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Opinion

February 2, 2018

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Perils of privatisation

The government of Pakistan has embarked on a fresh programme to privatise the remaining state-owned enterprises and properties. Our country has already gone too far along the road of privatisation, outsourcing and deregulation as compared with other countries in the region.

Successive governments have dismantled most of the public sector since the 1980s. There is hardly any industry that remains in the state’s hands. Nearly 90 percent of the banking sector has already fallen into private hands. Now, the PML-N government wants to privatise oil and gas; the power sector; and other utilities and services. Minister for Privatisation Daniyal Aziz recently announced his decision to privatise PIA before the 2018 elections. It appears that the government is repeating the same old rationale for privatisation: financial losses; inefficiency; crippling services; overstaffing; and that the state has nothing to do with running enterprises.

Privatisation is an integral part of the neoliberal economic agenda and the free market economy. We live in the era of the free market economy and neoliberalism where the concept of a welfare state is long gone. There is a general consensus among the ruling class since the 1980s that the free market economy and the neoliberal economic agenda should be the new economic religion. Privatisation is an important component of this neoliberal economic agenda. The main purpose of the privatisation policy is to reduce the welfare role of the state and minimise its intervention in the economy.

The philosophy of privatisation, in fact, stems from the role of the state in economic life. International financial institutions and free-market economists believe that the state should confine itself to introducing regulations while the operation and ownership of industrial enterprises, services and utilities should be left to the private sector.

In simple terms, privatisation means that the state is no longer responsible for providing basic services to the people. However, the state has transferred its role and responsibility to the private sector. Unlike the public sector, the main driving force of the private sector is to maximise profits and wealth. The main motive of the public sector is not to prioritise profits. Its fundamental aim is to provide services – either for free or at subsidised rates.

The history of privatisation in Pakistan reveals that rich investors have mostly benefitted from the process while workers and the public have suffered a great deal. Workers have lost permanent jobs, decent wages and legal protection against any form of victimisation. If anyone wants to know the adverse effects of privatisation, they should consider the example of banks and corporations that have been privatised. These examples will reveal who the real beneficiary of the privatisation policy is.

Privatisation has been used to plunder the state’s assets and resources. The process reflects an untold story of corruption, political patronage, manipulation and cartelisation. State monopolies have been converted into private monopolies and one section of the ruling elite has invariably used this policy to enrich itself.

We must prepare a balance sheet of such processes in Pakistan and gauge the merits of the privatisation policy by reviewing its performance over the last three decades. We were told that privatisation would reduce fiscal deficits and public debt and enhance the efficiency of privatised industries, services and utilities. In addition, prices were expected to fall while the rate of production was meant to increase. The process was also viewed as a strategy to increase foreign and local investment and boost employment and social expenditures. Many believed that it would reduce poverty and raise living standards. But the privatisation process in the country has, so far, failed to achieve these objectives and promises.

Our debt has risen to record levels. Poverty and unemployment have increased while the means of production and wealth has largely remained concentrated in a few hands. Prices have risen to unprecedented levels and commodities are now beyond the reach of the poorer sections of the society. Privatisation has also deprived people public sector jobs and resulted in the rights of workers being undermined.

According to an October 1998 report by the Asian Development Bank that analyses the impact of privatisation in Pakistan in the 1990s, only 22 percent of the privatised units performed better than they did during the pre-privatisation period. Around 44 percent performed the same whereas approximately 34 per cent performed worse. So, it is a myth that privatisation has made enterprises more efficient.

According to Dr Akhtar Hasan Khan, former federal secretary and author of ‘The Impact of Privatisation in Pakistan’, 166 state-owned enterprises have been sold since 1990 for a cumulative sum of Rs476.5 billion to finance budget deficits, cut losses and improve the efficiency of mismanaged entities that are aimed at boosting economic growth and job creation. Where are the jobs, the high levels of growth and the economic opportunities?

All these problems have surfaced at a time when the most noticeable feature of the economies that escaped the Great Recession, following the international financial crisis, is the significant role of the state in the economy. The economies with large public sectors recovered far more rapidly than others.

Why is privatisation not working in the interests of the working class, the poor and the economy? Just look at the horror story of the erstwhile KESC and PTCL and the profiteering of the privatised banks.

The privatisation of KESC and PTCL can be described as an “unmitigated disaster” and “the biggest blunder of the privatisation [process] in Pakistan”. Dr Akhtar Hasan Khan’s books states that the government spent Rs147 billion on KESC between 2002 and 2010– Rs109 billion before it was privatised and Rs38 billion after its privatised – and compelled Wapda to supply 700MW to the power utility company notwithstanding the outstanding payments worth Rs81 billion. PTCL is also an example of flawed privatisation.

If they are thoroughly investigated, our privatisation scandals are no less interesting than the Panama and Paradise leaks. Privatisation has not had a favourable impact on our GDP, investment potential and employment rate. It is not a solution to the economic problems faced by our country’s public sector.

The writer is a freelance journalist.

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