FEW believe that the government can pull off its plans to privatise the loss-making state-owned enterprises in whatever time it has left until the next elections. The scepticism stems from the fact that successive governments have failed to do so in the last one-and-a-half decades. It must also be pointed out that the incumbent government has succeeded in transacting only one real estate deal in more than three years despite having agreed with the IMF in 2019 to sell or restructure its major public-sector businesses. Now the prime minister has again ordered the process of privatisation to be expedited and to raise the maximum revenue. This shows that the privatisation agenda for a cash-strapped government is being driven at the moment primarily by its needs to cover the growing gap in its targeted non-tax revenues for the present fiscal year so that it can meet one of the IMF conditions for the resumption of the suspended $6bn deal.
In March, the government, which has been wavering between different options ranging from restructuring SOEs as profitable businesses by placing them in the control of private-sector managers under an umbrella-holding company to putting them up for sale, had come up with a list of 24 SOEs as potential privatisation candidates. The list comprises gas utilities, energy companies, banks and financial services, land, retail business, industrial complexes, etc. Little progress has been made so far. Even the sale of a hotel property in Lahore is mainly owed to the generous tax amnesty given to attract investment in the construction sector. The project was unrealistic to start off with in the current economic conditions. More than that, the implementation of corporate reforms or outright disinvestment of state enterprises in Pakistan is more a political issue than an economic decision. Therefore, we see such plans fall through in their infancy because policymakers don’t take the opposition parties or the staff/labour on board.
Broadly speaking, the opposition to privatisation of the public sector is linked to the future of employees of the enterprises being privatised, the implications for the common people, and the role of the state in the economic life of citizens as it limits its responsibilities. These are legitimate concerns and it is the job of a caring government to address them before making decisions that may bring about major changes in the political economy and affect the citizens’ well-being. Indeed, it is not the government’s business to be in business. Neither is it prudent policy to pursue privatisation for the sake of generating the needed cash because it is unable or unwilling to tax wealthy and politically connected lobbies. At least it is not expected of a party like the PTI that, while in opposition, had opposed the privatisation plans of the previous government and promised to turn around state enterprises through reforms.
Published in Dawn, October 30th, 2021
