With the take-over of the Government by Zulfikar Ali Bhutto in early 1970s, the policy of socialization of the private assets commenced in the name of "nationalisation". In fact this was not nationalisation at all as no foreign asset, with the exception of American Life Insurance Company, was taken over by the government. The take-over included the industrial undertakings, banking institutions, educational institutions etc.
Not even the smaller units like rice husking mills were spared. This was in the background of Pakistan Peoples Party's manifesto of 1970 general elections. For preparation of the grounds for socialization, a propaganda campaign was launched during the last 2-3 years of General Ayub Khan's regime that the national wealth has been accumulated in the hands of merely 22 families of the country and it was in the national interest to break the monopoly of the concerned families and bring their assets in the government control. The proponents of the campaign against 22 families included prominent economist Dr Mahboobul Haque.
It did not need great genius to arrive at a conclusion that after government take-over, the assets will fall into the hands of the bureaucracy which will ruin them.
How this could escape the genius of a man like Bhutto? In fact, the hatred which Bhutto had generated for a specific section of the country's populace, which was not the voters of the Pakistan Peoples Party (PPP), was one of the basic causes for enforcement of the policy.
And that is why the talk of "denationalisation" and subsequently privatisation began immediately following the end of Bhutto regime although there was not much progress in this regard during over a decade rule of General Muhammad Ziaul Haque.
The policy of privatisation gathered momentum during the democratic regimes of Nawaz Sharif and Ms Benazir Bhutto and is being continued by the present economic managers since October,1999. This is being done because the bureaucratic handling of the taken over units had started hemorrhaging the government exchequer @ Rs 100 billion per annum and consequently, the advice of our economic masters including the International Monetary Fund (IMF) and the World Bank was that the Government should get the assets privatised. However, the plea of hemorrhage to the national exchequer does not fit in the policy of the present rulers of privatising the profit-earning entities.
State Bank of Pakistan (SBP) governor had on the 12th August,2005 delivered a lecture on the subject of privatisation at a reception jointly arranged by the Overseas Universities Alumni Club and 21st Century Business and Economics Club. In the lecture, he has termed the socialist philosophy as the 'utopian' dream of the proponents of the philosophy and has cited the collapse of the Soviet Union and the bankruptcy of the socialist model as evidence.
He has built up the edifice of the success of the privatisation basing the analysis on merely two sectors e.g. banking and telecommunication and has refuted the apprehensions that privatisation in Pakistan has resulted in dislodgement of the employees at a large scale. He has mentioned that in 1997 the banking industry employed 105,000 persons while currently the employees in the banking industry are 114,000.
Talking about the privatisation of Pakistan Telecommunication Company Ltd, (PTCL) he has mentioned that if the company remained in government ownership, the private sector companies would have felt that they will always remain at a disadvantage in relation to the PTCL and that the constant fear that government's coercive powers and full force of policy making ability would always be used to safeguard and enhance the interest of the PTCL which would have kept the private firms away from investment in fixed telephone and wireless loop segments and the result: stagnation in the fixed telephony.
The governor has indicated that if there are job losses due to privatisation, the same will be more than offset through creation of new jobs in the local loops, wireless loop segments and that 100,000 new jobs will be added during the next 3-5 years.
The Governor emphasises that under the government control, the PTCL is considered as a rich cow to meet the fiscal needs rather than a business enterprise needing funds for its maintenance, operation and investment needs.
The pros and cons of the privatisation policy need to be examined in an overall scenario while the analysis contained in the governor's lecture more specifically about the increase in the employment opportunities in the aftermath of privatisation is restricted to the banking industry and the PTCL.
As per the information gathered from the annual reports for 1996, four major banks' staff strength as at the end of 1996 was 90798 as per following break-up: National Bank of Pakistan 23,730/, Habib Bank Ltd 31,099/ United Bank Ltd 21,680 and Muslim Commercial Bank Ltd 14,279. Thus the staff strength of all other banks at the end 1996 was 14212 [105,000 - 90,798].
During subsequent 7-year period, the banks could generate employment for 9000 individuals only although 12 new banks were opened in the private sector while 2 foreign banks opened their branches in Pakistan. Is the generation of 9000 employment opportunities despite large scale proliferation in the banking industry any commendable achievement of the privatisation?
As for generation of 100,000 employment opportunities in local loops/wireless loops during next 3 to 5 years, the number involved is not large keeping in view the large scale unemployment prevailing in the country. Further, these jobs are by and large meant for uneducated or low educated groups. The educated people coming out from the universities will hardly be benefited by these opportunities.
The question whether the privatisation is creating or reducing the employment opportunities may have to be examined in the overall scenario. A number of companies in the engineering industry were totally closed down after their privatisation, few of them are named here: Karachi Pipe Mills Ltd, Metropolitan Steel, Pakistan Switchgears, Quality Steel Works, Textile Machinery Company. Apart from that Zeal Pak Cement Factory at Hyderabad and Pak China Fertiliser Company privatised from time to time were closed down by the buyers.
As for other sectors, a few of the companies closed by the buyers after privatisation are: National Motors Ltd, Naya Daur Motors Ltd, Balochistan Wheels Ltd, Nowshera PVC Company, Pak PVC Company Quaid-e-Azam Woollen Mills, a number of "Roti" plants of the Roti Corporation, A&B Oil Mills, Hyderi Industries,Dargai, Malakand. etc. Has anybody assessed how much unemployment privatisation of these industries has created?
When an asset passes from the government to the private individual or enterprise, it is privatisation notwithstanding whether the buyer is domestic or foreigner. But in case where an asset is sold to foreigner(s), it will be fair and equitable to call it "internationalisation".
The concept of privatisation [ "internationalisation"] is basically a Western agenda. After the second World War, the European and Japanese economies destroyed by the war were built up with American Marshall Plan. When these countries developed and their capital formation flooded them with excess resources not needed by them, they commenced haunting the world to find out the places where they could deploy these resources.
Thus in / around 1980s the concept of free cross border flow of capital was floated with emphasis on the developing countries to open up their economies for the Western capital and goods. But the Western powers are not prepared to open up their borders for the free flow of labour. It was inevitable that in order to implement the agenda, the economic managers in the developing countries were the persons whose minds were embedded with the above agenda.
One can look at the list of the economic managers running the economy in Pakistan- beginning with the tenure of the prime minister Mueen Qureshi and his Finance Minister Shahid Javaid Burki- to substantiate that. If the developing countries continue to adhere to the concept through the carrot-and-stick game of the West, they will find that by the end of the first quarter of the current century, all their assets will be owned by the foreigners with virtual return of colonialism. Where the pace of privatisation is slow or there are hurdles in the way, the colonial powers can occupy the concerned country by brute force. Afghanistan and Iraq are recent examples.
In the situation where the economic managers in Pakistan fully subscribe to and are always eager to implement the western concepts, SBP governor's apprehension that in the event of PTCL remaining under government's ownership, the private sector [or more appropriately foreign investors] would shy away from making investment in the fixed telephony or wireless loop owing to the fear that the government's policy making ability would always be used to safeguard and enhance the interests of the PTCL is totally misplaced.
The matter of fact rather is just otherwise. Our policy makers' thrust enabled the foreign cellular phone companies to achieve full grip over the domestic market at the highest rates prevailing in the world and allowed the PTCL to introduce "U-fone" only after the foreign investors had already reaped exorbitant benefits.
SBP, governor's analysis that the PTCL was/ is being used by the government for milking the government exchequer instead of leaving the funds enabling the PTCL for making new investment. is challengeable. If the PTCL lacked in innovation and fresh investment, including introducing cellular phones in the initial stage, one of the reasons could be the policy of the economic managers envisaging patronising the foreigners.
During the second tenure of Ms Benazir Bhutto, a large number of contracts were awarded to the foreigners for setting up thermal power plants at the exorbitant costs and tariffs while simultaneously putting ban on WAPDA on establishing such power plants and the consequent buck of higher tariffs was passed on to WAPDA under the "forced power purchase agreements". The WAPDA's power generation cost was admittedly lower. This substantiates that the policy makers were from/after 1980s on the back of foreign investors.
The foreign investors entered the cellular phones and wireless loop segment because it was giving them the highest returns (with minimal investment at least by the companies which first entered the Pakistani market) without creating cumbersome and costly infrastructure required for the fixed telephones. It appears that the foreign companies are still not in a position to compete the PTCL in the matter of the fixed telephony.
Otherwise, when the government them (at the cost of PTCL) in entering into the mobile phones/ wireless loop segment, who was there to keep them away from the fixed telephony sector. The condemnation of the national companies by the economic managers on one pretext or the other is significantly indicative of their tilt in favour of the western agenda.
The quality of our policy makers [including economic managers] is that they do not show their muscles to the powerfully even if equity and justice demand it. The foreign investors are powerful backed by the powerful countries They are not prepared to devise means to ensure fair and equitable distribution of national assets and income and are balancing the budget by borrowings and levying indirect taxes like general sales tax impacting the poor people more seriously.
The absence of their writ over sugar and cement producers are the recent instances where they are not in a position to proceed beyond the rhetoric of asking the companies to reduce the prices. The same is true for automobiles sector. The economic managers are also not in a position to touch the speculators in bourses and real estate sector who are earning billions of tax free income.
The most injurious aspect of the "internationalisation" of the national assets relates to the external sector. Today, the country is flushed with foreign exchange reserves on various accounts, including sale of the national assets to the foreigners but nobody is prepared to look into the long-term impact of the policy when the country will stand deprived of its assets and the foreigners' demand on the balance of payments on account of remittances of profits / dividend will be mounting resulting in large mismatch in receipts and payments.
The sole consolation of the present economic managers in this context seems to be that they will not be there and may have quit not only the jobs but also the country after passing on the buck to their successors.
Yet another dangerous aspect of the "internationalisation" is that after PTCL, we shall be handing over Pakistan State Oil Company and National Refinery Ltd to the foreigners in the next few months.
If some day in future, our arch enemy India purchases these companies, what will happen to our national interest? If so happens, will that country not jeopardise our national interests at will? But our policy makers are not to worry because after some time they will depart from the scene after passing on the dangerous buck to their successors.
The sensitivity of the Western powers viz-a-viz sale of their assets to the foreigners can be gauged from the instance of American oil company UNOCAL for whose purchase China gave the highest bid but the American authorities immediately took a U-turn from their avowed policy and blocked the deal while our economic managers are blindly selling the strategic national assets to the foreigners.
To dismiss the philosophy of socialism as an outright "Utopian" dream is not justified. This very philosophy not only provided food, clothing and shelter to all the citizens of the socialist states for over 70 years and simultaneously compelled the capitalist Western world to introduce reforms in the social sectors including the health and education sectors also envisaging subsistence allowance to the unemployed [of which many Pakistanis are also the beneficiaries].
It will be worth noticing that after the collapse Soviet Union and other socialist states, the western world has started bringing cut in the social sector facilities. The causes of the collapse of the socialist society may have to be investigated in a greater depth instead of dismissing the philosophy itself by calling it a "utopian" dream. Prima facie, the political incompetence and short-sightedness of the Soviet leadership leading to their fall in the Western trap in invading Afghanistan in 1979 seems to be the reason.