise the cabinet committee on privatisation will take further decision to start work on giving it in private hands,” Minister of State for Privatisation/ Chairman Privatization Commission Muhammad Zubair said here on Wednesday while addressing an event “Breakfast with Jang” organised by Jang Group with a theme ‘Is Privatisation in our national interest?’
“In Pakistan, public sector enterprises (PSEs) are eating up about one-fifth (or Rs600 billion) of the country’s total tax revenue every year, draining fiscal resources which may otherwise be used for improving health and education services,” he said.
In Pakistan, there are 114 such entities under the federal government and provinces also hold a number of PSEs. Every year, this huge amount goes to this black hole, the reason being their huge loss making due to the problems of mismanagement and operational flaws.
While talking about the benefits of giving these entities in private hands, he said, it will not only save the taxpayers money in going into the black hole, but will also improve the performance of these entities and they will grow which will ultimately benefit the economy and society.
“If the true potential of these entities are unleashed, there will be direct positive impact on the country’s GDP growth which will help social uplift of the country,” he said. Zubair said since the public sector officials or bureaucracy normally used to have no practical experience of running a business, managing a public sector enterprise and unaware of market dynamics, so the better solution is to hand over state-run enterprises management in private hands that have better management skills and experts. However, in every transaction stakeholders have to be on board.
Besides, he said, these enterprises should have provided quality of services to the people, but in Pakistan’s case the story is different. Privatization has been controversial subject not only in Pakistan but in developed world too. In Pakistan, privatisation process started in 1991, when Nawaz Sharif was the prime minister and then every successive government followed it. Late Benazir Bhutto had also aggressively followed privatisation despite her father late Zulfikar Ali Bhutto followed the policy of nationalisation.
Replying to a question, Zubair said the good aspect of the Pakistan privatisation programme is that not a single employee of a privatised entity has been shown the door. He said such employees have been provided voluntary separation scheme and other incentives.
He further said, “Every year, one to 1.5 million people are added to the country’s work force, so we have also to think about them. Due to the low growth in GDP, or bleeding from these PSE’s, the absorption capacity of the economy of the additional work force is low.”
Although, taking a step of privatising an entity is a difficult task, yet it will have far more benefits in the long-run for the economy and its people. Zubair said investigation by the NAB into the privatisation of Muslim Commercial Bank (MCB) that happened in 1990 will send a ‘negative signal’ to the local and foreign investors. He questioned, “Whether they want to reverse this privatisation that took place some 26 years back? You cannot reverse the process; you are giving a negative message to the investors.”
Giving the example of privatised banks i.e. MCB, UBL, ABL and HBL, the Privatisation Commission chairman said that these were misused in 1980’s and 90’s, after loans were taken and then written off. “Even billions of rupees were given to these banks for running their activities, but now, these have the best services and are competing not only in Pakistan, but also in Middle East, Europe and America with other top banks,” he said.
He further said that from 2008 to 2013, the PPP-led government had spent 2,000 billion rupees (Rs2 trillion) on subsidising electricity to the consumers. “Had the money been spent on power infrastructure development, we would have no issue of energy shortage now,” he said.
Earlier, Jang Group's Syed Sarmad Ali said that privatisation has been a controversial subject in a sense that some are against it while others are supporting it. “Since privatisation started in Pakistan in 1990’s, there are some success stories and they (public sector enterprises) are performing well and have been role model for other public entities,” he said. He further said that if the government is privatising an entity, human factor will have to be kept in mind.