A different way forward

Business as usual cannot continue since it is becoming unsustainable. Operations and governance of Public Sector Enterprises (PSEs), on analysis, reveal that they continue to under-perform. Because of a lack of clarity on the part of government, multiple layers of accountability inclusive of PM Secretariat, line ministries, regulators if applicable, public accounts committee (PAC), Auditor General of Pakistan (AGP) and also the media. The management of these PSEs spend significant amount of time responding to these multiple layers. At times they have to contend with contradictory guidelines. These PSEs were initially established to fill investment gaps in key economic sectors. Later on they grew and became natural monopolies for sheer profit motives of the government - since their dividend earnings provide a non-revenue resource.
The debate whether a monopoly business concern should be government-managed affair or whether they need to be privatised will go on. Both sides have strengths and weaknesses in their arguments. In the end what matters is efficiency and cost of delivery in a sustainable manner to consumers. It is said that the motive of the two is different. One works exclusively for the consumer, ie, when owned and managed by a government. While the other - the private sector - mainly tries to keep its shareholders, having appointing authority, happy. In the end, the consumer is at the mercy of the monopoly company as he or she has no other option but to utilise their service. It is also claimed that the government has no business to be in a business but needs to create an even playing field between the producer and the consumer. How does the government do that? By establishing regulatory bodies where the government too is a stakeholder like others. But this requires the regulator to have an arm's length relationship with the government line ministry in the relevant field.
Further, the regulatory body needs to be manned by experts in related fields. Tenure appointments at the board level are done to give autonomy to these bodies. However, they also need financial independence; so as not to be dependent on the government for operational reasons. This is where we took a wrong turn. The present mess is an outcome of this. Regulatory bodies cannot be a parking lot for retired bureaucrats who have served their political or military masters to their hearts' content so as to be appointed once again after retirement. Regulatory bodies such as Nepra, Ogra and Pemra were established in the Musharraf/Shaukat Aziz era. Some of them were unfortunately turned into a soft landing patch for retired bureaucrats while the rest fell victim to patronage later. The military rulers went along with this phenomenon as they themselves had adopted a similar approach for their retired colleagues, who are regularly accommodated in Fauji Foundation, Army Welfare Trust, Bahria and Shaheen Foundation, Defense Housing Authority (DHA), etc.
A regulatory body in a developing country like Pakistan needs to lead and not be a mere implementer of governmental policy in that field. They need to adopt a leadership role and not just be a mere bystander; allowing the government to have the final say in matters of a variety of nature.
Public sector can also be efficient provided a public concern is run like a business and not as an appendage with a view to achieving political aims and objectives. Unfortunately, however, this has not happened despite numerous judicial interventions. Corporate governance in PSEs continues to rely on Islamabad. The political masters continue to dole out jobs and appoint their 'favourites' - friends and cronies - on Boards of Directors of these PSEs. The bureaucrats on the other hand, remain adversarial to professionals and treat them as unnecessary evils that need to be pushed around. They want to maintain their hold on the turf.
Failing to rope in the private sector to invest in the energy field and in order to achieve positive results before the next general election (prior to 2018) - PML(N) now seems to be putting more faith in the public sector.
If the government cannot privatise big entities that are bleeding the budget and also cannot lay off an army of persons employed in them it can perhaps hand over management to the private sector, for 26 percent stake as a golden share only. Private sector may be able to run these entities as businesses provided, however, the government improves the country's regulatory quality as well as contract enforcement. Only then would it be able to attract private sector entities, with requisite experience and also deep pockets. If these PSEs remain in the grip of the government, whether political or military-led, they would continue to under-perform. Over a period of time, private sector with proper management control and initial minority shareholding could gradually increase its shareholding. We need to be clear in our objectives. There is a need for creating a 'Chinese Wall' between management and ownership. A good manager needs to know his product, his competition and also create a market niche. A bureaucrat or a military man does not have the experience for that. Mere administrative control and passing orders in a civilian establishment is a different matter than in a khaki-clad environment. Marketers in a PSE or persons whose duties include the identification of the goods and services desired by a set of consumers can place rings around the CEO appointed having the wrong background/experience. Policymakers need to understand this. Placement of favourites on boards of these mega entities smacks of nepotism and cronyism. This needs to be avoided. A minister needs to act as a shield for the management dependent on line ministry for approvals. Bureaucrats by training will not compromise on their power unless it is snatched from them. Let the private sector run these mega units on a contract basis. Establish firm timelines for reduction of government's financial stake. It appears to be an option for privatising mega monopoly PSEs. However, prior to this, all outdated laws for establishing these PSEs would need to be amended. Flawed public perception also needs to be corrected. Weak regulatory structure needs to be improved and weak contract enforcement environment be addressed by the Privatisation Commission prior to sell-off of mega PSEs. It is a tall order but has to be fulfilled and met with an effective strategy provided the judiciary also helps out.