Pakistan International Airlines (PIA) has reportedly suffered a loss of Rs 5.4 billion for the year 2009 with an accumulated loss of Rs 43.4 billion during the last two years. Far from restructuring and reorganising the surplus staff, PIA confirmed thousands of workers on contract, paid them some arrears and is hell-bent on increasing domestic fares. All this without giving a second thought aimed at privatisation of PIA.
Good Airlines Captains do not make good Managing Directors. PIA has to be operated by private sector. The task is difficult but not impossible. Handling of Labour affairs should be in the hands of those who know human resources and are well-conversant with labour laws. Doling out cases to friends and relatives etc will not convert loss-making airlines into profitable venture.
It is not out of context to mention that different weights have been adopted in different countries keeping in view the country's specific social, political and economic conditions in relation to privatisation. Review of the broad patterns which may help a better focus on the Pakistan context are discussed herein below:-
i. Privatisation is often equated with supply sided management of the economy which includes a review of the role of the government in regard to budget, employment, Government provision of welfare and regulatory atmosphere. Two prime examples would be the US and the UK. The privatisation elements in terms of reduction of the size of the federal government and deregulation were emphasised more in the US. However, the actual results of the first six years in USA do not indicate reduction in the outlays of public expenditure, employment in government, budgetary deficits etc, though to some extent elements of welfare state have been marginally substituted by elements of warfare state.
ii. The privatisation of public enterprises has been taken to mean transferring the public assets to the private sector and thus enhancing efficiency as well as competitiveness. Prime examples would be the UK, Japan and to some extent, Canada, Italy and Germany etc. In these cases also, some of the objectives of introduction of ownership-democracy do not seem to have been achieved. However, profitability has increased, but what amount of it can be attributed to the fact of privatisation, is a moot point. "Window dressing" of the enterprise, undervaluation of shares, special privileges being given, are some of the criticism. The medium term impact on the fiscal situation of the sale is still a matter of serious debate and the accusation of "selling the silver" or "pawnshop" approaches continue to be raised. In regard to developing countries as a whole, the thrust has been in terms of re-privatisation of those which were nationalised and in select sectors like food, textiles, hotels, and banking. Other areas being actively considered are telecommunications, airlines and transport. Overall, however, it is estimated that the actual privatisation compared to the intentions would be in the range of 10-15%. Apart from political/union pressures, thin domestic capital markets and financial institutions hampering progress. Some analysts see an intended gap between pronouncements and real intentions.
iii. There has been an intensive review of the functioning of public enterprise with a view to making them stimulate the working of the private sector through a variety of instruments, including distancing them from the Government in terms of financing and operations. The instrument of memorandum of understanding practiced by France is being advocated on a large-scale in many developing countries also. Some of the holding companies in developing countries, including Canada and Italy, are also keen to introduce some elements of private sector approach in their units. It is expected that there will be a medium and short-term impact in terms of financial gains but the extent to which this will harm the "public purpose" of these enterprises, including their creativity and technological advances, is a moot point. In any case, a review of the public enterprises has almost universally resulted in a process of deceleration or a virtual halt of further expansion of public enterprise in most economies and allowing private enterprise to enter areas, which were hitherto reserved for the public sector.
iv. Deregulation and introduction of competitive forces within the economy seem to be an important area, particularly in developing countries practising a comprehensive planning approach. It is too early to make an assessment of the impact of such deregulation, though by and large, there has been a greater thrust towards removal of barriers to entry rather than removal of barriers to exit.
v. The liberalisation in terms of promoting international trade through more realistic foreign exchange regime, as well as relaxation of restrictions on imports and exports has been advocated. While in some countries such as the UK, this has resulted in opening up participation in their equity by other countries such as the US, in most developing countries it has resulted in a greater role for multinationals. The impact on the domestic economies, both in Latin America and Africa, as a result of liberalisation in the short term appears to be somewhat unsettling.
vi. Contracting out and giving franchises to private sector has been attempted in the US, the UK and the Western Europe with some success. Some developing countries, particularly in East Asia have started these measures in transportation and urban sector.
vii. The donor agencies, in particular the International Monetary Fund and the World Bank are advocating a whole package of measures towards privatisation, and the flow of resources from these institutions is overtly related to appropriate policy response from the recipients. The major donor countries in the world are acting in close union with the multilateral agencies in regard to the policy thrust. There is as yet little evaluator study made by these institutions on the results of the thrust towards privatisation, but the fragmentary evidence that is available in the reviews made in the recent past does not conclusively establish the superiority of "market' through failures of 'state' are well-established.
If one is to make broad generalisation on the basis of experience resulting from privatisation, four lessons emerge. First scope of privatisation in developed countries in terms of selling assets of public sector enterprises is limited, Second market environment for introducing competition in many development countries is not very conducive, Third there are costs in the medium term of a policy of liberalisation as a concomitant to privatisation and finally any policy will therefore have to be selective country and sector-specific within the socio-political economy and above all political will of government in power.
In analysis the scope and limitation of privatisation in Pakistan should be based on clear understanding and socio-political and economic condition. The pressure towards privatisation in Pakistan can be attributed to a number of factors, the most important no doubt is that wherein we are not a communist nor socialist economy but basically a capitalist economy. There is no doubt that an intensive debate as to whether the blame should be on government interference or on the inherent level of operational efficiency of the public sector enterprises but one thing is very clear and there is almost universal condemnation of the role of the government in regulation of state-owned enterprises. The persistent trade-deficit and increasing domestic and foreign savings to the finance current account deficit calls for review on the part of the government and the urgency for earlier privatisation taking advantage of employed workers being unsettled is a gimmick which the people of Pakistan are no more prepared to buy. If one institution suffering huge financial loss is to be privatised, it will not mean unemployment of workers as claimed by those in power and against privatisation. Good hardworking, honest skilled workers should not fear unemployment. They will be retained and absorbed. Only those workers who do not work and expect full salary and wages or those who fear that they are absolved from performing work but should only indulge in trade union activities and yet be paid salary and earn all perks and benefits or who feel that their grip on the exploitation of poor people being Labour Leaders will be loosened, alone do not want privatisation in this country. Such few persons cannot make this nation a hostage any further. Such unscrupulous elements will be replaced by more hardworking and educated workers, and thus the employment will not be retarded but generated. No person has the right to be in service if he is not performing work and is not working upto the expectation of the employers. There is no such thing as a "free lunch" in the private sector. One has to earn his employment to survive something which is neither encouraged, developed, nor publicised by those in power.
Any debate on privatisation of loss-making companies in Pakistan will be incomplete unless the capacity, existing performance and the potential of the private sector is fully utilised. This has to encompass the small, medium and large-scale sectors, co-operative and non co-operative sectors, joint sector and even areas like contracting and trading approach by employers in the private sector will have to be changed. The era of the law of Master and Servant has been relegated to the medieval past by the free and independent judiciary of this country. Employers in the private sector will have to be enlightened, broad-minded, and at any given point of time must ensure that they will rigidly enforce labour legislation in this country.
British Government through outside sale of British Airways through open offer and sale to the public received oversubscription of the amount to the extent of pound sterling 6 billion. Denationalisation in France has added to a new dimension to the raging controversy for privatisation. This has some relevance for Pakistan where thousands of crores of rupees had been invested in government-owned enterprises, which are loss-making, yet are not being privatised. It is unfortunate that profit-making Pak Saudi Fertiliser Limited has been privatised. However, it goes to the credit of those who are at the helm of affairs to privatise this fertilisers company that not only have they undertaken enterprises with no government loan, grant or aid but even absolved workers working in this organisation on the eve of privatisation. Privatisation in India is more or less on the basis of mixed ownership as in Pakistan namely, PTCL. In India, there are enterprises with mixed ownership. For example, Indo-Burma Petroleum, Balmer-Lawrie, Gujarat State Fertilisers Corporation to name a few. Even State Bank of India has small percentage of public shareholdings. More and more wholly-owned government enterprises can be converted through partial public subscription into joint sector corporation. This may not be called privatisation or denationalisation but simply a case of limited public shareholdings in an otherwise government-owned state enterprise. There are also a large number of public enterprises, which have established a steady record of profitability. Through this process labour has also not been affected but in fact have received improved and better terms and conditions of service. The crucial point involved is state has no fund to pump in more money at the cost of social welfare of its people. All this clearly goes without saying that such situation can only be possible if the state or the government has no personal involvement or motive in the state-owned enterprises.
Today, government business enterprises in Pakistan are undergoing micro and macro transformation with apparently no economic policy in view. Coming back to Pakistan Steel Mills, a welcome sign has been that after manipulation, finally a CBA has been determined who has support with the political party in power. The issue to be decided by the Government is are they ready and willing to annoy the few party workers and go for privatisation through a clear process as enunciated by the Apex Court earlier in the case of Pakistan Steel Mills. A full analysis to answer to this query would be available in my earlier book "Dynamics of Industrial Relations and Trade Unions in Pakistan" under the chapter "Privatisation and Labour Unrest". No doubt the present Government has announced that in every case of privatisation employees will have the right of share of certain percentage in such privatised institutions. This is an indirect induction of workers in management. It should be a welcome introduction as workers would be in a better position to appreciate the problems that confront the private sector employers in running the organisation. It may be pointed out that India has taken some initiatives in this regard and a committee disinvesting of shares in public sector enterprises was constituted. The committee has submitted its report commonly known as "Rangarajan Committee". The report of this committee is freely available in India. Pakistan High Commission can be approached in New Delhi through the foreign office and the government can obtain recommendations of this committee. It is understood that even modus operandi of this disinvestment of shares has been recommended in this report.
The voices against privatisation of Pakistan Steel Mills, Pakistan Railways and Pakistan International Airlines are invariably trade unions having support of the party in power, who strongly resist privatisation for various obvious reasons. The issue for the government is whether they are to please the few vested interests or avoid billions of rupees being poured in loss-making organisations at the cost of the welfare of this country.
In India, unlike Pakistan, research scholars and students of law have undertaken research in the field of privatisation and have written thesis on this subject published in the shape of book. The suggested books are "Competition, Privatisation and Reforms in Indian Telecom Industry by Dr Poonam Mittal and Dr Shahid Ashraf; "Privatisation Evolution of Indian Thought" by R. K. Mishra, P. Geeta and B. Narin, "Privatisation of State Enterprises, Finance Commission Approach" by R. K. Mishra; "Privatisation Strategies and Techniques" by R. Nandagopal and Chaudhry Lakshmi Kumari, "Privatisation of State Level Public Enterprises in India" by Chaudhry Lakshmi Kumari and R. K. Mishra, "Privatisation of Public Sector Undertaking - Experimentation Abroad" by Gesiah Seloam.
Pakistan government can obtain copies of these books through its High Commission in India and research people in the Privatisation Commission should study and analyse various committee recommendations and place suggestions for early trouble-free privatisation. This author in national spirit is ready to loan these books from his library to our Privatisation Commission.
To conclude this subject by the oft-quoted remarks of the US President Barack Obama:
"The government can get out of the way let the private sector do what it does best - innovate, create jobs and grow the economy."
(Concluded)
(The writer is an Advocate of Supreme Court of Pakistan)
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