EDITORIAL: Recently at an FPCC&I (Federation of Pakistan Chambers of Commerce and Industry) pre-budget seminar organised by this newspaper, finance minister Mohammad Aurangzeb categorically said that “there is no such thing as strategic SOE [state-owned enterprise]”. However, prime minister Shehbaz Sharif appears to have a different view, and the cabinet committee on privatisation chaired by Deputy Prime Minister Ishaq Dar is perhaps somewhere in the middle.
The finance minister said he and Dar are on the same wavelength on the issue. Well, if that is the case, why aren’t they resonating? The reality is that the tussle between ministries and committees is quite visible. And, there appears to be a rift amongst senior ministers (including the PM) on various economic issues. There is utter confusion while clarity on many aspects is missing.
That happens when the ruling party, Pakistan Muslim League-Nawaz (PML-N) is divided on how to proceed with economic structural reforms and negotiations with the IMF (International Monetary Fund) on the upcoming programme.
The leadership in Lahore wants to protect political capital by distancing itself from hybrid form of the government and staying away from tough economic measures to be taken in the upcoming budget. It’s an open secret that the Deputy PM and the PM were not on the same page as regards the appointment of the incumbent finance minister. The PM is keen to work closely with the bureaucracy (especially the Finance Secretary) that casts a shadow on the writ of the finance minister.
Thus, things are brewing up and conflicts becoming visible for key decisions. Making a list of SOEs up for privatisation is one. The point of view of not considering any commercial entity a strategic asset makes more sense.
The foremost strategic importance should be to have a sustainable fiscal house and servicing debt without defaulting. If SOEs are a drag on fiscal sustainability, these should be privatised on a priority basis. If the company is incurring losses, the private hands can stop the bleeding, and if the company is in green, private ownership can make it more profitable. The banking sector is an example where privatisation has reshaped the sector that is today perhaps the most profitable in the country and is contributing heftily to direct tax collection.
The idea of having scores of SOEs as strategic assets could be covered by the bureaucracy, which is not ready to let go their control. It’s a known fact that bureaucracy likes SOEs to remain under government control as they receive perks and benefits.
How come NTDC (National Transmission and Dispatch Company) is a strategic asset when the final link to consumers — the distribution companies — is up for sale? Will the private sector players drag the wires out? What is strategic in this case? Why is PSO (Pakistan State Oil), a commercial entity, strategic? There might be cases of storage and other strategic elements.
The government can separate these and privatise the rest. How can around 4,000 outlets (including franchises) across the country be strategic? If these are, then telcos are strategic too, and the list goes on. Back in the day, there was an argument about treating national carrier PIA’s domestic operations as strategic. However, as time elapsed, seeing the fiscal bleeding, that argument has fizzled away.
The whole idea of SOEs as strategic assets should be revisited, and commercial businesses should be taken out from the control of bureaucrats and the government and given to private hands, which have undoubtedly better potential to turn around these assets. In turn, the government will earn dividends and taxes to safeguard its economic sovereignty, which is very much strategic, indeed.
Copyright Business Recorder, 2024
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