In democratic setups, governments do not generally run industrial and business enterprises. In countries where governments assumed this role, the national exchequer had to meet deficits in billions to keep the public sector enterprises (PSEs) afloat. For instance, in Pakistan, the government had been paying over Rs500 billion annually to keep the loss-making PSEs running.

Despite liberal handouts, a stage comes where state enterprises collapse due to mishandling, inefficiency, indecision, wrong decisions, corruption, ignorance, apathy, over-staffing, etc. Here one may cite the fate of state-run Omni bus service? Without official handouts Pakistan Railways, PIA, Pakistan Steel Mills, electricity generation and distribution companies, Pakistan Television Corporation and Pakistan Broadcasting Corporation would have also met a similar fate!

How do government organisations in third world countries, like Pakistan, operate? Permit me to present a glimpse of that through an incident, as narrated by the host of an event held in Islamabad. The organisers of a roundtable conference on "Energy Crisis -- the way out" wrote a letter to the Chairman NEPRA, on October 11, 2012 seeking some information and guidance. NEPRA took 40 days to acknowledge that letter. If an entity of the government takes that long to simply acknowledge a letter, then one can imagine the time its minions would be taking to arriving at hard decisions. Even this factor (delayed decisions) alone might have massively contributed to the present dismal and pitiable sate of PSEs.

After nomination on the PSEs’ BoD (Board of Directors), the state minions try to make the most from these assignments that they get due to their official positions. The Transparency International Pakistan (TIP), last year, pointed out that civil servants are nominated to the BoDs on hundreds of private listed companies on the strength of government shareholding. TIP revealed that the act of Baboos taking fees and not depositing it in the national exchequer is a criminal act. The fee for Pak-Oman Holding is Rs500,000 per meeting and for Pak-Kuwait it is reportedly $10,000 per meeting. The nominations to such heavy fee organisations are prized nominations, which are obtained through political influence and favours.

The National Bank of Pakistan (NBP) alone holds over 100 meetings of their BoD or committees in a year. As NBP pays Rs85,000 per meeting to each of its director, it means that a director could make Rs8.5 million annually from those meetings. As part of the government’s austerity move, the Ministry of Finance, in July 2013, issued directives that no civil servant could become member of more than two BoDs. However, later, the government reviewed its decision and allowed civil servants to be member of only one BoD at a time. Previously, Baboos would become member of six BoDs of various organisations at a time.

Furthermore, it has been observed that some political parties, when in power, induct their party workers, camp followers, voters or sympathisers, in hundreds, in PSEs. Such appointments are often made in utter disregard to the rules. Perhaps, such a state of affairs impelled Milton Friedman to observe: "If you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand." Milton’s saying perfectly fits Pakistan where the government is in every sector. As a direct market participant/competitor, it is obstructing the private sector’s entry into the market place and thus arresting growth of both revenue and economy.

Analysis and consultations by Pakistan’s Planning Commission (PC) have shown poor governance and dysfunctional markets to be among the most important reasons why growth in Pakistan has not achieved a sustained acceleration. The footprint of the government has been estimated to be as large as over 50 per cent of the national income, making it very difficult for the private sector to expand. Furthermore, till recently, Pakistan’s growth policy was mainly based on public sector projects and arbitrary incentives -- subsidy and protection. While project selection difficulties considerably blunted the efficiency of infrastructure development, the system of incentives impeded the development of vibrant and competitive markets.

Furthermore, according to Pakistan’s Competition Commission, the government’s industrial licensing and financial sector policies have been promoting monopolies or strengthening the existing monopolies. For example, the infrastructure industries continue to be controlled by the public sector, e.g. railways, gas marketing, ports, airports and baggage handling, civil aviation, post office, electricity transmission, supply of potable water in cities, etc.

In the sphere of international trade, the country’s share has been constantly declining due to flaw in the economic policies, limited product range and continuous dependence on a few markets. Meanwhile, India has increased its share in the international trade because of diversification of export products to 1.61 per cent from 0.6 per cent in 1999, while Pakistan’s share has declined to 0.13 per cent from 0.21 per cent during the same period. Without rapidly increasing exports, sustained high growth rates are difficult to achieve. The rise in exports should be double than the GDP growth, say market experts.

For sustained growth, the country needs to attract private investment. But, the private sector makes investments in countries where the governments play the role of a facilitator/regulator and not direct competitor. If we wish the country to make progress on a continuous and sustained basis, we need to right-size and restructure PSEs expeditiously so as to provide an environment conducive for the growth and progress of trade and industry. If the trade and industry grows so would the government revenues.

Experience tells that on returning to power, political parties have been generally discarding the economic policies of their predecessors in a bid to chalk out new ones. Unless we ensure continuity in the economic policies on a long-term basis, the country’s march towards progress and prosperity will remain elusive.

Things have already reached a point where resource constraints and myriad economic challenges now make preparing a people-friendly budget as difficult as walking on a tight rope. Prudence demands that the country’s leaders and economic wizards should sit together and chalk out a long-term road map for the next 25 or 30 years, and no one should be allowed to alter or change it due to fanciful ideas or mere whims of a leader.