Privatise them!

The state-owned enterprises (SOEs) are bleeding heavily and the recent figures released through official sources, estimate that the losses have exceeded 500 billion rupees annually. Recently, the prime minister spoke on this issue while addressing the businessmen and called upon country's private sector to come up with proposals and run the state-owned enterprises (SOEs) to turn them around.
According to him, he has already instructed the finance minister to submit a plan in the Cabinet meeting regarding SOEs. He suggested that the best brains should head these organisations and if the business community thinks that it can do so, then the government can hand over these units to private sector. This is not the first time that he has shown his willingness to do something to reduce the huge losses of SOEs, but each time, it is said and forgotten and nothing is done on this important issue that is costing the nation heavily.
Therefore, it remained a wishful thinking and nothing was done on this front. These enterprises are still bleeding and bleeding heavily. To most of us, it remains a mystery that despite employing senior managements at hefty remuneration packages, to look after these national corporations, no one knows their current liabilities that needs to be paid to carry on their daily businesses. Pakistan Railways has no fuel to run its trains today and claims are being made that if six billion rupees are given to them, Pakistan Railways would be turned into a profitable enterprise.
Is there anyone who should tell them that it is almost four years now that they are at the helm of affairs and things have gone bad to worse? Pakistan International Airlines (PIA) has no funds to pay for the fuels and its aircraft are not allowed to fly from foreign countries. The story is the same that they should be injected more funds to buy new aircraft. Pakistan Steel owes billions of rupees to various financial institutions due to its heavy losses. Pakistan postal services are also in the bad shape. It is certain that the organisation is so inefficient that a registered post letter sent from Lahore reached the addressee in Karachi after a period of two months.
In fact, private courier companies are providing cheaper and faster postal services than this entity. There is no system that a user could complain for their dishonesty and inefficiency. This entity is completely old-fashioned, inefficient, corrupt and outdated and must be wound up in its present shape or structural changes are desired to incorporate these services so that these services are privatised later on as has been done in most other countries.
Similarly, other SOEs are following the same pattern, incurring huge losses, dependence on public or borrowed funding. We fail to understand how the government officials can make best business decisions whereas they are even not capable to make routine and simple administrative decisions. The inaction to improve the financial performance of these companies leads us to believe that these companies exist for corruption, nepotism and provision of employment to the most inefficient workers of the political parties that is in power. The government and the FBR tried their best to reduce the gap between revenue and expenditure through imposing harsh measures to tax the already taxed assessees but never realised that 500 billion rupees annually could be saved from this source.
All around the world, government services and enterprises that were loss-making were shifted to the private sector through privatisation. In Britain, privatisation process was started by Margaret Thatcher's government in the 1970s. Her government privatised over 1.5 million council houses that were created by the public sector. It also privatised the major airports, the gas utility company and the telephone system - all of which had always been in the public sector. Her government also sold Jaguar. British Telecom became a private company with shares sold in the open market. In addition, British Petroleum and British Aerospace became private corporations, as did the National Bus Company, the Associated British Ports, shipyards, factories of the Royal Ordnance and others.
Similarly, in Chile, hundreds of firms nationalised by the government were returned to private ownership. Likewise, the Japanese government privatised Nippon Telephone and Japan National Railways, which have been fixtures of the public sector. So in a very real sense, privatisation is actually dismantling big government, not merely correcting the excesses of socialist regimes.
By 1989, the idea of privatisation had been embraced by many other countries. The Canadian government sold off its two aircraft firms (De Havilland and Canadair) and Air Canada. Bangladesh has sold its textile mills and banking industry. Malaysia and Singapore sold portions of their state airlines. Turkey has privatised the Bosporus Bridge and is planning to sell off its airline and other state industries. Argentina, Brazil, Chile and Mexico have begun to sell numerous state-owned industries, as a way of coping with their foreign debt problems. Since such sales reduce government expenditures (to cover operating losses) while also bringing in one-time cash receipts, the US Agency for International Development, the World Bank, and the various international development banks have all endorsed privatisation as an important part of debt-reduction strategies.
Why did privatisation that developed in the late '70s become a world-wide phenomenon in the '80s? The fundamental reason was that people began to realise that governments had simply gotten too big, bureaucratic, and inefficient. Public funds were being wasted by the government-appointed managers. Therefore, it was realised that if services were to be provided cheaper and competitive, these units must be privatised and the private management would be the right choice to stop bleeding, provide cheap and competitive goods and services.
Why does privatisation lead to lower costs and more efficient operations? The fundamental reason is the difference in incentives between public and private sectors. The former has a legally-guaranteed monopoly on its services. Its workers are protected by a civil service system, which virtually guarantees continued employment and pay increases, regardless of their performance. But a private firm in a competitive market must win over its customers by offering them a superior combination of performance and price. If it fails to deliver adequately, its customers can go elsewhere.
In developed countries such as England, France and Japan, privatisation of state-owned enterprises has proceeded from a mixture of ideological and fiscal motives. Conservative political leaders in those countries concluded that the public sector had grown far too large and costly to operate. Economic analyses persuaded them that political factors would usually force state enterprises to operate in wasteful, non-businesslike ways over the long run. Thus, rather than try to reform those industries, it would be far better to get rid of them altogether.
What has made privatisation far more attractive was the realisation that large one-time cash infusions would be possible from the sale of these industries. As of the end of 1988, the British government had realised over $40 billion in one-time revenues from privatisation of council houses and state industries. The New Zealand government realised over $14 billion from its privatisations, and the Japanese government over $100 billion just from Nippon Telephone and Japan Air Lines. These are revenues, which help reduce budget deficits without tax increases. Pakistan may also benefit from others' experiences. It is being argued that even there is no one-time cash infusion in this case due to SOEs' financial health, Pakistan can save almost 500 billion rupees annually by stopping the bleeding of these enterprises.