Privatisation of state units: Drain on resources – the same old reason

Analysing losses, shifting the hub to Lahore and better flight management can revive PIA.

Usman Haroon December 29, 2013
Is it possible to have aircraft of only one manufacturer (either Boeing or Airbus) to make it easier to deal with inventory and other related issues like crew and engineering departments?


We are in for another round of privatisation of state assets. PIA could be the first institution to go. The reason given, for the public, is that it is a drain on the public exchequer.

Well, this reason is not new and has been floated whenever such decisions are made. It is so easy for the government to admit its inability to revive state assets or put in place systems in public organisations. It wants to spin off non- productive state-owned enterprises, without considering who was the sponsor of such institutions?

Unfortunately, the poor who financed these institutions for the rich to use this mode of transport, have no say in this or any other such decision. More than 80% of the population are not supposed to pay any income tax but are forced to pay indirect taxes because the government does not have the ability to tax the rich.

If the loss-making argument holds true, then why we have not heard that all non-performing state departments will be privatised. What are the achievements of Pakistan Customs, Federal Board of Revenue and other departments.

Have we heard that the FBR should be handed over to a private-public partnership. How much public money was spent on setting up the customs department and yet it is a failure. The personnel heading the department have ever thought why there is a gap of more than $5 billion between the books of Pakistan and China in export and import figures.

Finding the reason for this massive evasion is so hard that it is better to hide your head in the sand. It is an open secret as to who have been the beneficiaries of this corruption.

As always, the baboos, along with investors, are trying to portray that privatisation will help the poor as more funds for development will be available. Before taking the decision, did we think what happened when the cement industry was given in the hands of private sector.

It was said that once privatised, efficiency of cement plants would increase and that would lead to a decline in cement prices in the market. However, once it was done, cartels were formed and prices doubled within two years.

It is exactly the same in the case of banks. International practices are only applicable to administrative expenses. No one has time to look into the international practice on the spreads. Privatised banks are making money at the expense of the industry.

In the case of PIA, has anyone thought of reviving this enterprise and what are the reasons for the losses? Can we reduce losses and make this organisation profitable if the hub is shifted to where all the traffic terminates (Lahore). Is it possible to have aircraft of only one manufacturer (either Boeing or Airbus) to make it easier to deal with inventory and other related issues like crew and engineering departments?

Can we have better flight management? For instance, flights going to China and Spain have a stay of more than five days and the airline bears the cost of all crew members for these days.

The same holds true for Pakistan Railways as well. Here again, the private sector is ready to swallow the organisation funded by the poor. Soon, we will hear a cabinet decision that it is imperative to privatise this state asset too.

The government estimates that it spends Rs500 billion to cover the losses suffered by state assets and its financial wizards insist that if such assets are liquidated there will at least be a saving of Rs500 billion. So far so good.

Have they ever thought of adding the cost of their inefficiency in just one department, the FBR. Is privatisation of this department also a possibility since the government has been unable to control the losses?

The writer is an engineer and business graduate and is working in the industry

Published in The Express Tribune, December 30th, 2013.

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Ammar | 7 years ago | Reply Sorry author, I'm not agree with your stance in case of Banking industry. Banking industry witnessed growth by manifold since its privatization. MCB Bank and UBL are two examples, they've done wonders in term of profitability, efficiency, etc. As far as supervision is concerned, SBP is watching all the time and it has introduced many reforms like minimum saving rate etc.
the-realist | 7 years ago | Reply

The author should understand this: The chronic mismanagement and inefficiency that plagues our state enterprises and its functioning units cannot be rooted out instantly and all at once.Corruption is a tradition of decades here. The best thing then is to privatize institutions,that are a burden on the exchequer instead of philosophizing over the causes and remedies of their dismal state. States are not corporations.Their job is not to run businesses but to control the Executive and govern the country. I agree with the author that we should at least give a thought to the factors that led to this condition of these enterprises.However the costs and benefits associated with managing them should also be given weight and in case of PIA, railways etc.It is quite evident that state cannot run these due to decades of political postings and a culture of "mast mahol te meethay chawl"

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