Making SOEs viable prior to sale: easier said than done

He doesn get tired, does he? After having successfully brokered the NFC award in a tiresome series of moots, finance minister Shaukat Tarin has now embarked upon another daunting task: the cleaning of state-owned enterprises - or the white elephants as some aptly put it. If only best wishes were enough to get him through this dark forest.
What Tarin needs to know is that one mans ambition feeds on the ambition of others. So while his intentions may be honest and commendable, he might just be facing a high wall - starting from the sticky employees unions that will likely stand up against any sort of right-sizing aimed at gaining the much-needed efficiency gains.
Since most of these organisations are overstaffed, no thanks to those politically influenced appointments made over the past two decades, any downsizing move can become a publicly sensitive issue, given the populous nature of ruling party.
That would be something the government might not be able to deal with in present circumstances even if it has the funds available for severance payments.
Then there is a question of who would buy these loss making businesses - often marked by heavy debts. Pakistans economic climate isn exactly sanguine to attract foreign investors at this point in time. Had it been so, the country wouldn have seen 53.1 percent year-on-year decline in FDI inflows in the Jul-Oct period, despite having all those friends around.
While local investors may buy stakes in selective power firms, gencos and discos alike, for other SOEs like Pakistan Railways, Pakistan International Airlines and Pakistan Steel Mills, there is hardly any Warren Buffet around eyeing a strategic long-term stake in a rundown firm and make a success story out of it.
Even if the government manages to sell it off; the transaction would most likely, and perhaps quite rightly, be challenged in the court on "grounds" that many of the SOEs are strategic assets, which might as well be in public hands in the wake of growing war against terror in the country.
Instead of privatising these strategic assets that could evoke a new wave of controversies, the government should consider finding buyers for the expansive unutilized real estate and other immovable holdings sitting pretty on the balance sheets of many of these firms, and use that money to restructure the ailing entities.
Before it is done, however, something more important needs to be ensured: honesty and self-conscience - or the need for good governance as Tarin puts it. But then, thats something, unfortunately, no financial wizardry, fool-proof law making or shrewd politicking can instill in hearts and minds of those running the sick SOEs. Tough luck there Tarin.