Sell and be damned

Sunday, January 12th, 2014 7:10:10 by

This week, Prime Minister Nawaz Sharif through the rejuvenated Privatization Commission decided to sell off 32 state owned entities to raise Rs100 billion. We are told that this money will help the economy and that it will create jobs and bring in foreign investment. The usual noises.

While all that is fine, is this a good idea? Why is our government selling off strategic entities on the grounds that they are making losses? By doing so, the government is once again abdicating its responsibilities to its people – those who have elected it into office.

Our privatization experience so far has not been good. We have seen entities bought by the private sector stripped bare of their assets and then sold off. In other instances, services that such entities offered were stopped despite earlier commitments to the government that this would not happen.

As we move into yet another round of bargain sales, there are a number of questions we need to ask. Transport – whether on ground or in the air, is a basic responsibility of state. What we see, however, is that there is no public transport on the roads (except in the princely state of Lahore) in most parts of Pakistan, that the railways have been bled to a near breakdown stage and that the national airline has also been driven into the ground through corruption and mismanagement.

If you look at it, it’s a never ending cycle: a government comes into power and stuffs its party faithful into state enterprises. The Peoples Party is notorious for doing that. PIA has one of the highest employee to aircraft ratios anywhere in the world. Not only are these people a burden in terms of their numbers but are also incompetent and corrupt. They bleed the entity in more ways than one.

No wonder that profitable enterprises become loss-making. Following this, the government subsidizes them. All this drama takes place at state (read: taxpayer) expense. The final stage is that the government then decides to sell these organizations on the grounds that they are a burden to the taxpayer.

Before we agree to this fraud again, let us ask some questions. For example, why are these entities a burden? Can we take account of who stuffed how many of their faithful into these enterprises and at what cost? Can we not make them profitable without selling them?

We also need to know what we did with the money that we received as privatization proceeds. How much went into loan-repayment (this was what we were told the money would be used for). Are we richer or poorer after selling our family silver?

Then comes our other challenge: in a privatized playing field, the government ensures independent regulatory bodies. How many of our present regulators fit that bill? Today, our regulators are pushed around by the government in power for their own objectives. And almost none of these bodies have industry representation.

As a result, some of the privatized entities are more powerful than the regulators. This results in monopolistic practices and also a lack of a level playing field. We see that in many sectors in Pakistan. This begs us to ask who would benefit from this new bout of privatization if the regulatory framework remains the way it is?

Finally, what are the lessons we have learnt from the past? We were told that newly privatized entities are better run. What we see is that strategic but non-profitable services have been shut down in many sectors. And if the example of one of the largest banks of Pakistan, which was sold off some years back is anything to go by, then we are better off with the government-owned institutions.

This particular bank, who we will not name, has overcharged me several times – in one instance charging me the same car installment loan twice and in another levying charges on a credit card I never had. Service is so poor that promises made to reverse charges are not honored, one has to struggle to use its highly publicized internet-based services because they simple don’t work and officials almost never help. This bank belongs to the Soviet era. Ironically, it was much better with its basic services when government owned.

Published in The Express Tribune, January 13th, 2014.

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