Why only PSM?

The federal cabinet has approved a plan for the revival of Pakistan Steel Mills (PSM) that envisages converting it into a profitable national entity, so stated Firdous Ashiq Awan, Federal Minister for Information while briefing the media on decisions taken by the cabinet. The cabinet would perhaps not be surprised if this statement is taken with the proverbial pinch of salt given that numerous cabinet decisions on many economic issues, including the one on restructuring poorly-managed state-owned entities (SOEs) have been taken in the past, and not been implemented. More specifically a restructuring plan was presented to the cabinet end 2009, early 2010 by the former Finance Minister Shaukat Tarin who provided the roadmap that would turn loss-making entities including PSM, collectively costing the cash-strapped government over 300 billion rupees per annum, into entities that at least break even. The plan was approved by the cabinet at the time but two years later, the implementation status of the plan remains zero. Why should the country believe that the cabinet means business this time around, query critics of the government? And why did the cabinet focus on the PSM given that there are seven other SOEs that are in serious financial straits? The government can of course argue that factors beyond its control disallowed it from following its approved restructuring plan. One factor obviously is the negative political implications of restructuring any SOE that necessitates downsizing of the workforce. Additionally, given that an integral component of any restructuring is to promote management that takes decisions purely on the basis of their financial viability, there is concern that the best economic decision may well be in favour of winding down operations which would not only imply the entire staff of the SOE would become unemployed but also reduce Gross Domestic Product - directly as well as indirectly through the consequent winding down of operations in downstream industries. What the government fails to take account of is the fact that it is effectively socialising the loss of SOEs - given that it is using 300 billion rupees of our tax money for extending bailout packages - while it is unable to check corruption, collusion as well as nepotism in SOEs that it itself is responsible for through its flawed recruitment of senior management and using the SOEs as recruitment centres for its political supporters. Awan noted that the cabinet had directed that professional and technical Chief Executive Officer and vacant board of directors be appointed - directives made in the past three years that remain a challenge. Thus bailout packages have so far, been the norm. The Finance Ministry, the media was informed, did not support another bailout package, however the Finance Ministry has opposed bailout packages in the past but been compelled to disburse the amount when directed by the President or the Prime Minister. Firdous Ashiq Awan also revealed that the consensus in the cabinet was to establish a committee for PSM revival on the same pattern as in the case of Pakistan Railways (PR). This comparison too raises red flags for the general public. PR remains in the throes of a serious financial crisis fuelled further by charges of corruption attributed to flawed executive decisions that, critics argue, have the distinct element of corruption: support for massive purchases with an in-built mechanism for commissions as opposed to repairing the existing bogeys. PR's economic woes are so severe that the government has also been compelled to inject money to enable PR to pay pensions and salaries. Critics also refer to the oft-cited committee proverb: a camel is a horse made by a committee. The prescriptions are available and supported by the cabinet. However, the government seems reluctant to take the right dosage during the implementation phase. Copyright Business Recorder, 2011