PML-N’s privatisation agenda

One hears contrasting views whenever one pontificates over the policies and performance of the PML-N government. There is one view that harps on about the increase in foreign exchange reserves, while the other shrugs off the accumulation as tainted with the burden of debt. The government’s supporters applaud the country’s macroeconomic stability, improved GDP growth and a narrowing current account deficit, while the opposition continues to focus on falling exports, low levels of investment, the high cost of doing business and the perennial power crisis. But very few among the government’s supporters like discussing in detail its privatisation agenda, preferring to treat this area as the backyard no one tends to, but cleans up whenever guests — in this case international lenders — announce a visit.

When the government signed the three-year $6.2-billion Extended Fund Facility with the IMF, it promised restructuring and/or privatising of loss-making, state-owned entities. Since no one in their right mind would want to jump in to manage the affairs of liability-ridden companies, restructuring became a packaged deal of the privatisation process. This meant the government would need to do some work, i.e., restructure and reform companies before looking to sell its stakes in them to potential investors. But with half its tenure over, restructuring still remains on the to-do list. It has only managed to sell its stake in entities that were already profitable — commercial banks — with PIA, the Pakistan Steel Mills (PSM), and power distribution and generation companies awaiting both restructuring and privatisation. While the affairs of PIA have seen some improvement — helped by falling fuel prices that form the bulk of its operational cost — the government’s resolve to initiate reforms in other entities has been missing. The Privatisation Commission chairman admitted that the PSM is a “nightmare”. It has seen years of corruption, inefficiency and neglect. Meeting fierce opposition from Sindh, trying to find a buyer for PSM could only have landed the government in further trouble. Hence, whatever plans it may have had to sell it off, have failed to see fruition.

The proposed privatisation of PIA saw every ‘patriot’, who thought the airline should always remain a national asset, spring into action, never mind its management’s complete inability to turn its fortunes around for the past many years. There were some concerns regarding its privatisation that can be regarded as legitimate, such as whether in private hands the airline would continue to operate on less profitable routes and end up being unable to cater to a wider segment of society. The government insisted it was not selling its entire stake, with the president promulgating an ordinance to pave the way for its privatisation. A few rumours and weeks later, the Senate has passed a constitutional resolution to “disapprove” the PIA Corporation (Conversion) Ordinance 2015. The PML-N has not been pleased by this since PIA was the one entity it had actually tried to restructure after coming into power.

Maybe it was hoping that PIA’s sell-off would make it look good in the IMF’s eyes, compensating for the postponement it is planning in privatising power sector companies. After holding tons of meetings with the private sector and inviting interest in the privatisation of these companies, it is now considering putting off the entire process, seemingly for one reason alone — preserving its vote bank.

Most Pakistani governments don’t plan too far ahead. But the PML-N apparently does and it deserves ‘praise’ for its ‘long-term’ strategy. In postponing the power sector privatisation, the party is hoping to keep its supporters happy. Since most of these companies are based in Punjab, and massive layoffs might have ensued had they been privatised, it made little sense for the PML-N to pursue this policy. But it did nevertheless because it wanted the IMF to believe that it has sincere intentions, which means billions of dollars keep flowing in. These recent developments might confuse most citizens. But one word is enough to describe the reason behind them — politics.

Published in The Express Tribune, January 3^rd, 2016.

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