Editorial

Privatisation: Managing the pain

Our foremost problem is one of timing: the government seems to be in far too much of a hurry to complete the process.

Editorial February 05, 2014

While there are many in the political spectrum who disagree with the concept of privatisation, they must admit that the PML-N has earned the right to implement its agenda. ILLUSTRATION: JAMAL KHURSHID

Muhammad Zubair seems to know what he is getting himself into. The former IBM executive tapped by Prime Minister Nawaz Sharif to run the privatisation process appears to have a grasp of the urgency of the fiscal and economic bleeding created by state-owned enterprises. Unfortunately, he has yet to back away from the government’s unrealistically hasty deadlines for the process to be completed.

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Elections have consequences, and the PML-N explicitly pledged itself to privatisation in its manifesto and then won a convincing electoral mandate. While there are many in the political spectrum, who disagree with the concept of privatisation, they must admit that the PML-N has earned the right to implement its agenda. We do not disagree with the overall policy of privatisation, but we do take some issue with the Nawaz Administration’s approach to the process.

Our foremost problem is one of timing: the government seems to be in far too much of a hurry to complete the process. We understand that international investors have expectations that the government may be trying to fulfil, but they must also understand that there are far too many stakeholders in state-owned companies whose concerns need to be addressed one way or another before the privatisation process can move forward.

There is, for instance, the question of the inevitable layoffs that must occur in virtually all state-owned companies if they are to become financially viable. While these layoffs may be necessary, they are unlikely to be easy and will likely spark highly disruptive protests. The government would be better off trying to complete the restructuring process under its own ownership before handing off the companies to private investors. Not only is the government better equipped to handle the chaos, it would likely also fetch higher prices for assets that have been stripped of crippling legacy liabilities.

Needless to say, this will be a long drawn-out process. The two-year deadline the government has set for itself is highly unrealistic. It will be better to acknowledge that fact right now rather than missing the deadline and then losing credibility for having failed to keep its word.

Published in The Express Tribune, February 6^th, 2014.

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COMMENTS (2)

The Only Normal Person Here | 10 years ago | Reply State is to monitor the institutions, not to run them. Privatization is the way

Aamer | 10 years ago | Reply What is the advantage in privatising state asset? Let's take the case of PIA. What can a private owner do that the state of Pakistan couldn't do. Infact a private investor can do far less. There is a reason that the two most successful airlines in the world in the last 50 years are run by governments (emirates and Singapore). Airlines need to upgrade their fleets and using government's credibility they can borrow to upgrade the fleets. No private investor can dream of approaching the same borrowing credibility as the sovereign. All that is required is to have independent boards and professional management because that is the most that any private investor can do. Unfortunately the privatisation that is being undertaken is to pay back the favours received from the favourite businessmen who financed the election campaign of the ruling party.

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