PPP, PTI leaders oppose privatisation

Audience at LUMS debate vote against denationalisation

LAHORE: Several speakers at a debate on Pakistan’s experience with privatisation sought the establishment of an autonomous commission to audit implementation of the policy in the country.

The debate on the motion: Privatisation Has Failed in Pakistan was held at the Lahore University of Management Sciences (LUMS) on Wednesday. A poll taken at the end favoured proposition party consisting of MNAs Nafisa Shah and Asad Umar and Awami Workers Party’s Punjab president Aasim Sajjad Akhtar by 162 votes to 94. Prime Minister’s Assistant on Investment Miftah Ibrahim, former finance minister Salman Shah and lawyer Feisal Naqvi had opposed the motion. Nafisa Shah said that performance of an enterprise depended on its management, not ownership. She said most state-owned enterprises (SoEs) privatised in the country had not been sold to private firms. Instead, she said, firms owned by other states had purchased them. Shah said most of the privatised SoEs had been making profits. She said efficiency under private management had been stated as an objective in the power generation and distribution sectors. However, she said, several independent power producers (IPPs) and the Karachi Electric Supply Company (KESC) had failed to achieve this objective.

Referring to the argument that private management was likely to take greater risks, she said the banking sector had been averse to risks in spite of privatisation. She said instead of lending money to small and medium entrepreneurs, most banks were keeping it in secure government bonds.

Shah said the impression that SoEs were a burden on the country’s economy was false. It was the widening gap between inflow and outflow of funds facilitated by withdrawal of profits made by the firms under foreign ownership that was harming the economy, she said.

Referring to privatization of the Pakistan Telecommunication Corporation Limited (PTCL), Asad Umar said the company’s market capitalisation was a ninth of its value 10 years ago when was privatised. He said the KESC was still being subsidised by the federal government. Umar suggested that in order to improve their performance, management of the SoEs be made independent of political intervention. Akhtar said the view that the private sector could be an engine for economic growth was not supported by empirical evidence.

Referring to the global financial crisis of 2008 and the East Asian Debt Crisis of 1998, he said boom and bust were cyclical features of capitalist economies. He said productive economic sectors all over the world had ceased to function. He said most of the money being made was in the banking sector through speculative investments. He dismissed the suggestion that profit-seeking should be the primary concern for state institutions. He said state institutions should be concerned with serving the needs of the citizenry.

He said privatisation of SoEs had been a condition of the International Monetary Fund (IMF) for extension of funds to run the country and to better manage its budget. Yet, he said, nearly 70 per cent of the budget was spent on debt servicing and national defence.

Other arguments made by the opposition were that under private ownership firms had greater incentives to grow and to innovate. Referring to an Asian Development Bank report, Miftah Ibrahim said independent analysts had approved of Pakistan’s privatisation programme.

Naqvi said judged on the basis of non-performing loans, privatisation of banking sector had been a success. He said market penetration and affordability of services and ability to recover money should be the criteria to judge performance of telecomm companies and the KESC under private ownership.

Published in The Express Tribune, February 20^th, 2016.