Thursday June 20, 2024

Privatization: what are we not seeing?

At its core, privatization entails the strategic transfer of ownership of state-owned enterprises into private hands

By Capt (r) Wasif Syed
May 30, 2024
Crew members disembark from a Pakistan International Airways (PIA) flight at Kabul Airport, Afghanistan, September 13, 2021. — AFP
Crew members disembark from a Pakistan International Airways (PIA) flight at Kabul Airport, Afghanistan, September 13, 2021. — AFP

In recent months, discussions surrounding privatization have gained momentum, spurred on by the formation of the prime minister’s economic advisory council, a diverse assembly comprising business leaders and retired bureaucrats, including notable figures from the Federal Board of Revenue (FBR).

This council, tasked with steering Pakistan’s economic course, signifies the priorities of the current government when it comes to recalibrating the nation’s economic trajectory. It seems that the very term ‘privatization’ has become a buzzword for the current administration. Portrayed as a sweeping solution for the ailing economy, it is observed that privatization is often presented as a remedy to end the country’s financial woes.

At its core, privatization entails the strategic transfer of ownership of state-owned enterprises into private hands. This concept, however, is not new to Pakistan. The country’s economic history is punctuated by significant milestones, including the sweeping nationalization drive of the 1970s. This ambitious endeavour, aimed at consolidating state control over key industries, saw the government assert ownership over numerous enterprises, ranging from manufacturing to finance.

Yet, despite the initial fervour surrounding nationalization, subsequent disruptions, including periods of authoritarian rule and martial law in the 1980s, served to disrupt the nation’s economic momentum, casting doubts on the efficacy of state-led enterprises. What is often overlooked in this conversation is that the management of these entities was handed over primarily to bureaucrats serving within state machinery. It became evident that the management of the nationalized entities struggled to operate them efficiently.

The bureaucratic apparatus, lacking the necessary interest, capability, and expertise required to effectively run businesses, found itself ill-equipped for the task at hand. Consequently, the policy of nationalization failed to yield the desired results, as the bureaucratic machinery grappled with the complexities of managing commercial enterprises.

It was not until the 1990s that privatization regained traction, emerging as a focal point of economic reform efforts. Yet, the aftermath of privatization often paints a nuanced picture.

Therefore, as proponents extol the virtues of privatization, citing enhanced efficiency and innovation as key benefits, critics raise valid concerns regarding its potential pitfalls.

Escalating costs, diminished service quality, heightened job insecurity, and the emergence of monopolistic tendencies loom large, casting a shadow over Pakistan’s socioeconomic fabric. In contrast, proponents of public-private partnerships (PPPs) advocate for a more balanced approach. They argue that PPPs offer a middle ground, leveraging the strengths of both public and private entities while safeguarding public interests and fostering productivity and quality enhancements. This collaborative model, they contend, holds the potential to drive sustainable economic growth while addressing pressing social needs.

As Pakistan stands at the crossroads of economic reform, it is imperative to draw lessons from both domestic and international experiences. The cautionary tale of the Thatcher era in the UK serves as a stark reminder of the perils of hasty privatization, where initial promises of efficiency gave way to the erosion of essential services like the National Health Service (NHS) privatized 30 years ago.

The same was witnessed with the British Railways, electricity generation units and other services that were privatized in the 1980s. As a result, one is compelled to question the efficiency of the privatization model especially when the success stories are few, and the failures ample.

In contrast, experiences from neighbouring countries like Bangladesh, India, and Sri Lanka offer valuable insights into the transformative potential of PPP models, particularly in vital sectors such as healthcare and education. In fact, we need to look no further as the PPP model has yielded exemplary results in our very own Sindh, which offers a promising journey for other provinces.

Despite the challenges ahead, Pakistan remains poised as a hub of potential and can harness the transformative power of PPPs to drive sustainable economic growth and shared prosperity. By embracing a holistic approach that prioritizes public interests and draws on the wisdom of past experiences, Pakistan can chart a course towards economic resilience and inclusive development.

The journey towards economic prosperity is fraught with challenges and opportunities alike. Privatization, though promising in principle, must be approached with caution and foresight, taking into account the diverse needs and aspirations of Pakistanis. Through strategic partnerships and prudent policy measures, Pakistan can navigate the complexities of the global economic landscape, emerging stronger and more resilient than ever before.

The path to economic reform may be winding, but with steadfast commitment and collaborative efforts, Pakistan can seize the opportunity to shape a brighter future for generations to come.

The writer is an engineer and a freelance contributor.