Privatisation illusion

Privatisation in Pakistan has rarely been a deliberate or well-planned economic reform. More often, it emerges as a reluctant response to years of mismanagement. State-owned enterprises are routinely retained despite declining performance, political interference and weak accountability. Only after they have accumulated massive losses and unsustainable debt does privatisation suddenly become the chosen solution.

This pattern repeats itself across sectors with striking consistency. Professional management is gradually replaced by political appointments, commercial discipline erodes, and inefficiencies become normalised. Losses are financed through public funds for years, and only when an enterprise becomes fiscally unsustainable does privatisation suddenly appear as a solution. Instead of reforming governance early, successive governments postpone difficult decisions. At that point, the process resembles a fire sale rather than reform.

PIA illustrates this failure vividly. Once a respected regional carrier, PIA was undermined by overstaffing, political meddling and the absence of business logic. Successive governments treated the airline as a source of patronage rather than a commercial entity. Billions of rupees were spent to keep it afloat while service quality deteriorated and competitiveness vanished. Its eventual privatisation was not strategic; it was an admission of prolonged governance failure.

Supporters of privatisation often cite PTCL as evidence that private ownership improves performance. Indeed, PTCL did achieve operational and technological improvements after privatisation. Network modernisation and service expansion did take place. Yet this example also exposes the deep flaws in Pakistan's privatisation practices. Years later, thousands of former government employees and pensioners remain trapped in litigation over pensions, service regularisation and post-privatisation rights. These unresolved disputes highlight how human and legal costs were treated as secondary concerns. They reveal a process focused on completing transactions rather than safeguarding institutional responsibility.

Equally misleading is the assumption that privatisation automatically benefits consumers through lower prices. Pakistan's own experience contradicts this belief. K-Electric stands as a clear example. Despite privatisation, electricity tariffs have not declined but instead risen to record levels. While some efficiency gains and loss reductions have occurred, these improvements have not translated into affordability. Without robust regulation, privatisation merely replaces a public monopoly with a private one, often with greater pricing power and less accountability.

International experience further challenges blind faith in privatisation. The most frequently cited model is the large-scale privatisation of public utilities in the UK during Margaret Thatcher's tenure. Guided by the belief that public monopolies were inherently inefficient, her government privatised railways, electricity, gas, water and sanitation services. Decades later, the consequences are difficult to ignore. Britain's rail system is fragmented, prone to delays, burdened by high fares and dependent on aging infrastructure.

In contrast, several European countries that retained public ownership such as Germany and France operate modern, high-speed rail networks that outperform Britain's privatised system in reliability and efficiency. These systems benefit from coherent planning, public investment and strong institutional oversight. The difference lies not in ownership ideology, but in governance, regulation and sustained investment.

Private investors acquire public service companies to generate profits, not to provide social goods. Cost-cutting and operational streamlining alone are rarely sufficient to deliver market-level returns while maintaining service quality.

Privatisation can still be a sensible policy choice but only for small, non-strategic units with no national or security importance. The state has little justification for running minor commercial ventures that can operate competitively in open markets. However, privatising large strategic assets after allowing them to deteriorate through neglect merely socialises losses and privatises future gains.