Reforming the white elephants

The government has decided to privatise PIA, and though only a tad, the announcements seem to have brought some improvements in the airline’s operations in opposition to government’s decision. But, the list is longer than that. The bleeding state owned enterprises that have had a significant negative fiscal impact include not only the public sector utilities in the transport sector but also those in the power sector.
A recent report launched by Pakistan Country Team at the World Bank has dedicated an entire section to the haemorrhaging public sector enterprises, and though the issues have been highlighted many times, the recommendations are worth a look.
Though several bailout packages and restructuring attempts have been made in the recent past, the absence of a legal and regulatory framework for state-owned enterprises has been identified a key issue in restricting efforts for reforming the same. Currently, there exists no roadmap or framework for carrying out the proposed reforms, if any.
Lack of corporate governance and ownership policy are also major reasons behind malpractices such as lack of accountability and professionalism and in PIA, Pakistan Steel, Pakistan Railway, and power sector public giants.
Not only does the government need to strengthen the weak regulatory environment but also enhance financial discipline in each of the PSEs. The emphasis of the report rests on fast track process and timely completion of privatisation and corporatisation wherever required.
A step further, yet much needed effort, as proposed by the report is the commercialisation that would require a clean-up of the balance sheets, restructuring staff and streamlining of core and non-core activities to curtail costs.
Another valuable suggestion that has been long talked about is the clear distinction between the management and the regulator roles, and the performance management in the organisations.
While it may sound simple because of its repetition several times, things are not simple and they are not happening overnight. It will take some doing. Where hits are scarce, misses have been innumerable. The latest one is that the government has fallen foul of the structural benchmark of approving the privatisation strategy for 30 SOEs, one of the conditions under the three-year IMF EFF programme.