Privatization action

World Bank experts have published a review of Pakistan’s federal public expenditure with a view to exploring ways and means to manage the country’s large and growing fiscal deficit, with a chapter dedicated to reducing the fiscal impact of state-owned enterprises (SOEs). While many of the review’s recommendations should be considered by an elected government with a more robust mandate to make decisions with broad national implications, some of them look ripe for immediate action, especially in view of the precarious situation of our economy. The domain of privatization, in particular, is crying out for immediate action. The review includes a box on the lessons from the privatization experience in Pakistan, which incorporates valuable insights on the perception and reality of the process before, during, and after the government of Gen Pervez Musharraf and as such should be compulsory reading for all public functionaries associated with privatization.

It is instructive, for instance, how Pakistan’s privatization programme progressed satisfactorily on Musharraf’s watch, when 54 SOEs were privatized in the eight years from 2000 to 2008 yielding Rs416.8 billion. But later the process became bogged down and has generated no more than Rs173 billion in the 14 years since 2009. There is no denying that this veritable collapse of the privatization programme is largely attributable to judicial activism. The superior judiciary’s nixing of deals looking to put Pakistan Steel Mills (PSM) and the Reko Diq project in private hands badly dented Pakistan’s reputation among foreign and domestic inventors, painting the country as an unreliable investment destination.

However, this was not the only factor leading to the desolation of Pakistan’s privatization ambitions. Successive political governments struggled to demonstrate the need and transparency of the process – although it was largely governed by the same regulatory framework that made it tick under the military and quasi-military dispensations. Political opposition played an instrumental role in undermining public trust in the process out of mere political expediency. Egged on by their political patrons and other vested interests, powerful trade unions remained pitted against privatization. Finally, back-to-back political governments proved too squeamish to go out on a limb and make unpopular decisions.

The current caretaker setup is fortunate to exist in an era when an overbearing judiciary is a thing of the past, at least for the time being. Equally, it has no election to contest and should therefore be free of any political considerations centred on the pleasure of this or that voting bloc. It would not be injudicious to say that the caretaker government inherited a well-thought out strategy to expedite the privatization programme. A 2021 triage exercise led by the Finance Division, for instance, clearly identifies the federal SOEs that need to be privatized or liquidated. It also lays down clear timelines for the privatization of the SOEs identified for this purpose, and its implementation was likely already afoot when the caretaker government arrived. The drift is that caretaker Prime Minister Anwarul Haq Kakar and his cabinet have on their hands a clear roadmap for privatization, and their job is merely to stick to it while they hold the reins of power. They must realize their duty to make every minute of their term count towards ridding Pakistan of loss-making SOEs because they are a perpetual drain on the already overburdened exchequer.

Equally important, the caretaker government must keep the ball rolling on bringing under the tax net real estate and agriculture – the two sectors of our economy that have doggedly refused to pull their weight even when the nation is in deep crisis basically because of the paucity of revenue. Dominated by rent-seeking classes that wield irresistible political influence, real estate and agriculture are unlikely to be taxed by a political government any time soon. If PM Kakar can bell these two cats for the nation, he will earn himself lasting respect.