White elephants live on: ‘Govt interference ruined state-owned enterprises’

Finance minister admits that the government has to rethink its role since intervention did not help.

ISLAMABAD:

Liberal economists felt vindicated on Thursday after the government admitted to their long held belief – that it has no business running businesses in the country.

In a rare admission, Finance Minister Dr Abdul Hafeez Shaikh said that the strong government footprint in Pakistan Railways, Pakistan International Airlines and the power sector have ruined these institutions.

Speaking at a conference organised by the Competition Commission of Pakistan (CCP), the finance minister said that the government has to rethink its role, since intervention “is not yielding good results.”

The railways have almost come to a halt but the government has not laid off a single employee, despite admitting that out of its 110,000 staff, the organisation can be run with 40,000. The Pakistan Steel Mills also has surplus workforce but none have been removed.

The finance minister heads a cabinet committee constituted last year to diagnose and restructure eight loss-making public sector enterprises causing Rs250 billion in losses annually. The panel, however, has made little tangible progress.

The minister added that the power sector was posing serious challenges to the economy and required immediate revamping. The cabinet panel diagnosed that surplus workforce and political appointments at managerial posts were the main factors behind decay in the sector, but it lacked the political support to follow through with its diagnosis.

Autonomy for CCP

The finance minister assured the CCP head that the government would ensure financial autonomy to the institution and constitute an appellate tribunal to hear appeals against the watchdog’s judgments.

“Securing financial autonomy is the biggest challenge for the CCP and that has now threatened the institution’s autonomy,” said Rahat Kaunain Hasan, the CCP chairperson.

Under the CCP law, all public sector regulators are bound to pay three per cent of their fee to the CCP, but none are doing so.

The chairperson was seconded by the president of the Portuguese competition authority, Manual Sebastiao, who said that to detect cartels in any economy, the anti-trust watchdog needs to be an effective institution having financial autonomy, effective law and good enforcement tools.

‘Judicious’ commission

Former chairperson and founding member of the CCP, Khalid Mirza, said the commission should not lose momentum of good work.

“The institution must not be seen as hard or soft, but judicious by the market”, he said.

Softening on penalties may pose a serious danger to the commission’s moral authority and will lead to dilution of law enforcement, he added.

Praising the commission’s work, however, Russell Damtoft, an official at the US Federal Trade Commission, said that CCP had achieved in its first four years what the US anti-trust watchdog could not achieve during the first 50 years of its existence.

Published in The Express Tribune, December 2^nd, 2011.