Need to immediately privatize loss making companies

White horses must become growth engines

Privatization, the transfer of government-owned assets and services into the hands of private entities, has been a subject of intense debate and discussion for decades. It has been implemented worldwide, with varying degrees of success and controversy.

One of the primary reasons for privatization is to enhance economic efficiency. When state-owned enterprises are privatized, they typically become more responsive to market forces. This increased efficiency can lead to lower prices, higher quality products and services, and ultimately, economic growth.

Privatization can help alleviate fiscal burdens. When the private sector takes the responsibility for running and maintaining certain assets or services, the government can redirect funds to such needs as education, healthcare, and infrastructure. It can reduce the need for government subsidies for struggling SOEs.

As private companies enter markets previously dominated by SOEs, they bring fresh ideas, technologies, and innovations. Competition encourages businesses to continuously improve their products and services, leading to increased consumer choice and satisfaction.

Privatization often results in improved service quality. In many SOEs, customer service may not be a top priority. In privatized industries like telecommunications, transportation, and healthcare, consumers often experience better service, shorter wait times, and access to cutting-edge technologies. Privatization can also contribute to job creation and economic growth.

SOEs have sometimes become financial liabilities. Privatization allows governments to transfer the financial risks associated with them to private investors. When businesses operate under the discipline of profit and loss, they are more likely to manage risks prudently, reducing the potential for taxpayer-funded bailouts.

It is essential to approach privatization with careful planning, oversight, and consideration of the specific circumstances of each case. When executed thoughtfully, privatization can play a pivotal role in driving economic development and improving the overall well-being of a nation’s citizens.

Corruption in Pakistan’s government departments is not new. It affects every facet of public life. Transparency International’s Corruption Perceptions Index consistently ranks Pakistan among the countries with high levels of corruption.

Several factors contribute to its persistence:  many government employees, particularly those in lower-level positions, receive meagre salaries. This can lead to a susceptibility to bribery and kickbacks. Weak accountability mechanisms have allowed corrupt officials relative impunity. The absence of stringent consequences has emboldened wrongdoers. Pakistan’s bureaucratic structures often lead to excessive red tape and opportunities for corruption. This bureaucratic complexity can deter citizens from accessing public services without bribery. Politicians sometimes protect corrupt officials. This further erodes accountability and perpetuates corrupt practices. Poverty and limited education exacerbate the problem.

Corruption Corruption diverts valuable resources away from development projects and public services. Funds that could be invested in education, healthcare, and infrastructure are siphoned off by corrupt officials. Corruption often leads to unequal access to public services, perpetuating social and economic disparities. It erodes public trust in government institutions, discourages foreign investment and stifles economic growth.

Combatting corruption departments requires a multifaceted approach: Establishing independent anti-corruption bodies is crucial. These bodies should operate transparently and without political interference. A fair wage system can help, as can simplifying bureaucratic procedures, digitalization of government services, implementing open data initiatives and ensuring public access to government information, public awareness campaigns and educational programmes. To address this issue effectively, concerted efforts are required at all levels of society and government.

Many national institutions have been long losing money. Companies like Pakistan Steel, Railways and PIA etc are examples. While employees are in a bad situation, officers enjoy lavish salaries and perks. Corruption is separate. It is in the minds of government employees that whether you work or not, you will get paid after a month. After corruption this mindset also played a big role in destroying our national institutions. Political governments have contributed equally to the destruction of these institutions by recruiting additional employees.

Civil and military leaderships are on one page and working together for betterment of the country. The COAS is himself taking keen interest in the economic restoration along with his professional responsibilities. It is the right time to privatize loss-making organizations on reasonable price, and job guarantee for the employees.

Today, the Pakistan Steel Mill’s production is zero. Outdated machinery does not meet industry standards. Production shut down in June 2015, when Sui Southern stopped supplying gas due to arrears. Additionally, it is unable to pay employees’ salaries. It had lost Rs 16.9 billion by end of FY 2008. At present, the total losses and liabilities are approximately Rs 400 billion.

One of the primary reasons is the interference in Mills affairs by successive governments. Political governments always compromised merit while appointing the CEOs, besides inducting other incompetent people. Consequently, the organization has been managed very poorly. Another integral factor is dependency on imported steel for local purposes.

Despite its growth potential, Pakistan Steel Mills has lagged in competition with other countries. Domestic iron and steel products struggle to compete with cheap imports from countries like China.

The State Bank of Pakistan believes cheap imports from China and Ukraine had damaged the local production of iron and steel. While comparing Pakistan Steel Mills with the steel industries in other countries such as Japan, we can infer that a skilled workforce is crucial. Unfortunately, Pakistan Steel Mills lacked one.

The labour in developed countries is qualified and adept. Selecting workers based solely on their expertise instead of partiality or prejudice ensures this. In the Steel Mills however, the workforce hired was more than required. Political parties appointed thousands. While about 9,000 employees were enough, 17,000 were hired. This superfluous employment put an additional burden on Pakistan Steel Mills. Privatization is another dilemma. The government underpriced it. However, a group of Pakistan Steel Mills workers standing up against the mills’ privatization caused a reversal of this decision. Subsequently, the Supreme Court declared the decision when it intervened. This decision resulted in massive corruption as the government-appointed new public servants at the mills. To secure their position and obtain undue benefits, they practiced corruption and drained Pakistan Steel Mills from its revenue. This had adverse effects on the economy of Pakistan.

 

Then look at PIA which is one of another loss making organization. Regrettably, PIA serves only a fraction of the country’s population, accounting for less than three percent of citizens while consuming significant public funds. This stands in contrast to the power companies that cater to nearly 80per cent of the population. The government holds a 92 per cent share in PIA. Since the late 1990s, the airline has faced mounting losses, attributed to competition from emerging regional airlines, a lack of entrepreneurship, external influences, internal mismanagement, and insufficient funding for fleet expansion. To cope with its financial losses, PIA accumulated debt, now unmanageable. As of 31 December, 2022, PIA owed Rs 743 billion— five times the total value of its assets, while its total losses for 2022-2023 stood at Rs 86.5 billion, including Rs 11 billion in operational losses.

The severe shortage of funds is affecting flight operations. PIA is facing difficulties in getting fuel from PSO while, recently, two-way flights from Karachi to Faisalabad, Islamabad and Lahore were cancelled due to lack of funds. The flights from Karachi to Turbat, Bahawalpur and Sukkur were also cancelled as were the two-way flights from Karachi to Muscat. All PIA employees could not be paid salaries. Worse or the same is the situation of many other SOEs.

The history of institutions shows that private institutions have much lower losses than public institutions. Effective supervision, almost no corruption, competent and professional employees, officers and heads, have played an important role in increasing profits in private enterprises compared to government.

Another thing beyond comprehension is whether the government’s job is to run trains, buses, ships and factories. If you look at developed countries, you will find that apart from the national security, defense, foreign affairs, education and health etc. related departments, the rest of the institutions are mostly in the private sector and from which, governments also get taxes.

If it’s not possible to immediately privatize the loss making companies then at least there should be some revolutionary reforms. I remember, when I was studying in UET Lahore in 1993, politics was on its peak and four year’s course was taking six years to complete. Then, in 1998 a retired lieutenant-general was appointed VC. He brought revolutionary steps and now students are graduating exactly in four years.

I can give examples of many other departments where organizations showed substantial growth soon after appointing the management from the Army. Such setups are also going into much better profit than many government organizations where discipline, dedication, transparency and reward systems are playing a key role in the progress of those organizations.

In the current scenario, it might not be feasible to bring Army leaders in those organizations as they need to focus more on training, operational preparedness and professional activities. But at least we can adapt their leadership and management styles to help out up to some extent till commencement of their privatization process.

Readers, it is the urgent need of the hour to re-determine our goals and strategies. Our country should not bear the loss anymore.

Civil and military leaderships are on one page and working together for betterment of the country. The COAS is himself taking keen interest in the economic restoration along with his professional responsibilities. It is the right time to privatize loss-making organizations on reasonable price, and job guarantee for the employees.

Abdul Basit Alvi
Abdul Basit Alvi
The writer is a freelance columnist

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