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Saturday May 18, 2024

Privatization?

By Dr Farrukh Saleem
January 07, 2024

There’s a bloodbath going on in our so-called Public Sector Enterprises (PSEs). Is there a commercial entity in the world with assets of Rs150 billion and accumulated losses of Rs750 billion? The only one I know is Pakistan International Airlines (PIA). Pakistan Steel produces nothing but manages to lose Rs67 billion every six months.

The government’s so-called ‘commodity operations’ have so far lost Rs800 billion. The 200 PSEs lose some Rs1,800 billion a year, every year. In addition to that, the government doles out Rs1,000 billion in subsidies a year, every year. In addition to that, the government doles out grants of Rs1,400 a year, every year.

The image is a collage of photos of a PIA plane and the Pakistan Steel Mills. — APP
The image is a collage of photos of a PIA plane and the Pakistan Steel Mills. — APP 

Everyone knows this is unsustainable. Everyone knows this calls for urgent attention and strategic intervention. Everyone knows that the government has neither the will nor the capacity to run these PSEs. As the bloodbath goes on, successive governments have consistently found themselves immobilized. Everyone knows this inaction is untenable. Everyone knows PSEs are draining our national coffers. But, there’s no urgency, no vision.

There is a politician-bureaucrat-union nexus. Politicians create unproductive jobs within PSEs to fulfill campaign promises, secure voting blocs and solidify political support. Bureaucrats become holders of significant power over resource allocation. Unions produce inflated payrolls with ‘ghost employees’. All of this creates a fertile ground for collusive agreements with the nexus. To top it all, inflated contracts for public projects benefit companies close to politicians, who receive kickbacks or campaign contributions in exchange for influencing awarding contracts.

This complex, pervasive nexus has retarded economic growth by favouring unproductive jobs, misallocation of resources, corruption and other economic inefficiencies running into trillions of rupees. These inefficiencies have restricted the resources available for essential public services like education and healthcare, impacting the well-being of 240 million Pakistanis.

In the 1980s, Vietnam faced a grave economic crisis characterized by a staggering inflation rate of 700 per cent, a trade deficit, and economic stagnation. In 1986, Vietnam introduced the ‘Doi Moi’ economic growth model, which rested on five key pillars: privatization, foreign direct investment, cessation of subsidies to PSEs, dismantling of domestic cartels, and the promotion of free trade.

Chile, under the military regime of Augusto Pinochet, became a pioneer and a model of privatization by privatizing utilities, mining, banking and telecommunications. In the 1990s, Poland adopted a mass privatization scheme, where citizens were given vouchers that could be exchanged for shares in state-owned enterprises, as well as a direct privatization method, where strategic investors bought stakes in selected enterprises.

In Pakistan, this corrupt, self-serving nexus has eroded public trust in government institutions, bred cynicism and apathy towards political processes. There have been crippling inefficiencies. There have been paralyzing failures. There have been infinite rescues. There have been endless bailouts. We all know the disease. We all know the cure.

The mother of all questions is: Who will bell the cat? The question isn’t “how” but “who.” The politicians, the bureaucrats, the unions? Or……


The writer is a columnist based in Islamabad. He tweets/posts @saleemfarrukh and can be reached at: farrukh15@hotmail.com