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Privatisation in a hurry.

Privatisation in a Hurry

Today's debate in the rich countries is not how best to privatise but on ways to improve public sector efficiency in order to get better value for money. It is known that the interference in the day to day functioning is one of the most important factors in various problems that plague these organisations. Thus for example, the OGDC was made independent of the budget financially, but was denied administrative autonomy.

The privatisation policy of the government is not taking off the ground. The takeover of Muslim Commercial Bank was like a broad day robbery. An observer remarked that the policy of privatisation is like throwing out a baby along with dirty bathwater. The justification for such an action was sought through keeping the mother's arms bound.

The bids called for roti plants were not upto the expectations of the Government. Practically not a single bid was filed for the purchase of Bolan Castings and Balochistan wheels. Both these projects are working under Pakistan Automobile Corporation and are giving profits.

According to Finance Minister 114 units would be denationalised within a year. In the first phase 50 units were to be unloaded. The first preference has to be given to the old owners of these units provided they match the highest price. However, this principle was not followed while transferring the ownership of the MCB.

There has been widespread agitation by the workers against the policy of privatisation. Some labour leaders were arrested and put to solitary confinement. Clearly the Government has no clearcut policy in regard to job security of the employees. The assets of the Government Sponsored Corporations totalled Rs. 597 billion in 1987-88. Value added generated by these Corporations were Rs. 38 billion or 5.33 per cent of the GNP.

While some of the Corporations are making profits, there are some which are making losses. Complete reliance on private sector cannot be placed because of its dubious role in the past and its performance on the stock market.

Capacity utilisation in industries is deplorably low. Pakistan's industry as a whole is estimated to have operated uneconomically at as low a rate as 40 to 60 per cent of the installed capacity whereas many industrial units have ceased production. The industrial growth rate stagnated around 7 per cent for the last so many despite the fact that a policy of deregulation was followed liberally.

The fear pervading the economists' circles is that the private sector people would fragment the engineering enterprises of the public sector into small bundles, rendering them inoperatable. As profit is the leading motive of private industrialists, there is also the apprehension that they would produce goods that yield large profit and not necessarily the kind of goods that are needed by the national economy.

Cartelisation is another grim possibility because the entrepreneur base is still very narrow in Pakistan. One of the conditions of sale of public enterprises reportedly will be that the buyers would not be able to sell the land on which a manufacturing plant is situated. There is no dearth of the ways to circumvent this prohibition, it is pointed out. As such, a suggestion was made by a veteran economist that the Government should float three kinds of bids:

1. Only for land; 2. Only for plant installed on that land; 3. Consolidated-that is both land and plant.

That Government, he further urges, should not forego the option of keeping the engineering and other infrastructural industries. These then should be made autonomous under competent management which would run them on sound lines. They would not need protection from competition; for they would know that an industry nurtured in a climate of protection from competition and from fresh ideas is doomed beforehand.

Today's debate in the rich countries is not how best to privatise but on ways to improve public sector efficiency in order to get better value for money. It is known that the interference in the day to day functioning is one of the most important factors in various problems that plague these organisations. Thus for example, the OGDC was made independent of the budget financially, but was denied administrative autonomy. The Chairman, OGDC, in his report submitted to the Government at the end of the year pleaded for powers to hire and fire and adjust functionaries of the Corporation so that he would have free hand in managing its highly complex technical operations.
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Title Annotation:Special Issue: Industrial Relations in Pakistan '91
Author:Haidari, Iqbal
Publication:Economic Review
Article Type:editorial
Date:May 1, 1991
Words:740
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