Sell or sink
Privatisation is always a controversial issue and this government is no stranger to controversy
The writer is Editor of The Express Tribune
Privatisation is always a controversial issue and this government is no stranger to controversy. The manner in which it has pushed a bill through parliament for the sale of the national airline suggests its intentions are uncertain. Ostensibly on pressure from the IMF, the ruling party itself may not be in favour of a sell-off.
Despite having one of the highest employee to aircraft ratio of any airline in the world, the Sharif government is also guilty of stuffing party faithful into the bleeding airline. We are told that the government quietly recruited more people, taking PIA’s accumulative losses to Rs254.7 billion. This is the cost that we have to bear.
Logic suggests that we sell off all our loss making entities. Another option, which was tried with mixed results by successive governments, is to hire a management team which would turn around the fortunes of the public enterprise. Take for example the case of United Bank Limited (UBL) which was turned around by banker Zubyr Soomro and his team of talented managers. However, the target was to turn around the bank and sell it off, which was eventually done.
We have before us the example of Pakistan Steel Mills, which was turned around by a military man, General Sabeeh Qamaruz Zaman. But soon after his departure, his successors once again ran this entity into the ground.
Despite enjoying a near captive market, Pakistan Steel Mills today runs in huge losses. Salaries remain unpaid. There is no concept of investing in improving production. All the money goes into keeping a bloated workforce in place.
We do not have to rethink our privatisation strategy. We need to work on creating a conducive environment and a level playing field. This has not happened because of a number of reasons.
For example, in some governments, the privatisation programme remained murky and sell-offs were done through questionable deals. This problem was fixed later but the damage was done.
In the first round of sell offs, many of the entities were stripped bare and abandoned because those who bought them were more interested in the land and machinery, which were undervalued with the result that the buyer made a killing.
In another round of sell-offs, we sold to entities that did not invest further in the enterprise, even when the sold off company enjoyed a near monopoly-like status. This affected public sentiments against privatisation as one of the expectations was that once the company was sold, service would improve.
Of course there were exceptions like what we saw in the case of the KESC (now KE) sale. Those who pay their bills get reasonably uninterrupted power. This can be termed a win-win situation. Good sale, good service.
But the energy sector is not a level playing field as there is the problem of circular debt which is compounded by the fact that other power utilities, all state owned, cannot pay their dues owing to corruption and inefficiency. But they still buy power and supply to those who do not pay.
Possibly the answer lies in selling off most state enterprises but at the same time putting into place strong regulators. Regulators can penalise. We do not see that because today most regulatory bodies have political appointees heading them.
Pakistan has suffered immensely because of corruption in its state owned enterprises which enjoy near monopoly status, be it Steel Mills or Pakistan Railways or those entities that compete in the market but are heavily subsidised in one way or another like PIA and PNSC.
It is one thing to argue against the sale of the family silver, another to understand that the cost of keeping these inefficient and bloated entities afloat is very high and the money goes from our own pockets.
There are areas where we need to divide the role of the operator and the regulator like the CAA which runs airports and is the regulator for the aviation industry. Here airports need to be privatised and the CAA be made into a powerful watchdog, not the impotent body it is today.
But for all this to happen, there must be a will to set things right. That consistently seems to be missing.
Published in The Express Tribune, January 25th, 2016.
Despite having one of the highest employee to aircraft ratio of any airline in the world, the Sharif government is also guilty of stuffing party faithful into the bleeding airline. We are told that the government quietly recruited more people, taking PIA’s accumulative losses to Rs254.7 billion. This is the cost that we have to bear.
Logic suggests that we sell off all our loss making entities. Another option, which was tried with mixed results by successive governments, is to hire a management team which would turn around the fortunes of the public enterprise. Take for example the case of United Bank Limited (UBL) which was turned around by banker Zubyr Soomro and his team of talented managers. However, the target was to turn around the bank and sell it off, which was eventually done.
We have before us the example of Pakistan Steel Mills, which was turned around by a military man, General Sabeeh Qamaruz Zaman. But soon after his departure, his successors once again ran this entity into the ground.
Despite enjoying a near captive market, Pakistan Steel Mills today runs in huge losses. Salaries remain unpaid. There is no concept of investing in improving production. All the money goes into keeping a bloated workforce in place.
We do not have to rethink our privatisation strategy. We need to work on creating a conducive environment and a level playing field. This has not happened because of a number of reasons.
For example, in some governments, the privatisation programme remained murky and sell-offs were done through questionable deals. This problem was fixed later but the damage was done.
In the first round of sell offs, many of the entities were stripped bare and abandoned because those who bought them were more interested in the land and machinery, which were undervalued with the result that the buyer made a killing.
In another round of sell-offs, we sold to entities that did not invest further in the enterprise, even when the sold off company enjoyed a near monopoly-like status. This affected public sentiments against privatisation as one of the expectations was that once the company was sold, service would improve.
Of course there were exceptions like what we saw in the case of the KESC (now KE) sale. Those who pay their bills get reasonably uninterrupted power. This can be termed a win-win situation. Good sale, good service.
But the energy sector is not a level playing field as there is the problem of circular debt which is compounded by the fact that other power utilities, all state owned, cannot pay their dues owing to corruption and inefficiency. But they still buy power and supply to those who do not pay.
Possibly the answer lies in selling off most state enterprises but at the same time putting into place strong regulators. Regulators can penalise. We do not see that because today most regulatory bodies have political appointees heading them.
Pakistan has suffered immensely because of corruption in its state owned enterprises which enjoy near monopoly status, be it Steel Mills or Pakistan Railways or those entities that compete in the market but are heavily subsidised in one way or another like PIA and PNSC.
It is one thing to argue against the sale of the family silver, another to understand that the cost of keeping these inefficient and bloated entities afloat is very high and the money goes from our own pockets.
There are areas where we need to divide the role of the operator and the regulator like the CAA which runs airports and is the regulator for the aviation industry. Here airports need to be privatised and the CAA be made into a powerful watchdog, not the impotent body it is today.
But for all this to happen, there must be a will to set things right. That consistently seems to be missing.
Published in The Express Tribune, January 25th, 2016.