It is early days yet, but the Pakistan Muslim League-Nawaz’s proposal to limit its own power to undertake populist decisions in the energy sector is a welcome one. The incoming administration appears to have agreed to a proposal that has long been espoused by energy reform advocates: removing the power to make appointments in state-owned power companies from the prime minister’s office. It appears that Nawaz Sharif is willing to relinquish that power and hand it over to independent boards of directors at these companies.
And just for good measure, to ensure that the temptation never overwhelms any future prime minister, the Nawaz Sharif Administration appears to be contemplating selling more of the government’s shares to private investors, a move that would increase private sector representation on the boards and limit the government’s power to interfere in the running of state-owned energy companies. Such attention to institutional development is a refreshing change for the energy sector, particularly after the disastrous inaction of the previous administration.
The economy is best served when the private sector is left to run businesses and the government focuses on regulating those businesses. While a full privatisation would be preferable, the government placing credible constraints on its own authority is a significant step in the right direction, one that is likely to be welcomed by investors, local and foreign alike.
The incoming Nawaz Sharif Administration appears to be showing a great deal of political maturity so far and has given indications that it is more interested in solving the energy crisis than increasing its own powers. We hope this trend continues throughout the five years to follow. Here is one incentive for the new administration: energy sector stocks have skyrocketed since the election in anticipation of the PML-N undertaking real reform in the energy sector, driving up the broader stock market. If the administration dithers in the path towards that goal, it will face a stock market crash and a capital flight by foreign investors, who have been gearing up to pour money into the country.
Published in The Express Tribune, June 2nd, 2013.
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