EDITORIAL: Federal Minister for Industries and Production Hammad Azhar has informed the senate standing committee on industries that the cumulative losses of State-Owned Entities (SOEs) have reached the 2 trillion rupee mark. Taken in perspective 2 trillion rupees amounts to 41 percent of total Federal Board of Revenue (FBR) collections projected for the current year, 51 percent of the total revised FBR collections in 2019-20, nearly 700 billion rupees more than the revised non-tax revenue estimates for the outgoing year and a trillion rupees more than the total projected non-tax revenue for the current year, and is only 900 billion rupees lower than the markup for domestic and external debt in the current year and 800 billion rupees more than the allocation for defense during the current year.
Instead of taking cognizance of these disturbing statistics and trying to curtail the losses, the Pakistan Tehrik-i-Insaaf (PTI) government appears to be focused on a roll-back of the already devolved powers to the provinces; and, more particularly, to revisit the 2010 National Finance Commission (NFC) award that raised the share of the provinces in the federal divisible pool and the 18th Constitutional Amendment that disallowed a cut in the shares of the federating units in a previous NFC award. While in all fairness the PTI is merely following in the footsteps of its predecessors as neither the PPP-led government nor its successor the PML-N, achieved any of the objectives outlined in the 10th NFC Award and the Eighteenth Amendment yet this constant postponement accounts for a steady rise in the SOE losses.
The PML-N manifesto and subsequent agreement with the International Monetary Fund (IMF) in September 2013 as noted in the memorandum on economic and financial policies for 2013/14-2015-16 pledged the following: "We are working on a time-bound strategy for 65 PSEs approved for privatization by the Council of Common Interest ([CCI] to facilitate decisions to either privatize firms, restructure those with prospects of profitability but which the government wishes to retain in the public sector, or close nonviable firms." This pledge remained unmet.
The PTI prior to forming the government had supported restructuring through the establishment of Sarmaya Pakistan which, through adhering to a policy of meritocracy in appointments, was envisaged to have the capacity to turn loss-making SOEs around. That proposal appears to be floundering twenty months into the tenure for three reasons. First, because of lack of the requisite resources available to the government to empower Sarmaya Pakistan; second, unlike the model followed in Malaysia SOEs losses far outpace their assets; and finally with the induction of Dr Hafeez Sheikh as the Advisor on Finance, a man whose stated objective in previous executive positions he held in the country was to privatize loss-making units, the idea of Sarmaya Pakistan is all but dead. Incidentally, Sheikh's approach can be supported because had Pakistan Steel Mills (PSM) been privatized during Musharraf's era then the hundreds of billions of rupees that have been released to the entity since, including salaries of the employees, would have been saved.
The IMF in its recent paper on implementation of the 2018 framework for enhanced fund engagement on governance has stated that the government has pledged to identify those SOEs that are to remain under state management, or liquidated or privatized - an approach reminiscent of the pledge made by the PML-N government in 2013. Sadly, like other pledges of reforms that remain unmet, for example tax and power sector reforms, turning the SOEs around too is an objective that remains unmet and the reason is well organized labour unions that challenge any such attempt by the government of the day on the streets as well as in court. There is therefore a need to negotiate with labour before deciding on the best possible way forward.
Copyright Business Recorder, 2020
Comments
Comments are closed.