Going after USC — again!
Razzak Dawood was the minister for commerce and industries in the cabinet formed by General Pervez Musharraf
The writer is a senior economist. He can be contacted at pervez.tahir@tribune.com.pk
At the turn of the century Razzak Dawood was the minister for commerce and industries in the cabinet formed by General Pervez Musharraf, Pakistan’s first ever CEO, for an SC-determined term of three years.
Eighteen years on, he is now adviser to the prime minister on the same two subjects, and many more. While one awaits the launch of innovative initiatives to reverse the shrinking share of exports in the GDP and the menacing pace of de-industrialisation, he has chosen to go after the Utility Stores Corporation (USC). This is exactly what he did in his earlier tenure, with exactly the same outcome.
An announcement to privatise or downright closure was made in great haste, only to be followed by the clarification that the intent was only to close the loss-making stores. By April 2002, the number of stores was reduced to 372 from 542 in December 1999. Until 1999, the Pakistan Economic Survey included USC operations as an important price stabilisation and relief measure.
However, the Pakistan Economic Survey 2002-03 made no mention of it, pontificating instead: “Price stabilisation measures are important when there are unusual variations in the prices. Presently, the government in commensurate [sic] with its policy of decontrol, deregulation and liberalisation, believes in tackling the inflationary pressures through economic measures rather than formal price control.”
In August 2018, all procurement was ordered to be suspended forthwith. As it effectively amounted to closure, reportedly with a view to privatising eventually, the hue and cry raised by some 14,000 employees led to a question in the Senate. A resolution was also submitted in the Punjab Assembly demanding immediate reversal of the decision. In the Senate, the adviser retracted to say that there was no truth in the news about the closure. He was only trying to rationalise the number of branches by shutting down stores that had “no business at all.” He also talked about overall losses of Rs11 billion in the past three years.
Is everything that is not profitable, useless? The federal government ran 20 retail outlets under its Staff Welfare Organisation in July 1971. Bhutto took over these outlets to establish the USC. The purpose was to extend the service to the low-income groups in general. These outlets provide basic food items at reduced rates, subsidised items during Ramazan and whenever prices shoot up. In spite of Razzak Dawood’s downsizing of 170 stores out of 542 in his previous stint, the expansion continued. Today the total number is around 6,000. The adviser wants to axe around 1,000. He conveniently ignored the fact that the USC was posting profits during 2008-13.
True, a regime of austerity cannot be escaped in the hard times ahead. But it is unfortunate to begin with those who can afford it the least. As he failed in the past to kill the USC, so will he fail now. Sooner than later, political economy considerations will take over. The adviser, who has never been through an election, does not realise that the deepening as well as widening of deregulation and liberalisation has left nothing in the hands of a government accountable to the ordinary voters to deal with unusual and excessive price rises. Market-based policies can, and often do, leave the weaker sections of society high and dry. The USC provides a mechanism to intervene in such situations. It has survived all death threats before. The news of its imminent death is, in the words of Mark Twain, vastly exaggerated. Too bad that the adviser could not even find a new bottle for old wine.
Published in The Express Tribune, September 7th, 2018.
Eighteen years on, he is now adviser to the prime minister on the same two subjects, and many more. While one awaits the launch of innovative initiatives to reverse the shrinking share of exports in the GDP and the menacing pace of de-industrialisation, he has chosen to go after the Utility Stores Corporation (USC). This is exactly what he did in his earlier tenure, with exactly the same outcome.
An announcement to privatise or downright closure was made in great haste, only to be followed by the clarification that the intent was only to close the loss-making stores. By April 2002, the number of stores was reduced to 372 from 542 in December 1999. Until 1999, the Pakistan Economic Survey included USC operations as an important price stabilisation and relief measure.
However, the Pakistan Economic Survey 2002-03 made no mention of it, pontificating instead: “Price stabilisation measures are important when there are unusual variations in the prices. Presently, the government in commensurate [sic] with its policy of decontrol, deregulation and liberalisation, believes in tackling the inflationary pressures through economic measures rather than formal price control.”
In August 2018, all procurement was ordered to be suspended forthwith. As it effectively amounted to closure, reportedly with a view to privatising eventually, the hue and cry raised by some 14,000 employees led to a question in the Senate. A resolution was also submitted in the Punjab Assembly demanding immediate reversal of the decision. In the Senate, the adviser retracted to say that there was no truth in the news about the closure. He was only trying to rationalise the number of branches by shutting down stores that had “no business at all.” He also talked about overall losses of Rs11 billion in the past three years.
Is everything that is not profitable, useless? The federal government ran 20 retail outlets under its Staff Welfare Organisation in July 1971. Bhutto took over these outlets to establish the USC. The purpose was to extend the service to the low-income groups in general. These outlets provide basic food items at reduced rates, subsidised items during Ramazan and whenever prices shoot up. In spite of Razzak Dawood’s downsizing of 170 stores out of 542 in his previous stint, the expansion continued. Today the total number is around 6,000. The adviser wants to axe around 1,000. He conveniently ignored the fact that the USC was posting profits during 2008-13.
True, a regime of austerity cannot be escaped in the hard times ahead. But it is unfortunate to begin with those who can afford it the least. As he failed in the past to kill the USC, so will he fail now. Sooner than later, political economy considerations will take over. The adviser, who has never been through an election, does not realise that the deepening as well as widening of deregulation and liberalisation has left nothing in the hands of a government accountable to the ordinary voters to deal with unusual and excessive price rises. Market-based policies can, and often do, leave the weaker sections of society high and dry. The USC provides a mechanism to intervene in such situations. It has survived all death threats before. The news of its imminent death is, in the words of Mark Twain, vastly exaggerated. Too bad that the adviser could not even find a new bottle for old wine.
Published in The Express Tribune, September 7th, 2018.