The incumbent government, in its third year in office, appears to have concluded that restructuring and turnaround of loss making Public Sector Enterprises (PSEs) is an exercise in futility and their privatisation is the only way out. Inspite of putting in great efforts and expense, Pakistan Steel Mills could not be revived as a viable entity. The International Monetary Fund (IMF), too, since long, is reported to be expressing its reservations on the never-ending subsidies provided to PSEs and slow pedalling on their restructuring. This is one of the sore points in the on-going negotiations with the Fund which the government has to now resolve.
The government to start with opted to salvage the PSEs by putting them under a “Sarmaya Company” and then restructuring them into viable enterprises. As expected, this did not work. The past 10 decades of incompetence, political expediency, corrupt practices and neglect rendered these public sector enterprise as bad liabilities. Deep pockets, dramatic change of management and high level of competence free from political expediency could have turned them around. However, the government cannot provide any of this. The private sector may be able to.
The government now appears to be in a hurry to roll out the privatisation process. Early this week, the Cabinet Committee on Privatization (CCoP), under the chairmanship of the federal finance minister Dr Hafeez Sheikh, directed the Privatization Commission (PC) to accelerate the privatizaion/management contracts of all entities and present the implementation plan within a week. Also, in one of the recent media talk shows, the special assistant to Prime Minister on Energy, Nadeem Babar, made public that the government intends to privatise public power utility companies in the next 4 years.
The government’s decision in favour of privatisation is the right decision but unfortunately too late in the day. Had this logical decision been taken in the first few months of its tenure, the government by now or by next year would have reaped a few billion dollars on account of sale proceeds and timely termination of subsidies provided to PSEs to sustain them.
Considering the slow pedalling of the Privatisation process and related multiple issues, the process of privatisation may stretch well beyond the tenure of the incumbent government. This pushes the process to a grey area of uncertainty. It will work well if the PTI government continues beyond 2023. If not, then the next government will most likely start all over again if the past is any guide; an incoming government tends to undo whatever has been done by the outgoing government. Furthermore, securing the right response and right bid in these times of economic slowdown is a challenge. The government, in parallel, may consider awarding operation and management (O&M) of PSEs to professional O&M service providers pending their privatisation in due course of time.
(The writer is former President Overseas Investors Chambers of Commerce and Industry)
Copyright Business Recorder, 2021