Shaukat Tarin on television

While he is a good man with his heart in the right place, Shaukat Tarin’s recent interview on a major TV network in Pakistan was underwhelming and lacklustre. He repeated a number of homilies and went over well-trod ground. Poverty, inflation, staggering losses in public sector enterprises (PSE), circular debt, low tax-to-GDP ratio, no tax on agriculture, power shortages and so on. None of this is stirring news. We know the problems Pakistan faces and simply repeating them is not very fruitful.

Mr Tarin should have suggested bold and credible initiatives the government must take urgently. He has the license to do so now that he is no longer finance minister. No bold moves were taken on his watch although, to be fair to him, his time was short and he inherited an economy on the cusp of a balance of payments crisis. It is true that he managed to steady the economic ship. That’s the easy – if painfully wrenching – part. Now we need to put it on a high and sustainable employment-augmenting growth track and keep it there. Homilies won't do. We need credible actionable, well-articulated plans. I don't see any of that. There is a cabinet committee on the PSEs but no one knows much about PSE re-structuring, except perhaps the finance minister himself who may have done some restructuring work in his previous incarnation with the World Bank. The rest may be competent and smart but that does not make them restructuring experts. I hope the committee will hire some.

No restructuring can be meaningful unless it is accompanied by, but not limited to, deep cuts in the PSE workforce. This is the cold reality that we must accept. No restructuring anywhere in the world has proceeded without deep cuts in employment. It seems we are more worried about the perception that this creates in Pakistan (the government is anti-employment and anti-labour) than the reality. The reality is that there are rules about severance pay, or there should be. No one is being put out on the street penniless. Each lost job will be compensated with a fair severance package. This has been our experience not long ago in the banking sector. Using a soft World Bank loan, millions were handed out in severance pay to those who lost their jobs when banks were restructured and privatised. When PIA transitioned to the two-person cockpit of the Boeing 777, flight engineers were up in arms. Yet those who lost their jobs because of the transition (some have got them back as Jumbo service with their gas-guzzling engines continues) were compensated handsomely. They will not tell you that.

Cutting an over-bloated labour force helps reduce unit costs and raise productivity, or output per person-hour. Raising productivity with the same stock of labour is difficult to do. Indeed it is almost impossible. It sounds cold and calculated but that is the reality. No PSE will be revived and ready for privatisation, if that is the government’s ultimate objective (and it need not be), unless this first bold step is taken. What is remarkable and worthy of note is that many of these PSEs now in financial distress were once profitable organisations, including Wapda (the bane of everyone’s life in Pakistan) and PIA to give just two examples. Wapda was well run, efficient and profitable. PIA was the best airline in Asia, lean and efficient under a management whose names are now a legend with their brand-new Boeing and Trident jets cutting travel time in half and reaching out to new, exotic destinations around the world.

Published in The Express Tribune, June 28^th, 2010.