PSEs: misplaced optimism

The government’s quest for turning around loss-making Public Sector Enterprises (PSEs) continues in the fourth year of its tenure. It has been reported that the government has handed over the loss-making entity – the Telephone Industries of Pakistan (TIP) to the National Radio and Telecommunication Corporation (NRTC) along with billions of liabilities and hundreds of employees and pensioners for revitalising it as confirmed by the Minister for Economic Affairs Omar Ayub Khan in his Twitter message: “Congratulations to the people of District Haripur. Gratitude to Prime Minister Imran Khan and NRTC. TIP has been transferred to NRTC. 100 percent process completed. In SECP, TIP is visible as a subsidiary of NRTC. TIP will now become a state of the art tech unit and will create jobs.” He further said that NRTC will invest over Rs 6 billion.

Moreover, Minister for Information Technology and Telecommunication Aminul Haque is reported to have stated: “TIP was incurring losses since 2004, however, the IT Ministry has taken two assurances from the NRTC during the handing over of TIP. First, NRTC will take all the liabilities of TIP. Second, jobs of all employees and pensions of retired employees of the organisation would be ensured and that the IT Ministry would also receive income from the NRTC.”

Interestingly, soon after coming into power, the then Minister for Information Technology and Telecommunication, Khalid Maqbool Siddiqui, had announced that the government was ready to establish a mobile phone manufacturing plant in Haripur in collaboration with the private sector, dropping the idea of privatising the TIP.

The federal cabinet had approved the handover of the TIP to the NRTC to revitalise this loss-making entity. Before digging a bit into the wisdom of this decision one needs to take a closer look at these two public-sector enterprises.

Under an agreement signed in 1952 between the Government of Pakistan and Siemens & Halske (S&H) A.G. of Germany, a limited company under the title of Telephone Industries of Pakistan (TIP) was incorporated in 1953 as a Joint Venture (JV) manufacturing unit. This was the first joint venture signed by the newly established state of Pakistan and also for Germany (the then West Germany) as the first one after the end of World War II. This JV brought Germany and Pakistan closer in other public sector segments; notably, the emerging power sector of Pakistan. This one enterprise firmly laid the telecom foundation of Pakistan.

Whereas, the National Radio Telecommunication Corporation (NRTC) was established in 1965-66 as a high-tech industry engaged in manufacturing of microwave telecommunication equipment in Pakistan as the pioneer in telecommunication equipment in Pakistan and a big leader in the field of communication. NRTC is producing high quality products for defence services, Pakistan Telecommunication Corporation Limited (PTCL) and other organisations.

TIP’s annual revenue has drastically gone down from Rs 700 million to about Rs 20 million in the recent past. It is currently running in losses and draining an average Rs 500 million a year in terms of salary support. It is, therefore, hardly different from Pakistan Steel Mills (PSM) and other loss-making Public-Sector Enterprises.

Other than TIP’s assets of high priced land spreading over 432 kanals, old infrastructure, and outmoded skilled manpower, this enterprise, on its face value, cannot be of any value addition to the already fragile structure of NRTC in terms of its financials, out-of-pace technology and absence of any viable potential of growth. Therefore, it increasingly appears unrealistic that NRTC by inheriting billions of liabilities and hundreds of employees and pensioners costing Rs 500 million a year can sustain this burden. It is also unlikely that it will be investing Rs 6 billion, creating new jobs and generating income for the IT Ministry as a state-of-art enterprise of the country.

(The writer is former President, Overseas Investors Chamber of Commerce and Industry)

Copyright Business Recorder, 2021