Privatisation of PSEs

Privatisation of public sector enterprises (PSEs) is an important economic reform policy tool to reduce structural inefficiencies of the economy and to generate growth by removing artificial barriers and opening up the economy to competition.
In Pakistan, privatisation efforts began after the creation of the Privatisation Commission (PC) in January 1991. However, since the progress on privatisation was slow, the government promulgated the PC Ordinance 2000 on 28th September, 2000 which strengthened PC's legal authority for implementing the privatisation policy on a fast track.
The government's commitment to privatisation and the enabling legal framework has given an added impetus to the sale of public sector units and assets worth billions of dollars to the private sector. The primary model adopted by the government has been the sale of strategic interests, along with management control, to investors.
While the government is doing all it can, the World Bank is reported to have "demanded" that it privatise OGDC, PPL and gas distribution companies on a fast track basis to make its reforms programme meaningful in real terms. A World Bank delegation had recently held a detailed meeting with the privatisation team of the government and "sought" a complete presentation on the privatisation plan of gas exploration, production and distribution companies.
While the WB team suggested some measures to expedite the process and conveyed its desire for early privatisation, the government explained that it was following the privatisation plan for 2005-06, which included offering of OGDC, PPL and PSO and most of the entities listed for sale during the year would go to the private sector before June 30. The delegation was also informed that the government had short-listed three parties for PSO and it would be presented for final bidding as early as possible.
Speaking at a Credit Suisse Investment Conference in Hong Kong on 29th March, 2006, Salman Shah, Advisor to the Prime Minister, revealed that the government had tight deadlines for privatisation and was planning to have road-shows for Pakistan Steel Mills, the gas companies, Pakistan State Oil and the OGDC before the year was out. The amount targeted in assets sales was up to $2.5 billion.
There is absolutely no doubt about the economic benefits and the need of selling state-owned units to the private sector. Such a policy, among other factors, is dictated by efficiency reasons and fiscal imperatives because of huge losses of PSEs which have to be met from the budget.
However, what we don't understand is the behaviour of the World Bank in conveying the feeling of unease and pushing the government to expedite the privatisation programme when it is more than clear that the present economic team of the government is already fully convinced about its utility to the economy and is trying to speed up the process through all the measures at its disposal. In fact, at times it is accused of unnecessary haste and selling the family silver at throw-away prices to the foreign investors who could exploit the situation under certain circumstances.
Moreover, the privatisation process is not as simple and straight-forward in Pakistan as sometime thought by the outsiders. For instance, the government had to face a lot of problems and make certain compromises at the time of PTCL deal with Etisalat and KESC sell-off. Obviously, the economic team has to evolve a transparent mechanism for the sale of PSEs, offer the units only to the highest bidders and sound parties and also ensure that it is not accused of corruption and censored by the future governments.
Besides, large-scale unemployment and labour unrest has also to be avoided for social harmony. Therefore, we would advise the World Bank to be a little patient and not to push the government too hard, especially when both the parties are on the same wavelength in the matter of privatisation.