Pro-market; not pro-business

The pro-business government is getting its due wrath from various political as well as economic circles; the argument goes that recent policies are biased in the favour of a few business hubs. Some term these policies as failing to be ‘market friendly’ which is creating doubts and suspicions in the public at large. All this is giving reasons to many political parties to campaign against the privatization plans charted down by the current regime.
Based on their manifesto which is tilted towards promoting public sector, the PPP is already vocal against the full-fledged privatization philosophy. Now experts in the pro-private sector party-–the PTI—are raising eyebrows over PML-N government’s aggressive privatization plans. Such practices are detrimental to swift economic recovery, which is imperative for job creation and for curbing inflationary trends.
Experts argue that a few IPPs owned by private sector are seeking rent as their returns are artificially high owing to their overstated cost and these guys are also getting undue benefit upon coal conversion policies. Then there are questions on the ability of regulators to eliminate market inefficiencies as the cartel in cement sector is very much prevalent.
Nonetheless, electoral imperatives are governing the policy implementation; for instance, the government’s initial announcement to supply gas on priority to power sector over industry was reversed in the aftermath of PML-N losing by-elections in Faisalabad.
It is true that some of the government policies led to some economic recovery, evident by better growth, improved food administration due to which food prices have stabilized (December inflation is going to be low, sources say), curtailment of fiscal deficit and some correction in the depreciating currency.
But, economic sustainability is contingent upon developing economic consensus amongst political parties, establishment, the civil society and business community. And on the cross section all the provinces have to be on the same note, especially in cementing power sector leakages and enhancing its capacity. Lately, the KPK government is demanding its right to power generation and instead of merely taking on distribution rights offered by the centre. It is also not ready to bear accumulated losses of the provincial discos.
That is in sprit with the constitution and part of the implementation of 18th Amendment. Similar, steps are going to be taken in other provinces too. This would create shortage of hydro and gas produced cheaper power for Punjab and increased its dependence on expensive furnace oil. Nonetheless, a timely conversion of oil-based plants on coal can save the skin in Punjab. And that is what PML-N intends to do. The issue opponents raise is of favouring close allies of ruling party in the process.
Well, sadly this is how real politic works. Still, these loopholes ought to be fixed by having better regulatory regime. Those who are regulated shouldn’t be stronger than the regulators. NEPRA board needs to be revamped and have more independent directors. SBP has to regain its true autonomy that the institution was privileged a few years back. Similarly the influence of stock brokers should not affect functioning of the SECP. CCP should have teeth to end cement cartel and the list goes on.
Without strengthening regulatory regime, it’s hard to get a political consensus on privatization and the process would be limited to secondary offering of some government shares in listed entities.