PIA: the PM has the answer but...

It was January 2014 and Prime Minister Nawaz Sharif was chairing a meeting on the restructuring and privatisation of public-sector enterprises. The issue, as always was considered critical by the Sharif government given the financial haemorrhaging of most of the public-sector enterprises.

The reasons were multiple, ranging from inept management, political interference, bad business decisions and – in some cases – virtually non-existent enterprises which still drew salaries for a staff. There was a tool factory in Punjab which only had land!

In this January meeting the prime minister’s key ministers related to privatisation, Ishaq Dar and Zubayr Ahmad, were also present. Shaukat Tareen, Pakistan’s former finance minister was also present. While reviewing the government’s stalled restructuring agenda, the prime minister was reminded that according to his own six-month-old decision PIA should have been privatised by now.

In a July 2013 meeting, the prime minister had instructed Secretary Civil Aviation Nargis Sethi that PIA must be privatised within four months. Sethi had tried to tell her boss that it would not take less than eight to ten months for that to happen; the PM finally relented and agreed on six months.

On being reminded six months later that the process of privatisation had not even begun, the PM remained upbeat. The prime minister instead ended the meeting with the resolve to restructure all state enterprises within two years. The source of his conviction and confidence to move with lightening speed on the clearly compelling and complex task of restructuring state enterprises remains unclear.

Who has been advising the prime minister? And why has he opted to follow this disastrous advice? These are questions the PM must answer – to the people, to the taxpayers and of course to the families of the two protesting PIA men who have lost their lives.

PIA illustrates the completely illogical and impractical approach this government has opted for in dealing with public-sector enterprises. To expect that employees will not react if they begin to feel insecure about their jobs or, alternatively, to imagine that invoking the Essential Services Act will force those who fear loss of jobs to back off from their strike call is like living in a fool’s paradise.

How many decisions have Pakistan’s governments made under pressure from street power? Endless. Fear of street power must not become the deciding factor in any decision but it certainly must force our decision-makers to wisely think through issues. There is a huge cost attached to haphazard decision-making.

The PIA crisis is now unfolding before us. Employees are protesting, passengers are suffering, politicians are having a field day as they demonstrate solidarity with PIA employees, the organisation’s credibility is taking a hit at home and globally, and of course the government has produced a crisis that involves use of law-enforcement agencies at a time when they are already very thinly spread.

Bad decisions are a very costly affair. Last year there was a mess related to privatisation and restructuring around the sale of OGDC shares. The privatisation minister had flown off abroad for a road show to attract investors while the courts ordered a stay on the sale of shares. The PTI had gone to court invoking constitutional articles that disallowed sale of corporate family silver without getting clearance from all the provinces. According to a senior cabinet minister, the law ministry has advised the government that getting provincial clearance was not required. The article covering the Council of Common Interests (CCI) clearly contradicted the law ministry’s reported advice.

Interestingly, the prime minister, now blundering on restructuring and privatisation, is not new to the issue. In 1997 this same prime minister had overseen the successful restructuring of several government-owned banks. One of the banks was running at a Rs6.5 billion minus credit, operating loss and had 32,000 employees. Sharif had then brought in trusted technocrats from the market. Taking their advice, he had agreed to the setting up an independent board of technocrats to whom the banks began reporting instead of to a joint secretary in the Q block of the secretariat.

The model of that restructuring was successful at several levels. Around 7,500 people were removed but under a transparent golden handshake programme, which many opted for voluntarily. Not one person went to court and there were no strikes. The bank also went into profit within a year of its restructuring.

In June 2013, the prime minister sought advice from professionals with experience in restructuring. He was given a proposal to set up a holding company which would undertake three tasks: one, liquidate virtually non-existent corporations, restructure and then sell strategic shares of 26 percent of some state corporations and only restructure and retain others including the Pakistan Steel Mills and OGDC. The holding company, like the independent board that oversaw the 1997 restructuring of Habib Bank, would have an independent non-bureaucratic board. The holding company would protect the restructuring from all political and bureaucratic influences while protecting the interests of the employees – using the Habib Bank model. The company would operate independent of vested interests and of bureaucratic ineptitude.

The prime minister bought into the Tareen proposal but changed his mind by July. Politicians and bureaucrats must have prevailed. Let’s see when the prime minister decides to opt for wiser council on the restructuring of public-sector corporations.

Wonder whose advice will work.

The writer is a national security strategist, visiting faculty at NUST and fellow at
Harvard University’s Asia Centre.

Email: nasimzehra@gmail.com

Twitter: @nasimzehra