Three marketeers disagree

In these columns (June 21 and 26), three marketeers have disagreed on the opening shots of privatisation played by the PML-N government. The ‘antis’ are upset that the government played foul on nearly all known counts of privatisation. Efficiency, transparency, economic concentration and debt retirement went for a six. As if in response to this criticism on the off-loading of the 19.8 per cent shares of UBL, the government in its very next transaction related to the PPL fixed the discount at a lower level than that recommended by the financial adviser, but ended up selling the shares at a price above the market price. Does this premium make the transaction “halal”?



We all know that most of the manufacturing units privatised during the first and the second PML-N governments in the 1990s were either closed down or performing poorly after privatisation. Transparency was a scarce commodity. The debt level ranged from 90-100 per cent of GDP. Cartels, such as in fertiliser and cement, became a stark reality. The burden of debt came down during the period of General (retd) Pervez Musharraf, but it had more to do with debt rescheduling and restructuring allowed by the generous donors than by privatisation. In fact, the major privatisation initiatives of the period were ridden by scandals. The clever, clever act set aside by the Supreme Court in the case of the Pakistan Steel Mills, the PTCL sale to a party that had withdrawn its bid, and the Habib Bank divestiture for a song do not bear repeating. Since the start of the mantra of deregulation, liberalisation and privatisation in 1988, the rate of investment has fallen to half of what it used to be as percentage of GDP. Expecting growth without investment is like staging Hamlet without the Prince of Denmark.

But let us see what the pro-marketeer has to say. He thinks the difference lies in perspectives. The government needs money, not only for its grandiose projects, but also for the military operation that is underway. It is in no mood to tax the rich and the powerful. There are also limits to burdening the underlings. The purpose of privatisation is to generate non-tax receipts. Efficient or not, transparent or not, the government must go ahead. A rupee earned from the sale of assets is interest free, compared to the costly external debt and the costlier domestic debt. If it is earned in the form of dollars, then it yields the extra benefit of making the rupee stronger, which is another passion of the finance minister. Governments are not driven by ideology. Practical politics is the basis of economic decision-making. So there are ideologues, there are governments, and their apologists.

Talking of perspectives, Akhtar Hasan Khan, the author of an authentic book on privatisation in Pakistan and an insider, would love the recent capital market transactions. He thinks wider share ownership is the best form of privatisation. Following Mrs Margaret Thatcher, he calls it peoples’ capitalism. Sitting here in London these days, I only hear of Thatcher the Milk Snatcher, though. I wonder what Mr Khan thinks of the Benazir Employees Stock Option Scheme. The government is understood to be considering its termination.

It seems the government is doing the easy thing of selling the shares of the profitable entities. The real test will be the privatisation of loss-making, large and unionised entities such as PIA and the Pakistan Steel Mills. For the moment, it will be earning on the one side and losing on the other. This is the perspective of a book builder, not an economic manager.

Published in The Express Tribune, July 4^th, 2014.

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