Need to immediately Privatize Loss Making Companies

Abdul Basit Alvi

Privatization, the transfer of government-owned assets and services into the hands of private entities, has been a subject of intense debate and discussion for decades. It is a policy approach that has been implemented worldwide, with varying degrees of success and controversy. One of the primary reasons for privatization is to enhance economic efficiency. Government-owned enterprises often suffer from inefficiencies, bureaucracy, and lack of competition. When these assets are privatized, they typically become more competitive and responsive to market forces. Private companies are driven by profit motives, which incentivize them to cut costs, improve productivity, and innovate to meet consumer demands. This increased efficiency can lead to lower prices, higher quality products and services, and ultimately, economic growth. Governments often face budgetary constraints and limited resources. Privatization can help alleviate these fiscal burdens. When the private sector takes over the responsibility for running and maintaining certain assets or services, the government can redirect funds to other pressing needs such as education, healthcare, and infrastructure. Privatization can also reduce the need for government subsidies and bailouts for struggling state-owned enterprises, contributing to long-term fiscal stability. Competition is a cornerstone of market-driven economies, and privatization promotes competition in various sectors. As private companies enter markets previously dominated by state-owned enterprises, they bring fresh ideas, technologies, and innovations. Competition encourages businesses to continuously improve their products and services, leading to increased consumer choice and satisfaction. Moreover, privatization fosters a dynamic business environment that rewards innovation and drives economic growth. Privatization often results in improved service quality for consumers. Private companies are motivated to provide excellent customer service and meet consumer expectations to retain and attract customers. This contrasts with many government-owned enterprises, where customer service may not be a top priority. In privatized industries like telecommunications, transportation, and healthcare, consumers often experience better service, shorter wait times, and access to cutting-edge technologies. Privatization can also contribute to job creation and economic growth. As private companies expand their operations and invest in new ventures, they create job opportunities and stimulate economic activity. The increased efficiency and competitiveness of privatized enterprises can drive economic growth and prosperity for communities and regions. Government-owned enterprises can sometimes become financial liabilities. Privatization allows governments to transfer the financial risks associated with these enterprises to private investors. When businesses operate under the discipline of profit and loss, they are more likely to manage risks prudently, reducing the potential for taxpayer-funded bailouts. Privatization is a policy approach that offers numerous benefits to economies, industries, and society. By enhancing economic efficiency, promoting innovation and competition, improving service quality, and contributing to job creation and economic growth, privatization can lead to positive outcomes for both governments and citizens. However, it is essential to approach privatization with careful planning, oversight, and consideration of the specific circumstances of each case. When executed thoughtfully, privatization can play a pivotal role in driving economic development and improving the overall well-being of a nation’s citizens. Corruption has been a pervasive issue in Pakistan’s government departments for many years, hindering progress, eroding public trust, and impeding socio-economic development. Despite numerous efforts to combat corruption, it continues to plague various sectors of the government. Corruption in Pakistan’s government departments is not a new phenomenon. It manifests itself in various forms, including bribery, embezzlement, nepotism, and misappropriation of funds. It affects every facet of public life, from law enforcement agencies to healthcare and education systems. Transparency International’s Corruption Perceptions Index consistently ranks Pakistan among the countries with high levels of corruption. Several factors contribute to the persistence of corruption in Pakistan’s government departments: Many government employees, particularly those in lower-level positions, receive meager salaries that do not align with the cost of living. This financial strain can lead to a susceptibility to bribery and kickbacks as a means of supplementing income. Weak accountability mechanisms and a culture of impunity have allowed corrupt officials to operate with relative impunity. The absence of stringent consequences for corrupt practices has emboldened wrongdoers. Pakistan’s bureaucratic structures are often complex, leading to excessive red tape and opportunities for corruption. This bureaucratic complexity can deter citizens from accessing public services without resorting to bribery. Politicians sometimes protect corrupt officials in exchange for loyalty and support. This culture of political patronage further erodes accountability and perpetuates corrupt practices. Poverty and limited access to education exacerbate the problem of corruption. Vulnerable individuals may feel compelled to engage in corrupt activities to secure basic necessities for themselves and their families. Corruption has profound implications for Pakistan’s development and the well-being of its citizens: Corruption diverts valuable resources away from development projects and public services. Funds that could be invested in education, healthcare, and infrastructure are siphoned off by corrupt officials. Corruption often leads to unequal access to public services, with those who can afford to pay bribes receiving preferential treatment. This perpetuates social and economic disparities. Corruption erodes public trust in government institutions. When citizens perceive government departments as corrupt, they are less likely to engage with public services and institutions, further weakening the state’s legitimacy. Corruption discourages foreign investment and stifles economic growth. Businesses may be reluctant to invest in a country with a reputation for corruption, limiting job opportunities and economic development. Combatting corruption in Pakistan’s government departments requires a multifaceted approach: Establishing independent anti-corruption bodies with the power to investigate and prosecute corrupt officials is crucial. These bodies should operate transparently and without political interference. Adequate remuneration for government employees can reduce their vulnerability to corrupt practices. A fair wage system can help deter bribery and improve the quality of public services. Simplifying bureaucratic procedures and reducing red tape can minimize opportunities for corruption. Digitalization of government services can also enhance transparency and efficiency. Implementing open data initiatives and ensuring public access to government information can help expose corrupt practices and hold officials accountable. Public awareness campaigns and educational programs can inform citizens about the detrimental effects of corruption and empower them to resist it. Corruption in Pakistan’s government departments remains a significant challenge that impedes progress and undermines trust in public institutions. To address this issue effectively, concerted efforts are required at all levels of society and government. By implementing reforms that focus on accountability, transparency, and socioeconomic development, Pakistan can make strides toward a more just and prosperous future for its citizens. These steps are very difficult to implement in Pakistan’s Governmental departments due to many reasons. Many of our national institutions have been losing money for a long time and are a huge burden on the economy. Companies like Pakistan Steel, Railways and PIA etc are the examples of this scenario. As much as the employees are in a bad situation, the lavish salaries, perks and royal expenses of the officers are not hidden from anyone. Corruption is separate from that. It is in the minds of government employees and officers in our beloved country that whether you work in the government job or not, you will get salary after a month. After corruption this mindset also played a big role in destroying our national institutions. In addition, the political governments in their respective periods have contributed equally to the destruction of these institutions by recruiting additional employees. Absence of technical officers and heads is also a major reason for the destruction of these institutions. Today, the Pakistan Steel mill’s production is zero. Outdated machinery does not meet the standards set by other leading mills in the steel industry. The technology is far from self-reliant due to administrative and financial constraints. Production at the mills shut down in June 2015, when Sui Southern Gas Company (SSGC) stopped supplying gas due to overdue payment. Additionally, Pakistan Steel Mills is unable to pay the salaries of its employees. Pakistan Steel Mills incurred a loss of PKR 16.9 billion by end of FY 2008. Within 5 years this had ballooned to PKR 118.7 billion. These losses continued to bulge and reached PKR 200 billion in 2018. At present, the total losses and liabilities are approximately PKR 400 billion. One of the primary reasons behind Pakistan Steel Mill’s failure is the interference in the mills’ affairs by successive political governments. These governments always compromised merit while appointing the CEO’s of the organization during all the previous governments, besides inducting incompetent people at various key positions, having political affiliations. Consequently, the organization has been managed very poorly throughout all these years. Another integral factor that has triggered Pakistan Steel Mill’s downfall is the dependency on imported steel for local purposes. Despite its potential to expand and grow, Pakistan Steel Mills has failed to meet the nation’s demand and lagged in competition with other countries. Domestic iron and steel products struggle to compete with cheap imports from countries like China, where advanced technology and skilled labor involvement produces high-quality steel. China-Pakistan Economic Corridor (CPEC) is also expected to accelerate the imports of steel. State Bank of Pakistan (SBP) believes cheap imports from China and Ukraine had damaged the local production of iron and steel, which fell 8.6% during the first half of FY16 compared to a growth of 31% during the same period of FY15. While comparing Pakistan Steel Mills with the steel industries in other countries such as Japan, we can infer that a skilled workforce’s employment is crucial in developing a steel industry. Unfortunately, Pakistan Steel Mills lacked a skilled workforce. The labor in developed countries is qualified and adept in their respective departments. Selecting workers based solely on their expertise instead of partiality or prejudice ensures this. Industries in developed countries hire the required amount of workforce that can produce enough products. In case of Pakistan Steel Mills however, the workforce hired was more than the mills required. Political Parties appointed thousands of new employees. While about 9,000 employees could have met Pakistan Steel Mill’s workforce requirement, 17,000 ended up being hired. This superfluous employment put an additional burden on Pakistan Steel Mills. The privatization of Pakistan Steel Mills is another equally impactful dilemma. The government under priced the Pakistan Steel Mills structure and decided to sell the stake at a low price. However, a group of Pakistan Steel Mills workers standing up against the mills’ privatization caused a reversal of this decision. Subsequently, the Supreme Court declared the decision when it intervened. This decision resulted in massive corruption as the government-appointed new public servants at the mills. To secure their position and obtain undue benefits, they practiced corruption and drained Pakistan Steel Mills from its revenue. This had adverse effects on the economy of Pakistan. Then look at PIA which is one of another loss making organization. Regrettably, PIA serves only a fraction of the country’s population, accounting for less than 3pc of citizens using air travel while consuming significant public funds. This stands in stark contrast to the highly criticised and loss-making power companies that cater to nearly 80pc of the population with electricity. The government of Pakistan holds a 92pc share in PIA, which was once known for its slogan “Great People to Fly With”. However, since the late 1990s, the airline has faced mounting losses, attributed to competition from emerging regional airlines, a lack of entrepreneurship, external influences, internal mismanagement, and insufficient funding for fleet expansion, as highlighted by the Aviation Division. To cope with its financial losses, PIA accumulated significant debt, which has now reached unmanageable levels. As of Dec 31, 2022, PIA’s debt and liabilities stood at Rs743bn — five times more than the total value of its assets, the Aviation Ministry said, adding that its total losses for the last financial year (2022-23) stood at Rs86.5bn, out of which Rs11 bn were operational losses. Pakistan International Airlines (PIA) is facing severe shortage of funds which is affecting flight operations. According to sources, PIA is facing difficulties in getting fuel for its planes from Pakistan State Oil (PSO) while, recently, two-way flights from Karachi to Faisalabad, Islamabad and Lahore were canceled due to lack of funds. Sources said that the flights from Karachi to Turbat, Bahawalpur and Sukkur were also been canceled while the two-way flights from Karachi to Muscat abroad were also cancelled. Sources further said that due to shortage of funds, all PIA employees could not be paid salaries, for which PIA has requested the government to provide funds immediately. Worst or same is the situation of many other State-owned organizations which is on record. Now come to other side of the picture. As explained earlier, the history of institutions shows that private institutions have a much lower rate of loss than public institutions. Effective supervision, almost no corruption, competent and professional employees, officers and heads, competence along with other factors such as promotions on the basis of performance, attractive salaries and perks etc. have played an important role in increasing the rate of profit in private enterprises as compared to government enterprises. Another thing that is beyond comprehension is whether the government’s job is to run trains, buses, ships and factories etc. If you look at developed countries, you will find that apart from the national security, defense, foreign affairs, education and health etc. related departments, the rest of the institutions are mostly entrusted to the private sector and from these private institutions, governments also get a lot of money in the form of taxes. If it’s not possible to immediately privatize the loss making companies then at least there should be some revolutionary reforms. I remember, when I was studying in UET Lahore in 1993, the Vice Chancellors were being appointed by Government of Punjab. Politics was on peak in UET at that time and University remained close on an average of four-six months a year. Four year’s course was taking six years to complete. Then, in 1998 a retired Lt General was appointed as Vice Chancellor. He brought revolutionary steps and now students are graduating exactly in four years. I can give the examples of many other departments where the organizations showed substantial growth soon after appointing the management from Pak Army. Pak Army’s governed setups are also going in much better profit than many of Government organizations where discipline, dedication, transparency and reward systems is playing a key role in the progress of those organizations. It’s a matter to think for our civilian class that why they can’t treat the dead companies in professional way like Army. In current scenario, it might not be feasible to bring Army leadership in those organizations as they need to focus more on trainings, operational preparedness and professional activities to cope with internal and external challenges. But at least we can adapt their leadership and management styles to help out up to some extent till commencement of their privatization process. Readers, it is the urgent need of the hour to re-determine our goals and strategies. Our country should not bear the loss anymore. There is a trough after every crest and crest after every trough. As the country is now moving in good direction and due to recent remarkable developments we are rapidly proceeding towards crest. Civil-Military leaderships and all pillars of the State are on one page and working together for betterment of the country. Army Chief is himself taking keen interest in economical restoration of the country along with his professional responsibilities. Crackdown against Mafias is going on, new investment is expected, political stability is also expected soon and things are moving in good direction so it is right time to privatize the loss making organizations on reasonable price, terms & conditions and job guarantee of the employees. Government need to take immediate steps to increase revenue, growth and productivity.

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