Cash-bleeding ‘assets’

Privatisation decisions should not be based on what can be sold, for how much profit, but on taxpayers’ best interest

The increasing debts of state-owned entities have become a serious concern for the government, and while PIA may get most of the attention, the problems go well beyond the cash-bleeding flag carrier. Pakistan Steel Mills remains a drain on national resources almost a decade after it was closed, and the failure to find a buyer has put the government in the unenviable position of potentially reopening an institution that it failed to run properly for decades and would now face even more international competition. On a related note, four potential Chinese buyers all backed out in the last few years, citing changes to the global steel market.

Then there is Wapda, which, like other utility companies, has found that perfect balance between poor service delivery, poor investor returns and poor sale potential. While the company does have sellable assets, we have seen at home and abroad how privatising critical public utilities can backfire, with higher prices and even outright failure a common occurrence. Thames Water, A UK water utility privatised in 1989, has been flirting with bankruptcy after decades of failure to replace aging pipes and illegally releasing untreated sewerage into the country’s waterways. Even the proposed solution — the Thames Tideway Tunnel — is being funded by taxpayers, with the water company refusing to cut dividends and other payouts to shareholders. Similar cases always occur when natural monopolies fall into private control.

Privatisation decisions should not be based on what can be sold and for how much profit, but on what is in the taxpayers’ best interest. It is almost always for the best that the government stays out of profit-driven industries, but essential that it maintains control of utilities and other critical services, such as infrastructure and public transport. If it cannot make PIA and others more attractive for sale, it should take the best deal on the table instead of waiting and further burdening taxpayers. But for utilities and other essential units, efficiency reforms, rather than sale, should be the only focus.

Published in The Express Tribune, December 26^th, 2023.

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