Shutting down PSEs versus privatisation

LAHORE: No regular loss making public sector institution has ever been revamped in Pakistan. These institutions continue to bleed the national exchequer, reducing the resources for the development of federating units.

Instead of disposing off the loss-making institutes, the governments, one after another, continue keeping the entity alive forcefully. The measures taken to do so are repeatedly applied by each government that follows.

The first measure that successive governments in Pakistan have taken to revive dead public sector entities is changing the management and leadership. They appoint a strict administrator in the same way a rider uses a stronger whip to force a dying horse to move ahead. Often this tactic is used twice by a government.

However, the dead institute fails to recover, which generally is taken as an insult. The bureaucracy then advises the state to arrange visits to foreign countries for finding out how such loss-making entities are revived by other administrators. This too remains a cosmetic attempt at fixing the public sector enterprise (PSE), though the foreign trips add to the credentials of the bureaucrats.  

As the failures pile up, the rulers sit together with the bureaucracy and appoint a committee to study the causes of failure of the institution. Nationalised banks were targeted for restructuring in 1997, conveniently ignoring the fact that earlier privatised MCB, without restructuring was going great. A lot of money was poured in HBL and UBL but they remained huge loss making entities when privatised a decade later.

Similarly, huge amounts have been poured in PIA to bring back its lost glory. New fleets have been bought on government guarantees, which rusted without improving the performance of the airline.

The process has been the same in case of PIA as well. When the government failed to resuscitate the institution by pouring in more money, they lowered the standards so the institution could continue to operate.

The argument, as always has been that it employs thousands of people. The machinery and equipment installed in the institution is many times the price being offered by the private sector.

The bureaucracy also argues that handing over institutions to the private sector would create monopoly and increase the price of the services it provides. (They conveniently ignore that the inept institution provides low quality services and products or no service at all). The end result is that they convince the rulers to let the institution operate on somewhat reduced loses. They thus reclassify the dead horse as living-impaired.

That is what is happening with PIA. No matter the huge amount being spent to keep it afloat, or the many procedures to reenergise the national carrier, the results remain nil. Pakistan Steel Mills too has proved to be a white elephant. We have infused more money in the entity than its actual value. The result is still zero. Its salaries are paid by the federal government.

The story of Pakistan Railways is not much different either. The stated government policy is to involve the private sector, and the Railways is being taken over by privately run trains on one pretext or other.