EDITORIAL: The World Bank report that declared Pakistan’s state-run firms “the worst in Asia” only put the spotlight on what the government already knows very well.
The real story is that Pakistan’s SOEs (State Owned Enterprises) have been in a state of steep decline for decades, during which time all sorts of political parties from all over the country have held power, and still nobody has a clue about what to do with them.
PML-N (Pakistan Muslim League-Nawaz) is all for privatisation or sell-off, though it’s never been able to come up with an actionable roadmap. PPP (Pakistan People’s Party), on the other hand, is dead against putting the so-called family silver up for sale. Though it, too, has never gone beyond politically-charged statements or bothered to explain how it would reform these enterprises.
PTI (Pakistan Tehreek-e-Insaf), however, seemed to have the most novel idea. First, when Asad Umar was finance minister early in its tenure, the government proposed making a holding company to isolate all the bad debt of these outfits.
But when that turned out to be a non-starter, it went back to blaming previous administrations for all their problems; and rightly so. And now, with the PDM (Pakistan Democratic Movement) alliance running the show and zero-sum politics all the rage, it’s no surprise that such things are too low on the priority list to get much mention in cabinet meetings or even the press; except perhaps when a leading international financial institution examines them in its report.
Whichever way you look at it, the SOE story only bolsters the claim that government has no business being in business. And it’s not just improper, illegal, incompetent and corrupt political appointments that have wrecked these companies – though it is one of the biggest contributing factors – it is also the regressive, inefficient nature of the bureaucracy.
That is why such enterprises belong in the private sector in all advanced countries and eventually there will be little choice except privatisation; no matter how much one party might disagree with the concept. But the problem is that big, loss-making companies are not privatised by simply turning on a switch.
There’s always a catch. They’re only going to fetch bottom dollar if you just put them on the market because no serious, big investor would commit good money to bad companies. And if you are going to first get them on their feet and make them profitable, then there might be fresh arguments against relinquishing the federal control.
But these problems come later. The first order of business is to cut losses immediately. SOEs, which were meant to make money for the government in addition to providing essential services to people, must be made to stop haemorrhaging hundreds of billions of rupees every year.
The World Bank report revealed that Pakistan’s SOEs eat more than Rs 458 billion in public funds annually just to stay afloat and their combined loans and guarantees rose to almost 10 percent of GDP or Rs 5.4 trillion in FY21, up from 3.1 percent of GDP (Rs 1.05 trillion) in 2016.
This trajectory alone ought to raise serious alarm bells in Islamabad. Pakistan is completely bankrupt and needs to shed this deadweight at once. It’s bad enough that the government proved utterly incapable of running these enterprises, it’s much worse that it’s still clueless about controlling the damage.
Any administration in its right mind would give this matter the utmost priority. Sadly, though, it does not seem as if things are going to change anytime soon. The political elite is just too consumed in the fight for its own power and privileges to give the people’s, and the state’s, real problems too much time. That’s how it’s been for a long time, and that’s how it seems it will be for a while longer.
Copyright Business Recorder, 2023