Wise call on state assets

In a ringing endorsement of the Privatisation Commission Board’s decision this week, the federal cabinet has scrapped the previous government’s highly contentious plan to sell off Pakistan International Airlines and the Pakistan Steel Mills. By placing its faith in restructuring these two loss-making state enterprises — enduring symbols of national pride — the government has indicated its strong resolve to swim against the tide and undertake a venture fraught with potential risks. This is exactly what the Pakistan Tehreek-e-Insaf government had promised to do and commendably it has kept its word. Restructuring two state giants is going to be a massive headache and few governments had the stomach for it, much less the brains or patience to do it smoothly and efficiently.

Unlike PIA and the PSM, the government will go ahead with the privatisation of other state-owned entities such as First Women’s Bank, Lakhra Coalmine and Balloki Power Plant and a few others. The argument for restructuring the national air carrier and state-run steel mills and not privatising them pivots around the central theme of productive efficiency. So while privatisation does lift productive efficiency it often flounders in the effort to bring the kind of improvements that are sought at least in the public sphere. On the other hand, proper restructuring will almost always involve such improvements. Apart from that there were also valid concerns that the state’s assets could be pilfered and agglomerated among a select few under the previous regime

Therefore, the PTI’s strategy is both sound and realistic. It is endeavouring to establish state-owned enterprises like PIA and the PSM as handy instruments to fulfil as well as advance development goals rather than dismiss them as epic failures. Indeed state-owned entities have tremendous potential and provide a strong basis for a well-oiled economy and a healthy, well-informed population. They can operate in a broad spectrum of sectors across the world and have proved themselves in performance as well.

Successful sell-offs can take place in those countries where there is an active regulatory structure in place to deal with companies inappropriately using their market power. Strong institutions are also essential for smooth privatisation.

Published in The Express Tribune, November 3^rd, 2018.

Like Opinion & Editorial on Facebook, follow @ETOpEd on Twitter to receive all updates on all our daily pieces.