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The State, Industry and Commerce – III

Among the designated HIT LIST of the Disinvestment Committee for Privatisation are the Trading Corporation of Pakistan (TCP), the Rice Export Corporation of Pakistan (RECP) and the Cotton Export Corporation of Pakistan (CECP). The performance of TCP, except for a brief period under Mr Yousuf as Chairman during 1983-85, has been more or less atrocious, more due to mala fide intervention (or benign negligence) of the Ministry of Commerce (MoC) as opposed to its own shortcomings. RECP and CECP could have performed much better, in the final analysis they have more than served the national purpose. The efficacy of top management and national requirement may have varied directly proportional to the quality of bureaucrats posted in but Pakistan has had a world position for the last two decades in rice and cotton because of the monopoly situation created by RECP and CECP.

Bangladesh’s sorry and sad experience with the privatising of exports of jute goods should serve as a strong note of caution. About a decade ago, Bangladesh’s 70 or so jute mills were grouped under one public sector entity, Bangladesh Jute Mills Corporation (BJMC), enjoying a world monopoly as regards supply and prices of jute goods. Despite the disastrous experience with respect to foreign trade of raw jute in the private sector, the then Martial Law Government in Bangladesh, which was on a IMF-inspired denationalisation/privatisation binge, failed to reconcile economic pragmatism and common sense with the letter and spirit of their new policy, applying a broad brush without in-depth sectoral analysis. Despite strong resistance by the then Chairman BJMC, Mr M A Syed, an honest and dynamic civil servant, who had years of marketing experience in the jute trade in the 70s decade, about 25 jute mills were handed back to private Bangladeshi owners, the Government retaining within BJMC those jute mills which were the “Abandoned Property” of persons of former West Pakistan origin pre-1971. Most of the private owners promptly stripped and sold the machinery (after having obtained loans against them as lien), even disposing of the land later as real estate. While the Government still sets a weekly Minimum Export Price (MEP) for jute goods through a Committee formed in the Bangladesh State Bank, private traders unofficially undercut the price level by giving large kickbacks to foreign buyers (in the same manner as they had done and still do for the raw jute trade), sometime even to the extent of 25-35% of the FOB price value.

Government to Government deals have ensured fair price levels intermittently but because of the anomaly Bangladesh ends up competing with itself in the international market. Jute goods trade was transformed into Buyers market completely, resulting in cumulative and recurring losses amounting to US$ 700 million to US$ 1 billion annually, near fatal for a poor country like Bangladesh, 70% of whose population are dependent for their livelihood on jute in one way or the other.

Normally privatisation/denationalisation is a correct economic move, this move has been a disaster of the greatest magnitude for Bangladesh. The ultimate irony is that the most vociferous Bangladeshi advocate of continued public sector involvement as a monopoly in the world jute goods trade, Mr M. A. Syed, eulogised RECP and CECP in 1982 as living, shining examples why a Third World nation’s primary commodities could (and should) profitably remain within public sector domain. After all, why don’t the OPEC countries put oil in the private sector? Market forces have been resilient enough to defer the jute goods exports from becoming a terminal case, we must ensure that the same fate does not befall rice and cotton, at least 60% of our population has a direct relationship to agriculture. Despite all the hoopla with catchy ADs, the private sector’s involvement, even partially has resulted in losses of precious foreign exchange amounting to billions of rupees annually.

The supreme national interest dictates that instead we must streamline and consolidate the working of the three Corporations in order to revitalize the whole gamut of our foreign trade in competition to the private sector under a more commercially sensitive Trading Authority of the State which should also include the Export Promotion Bureau (EPB), to be possibly called Pakistan National Trade Authority (PNTA). The Corporate standards can be raised to international level dealing with international finance and trade institutions by inculcating basic reforms. On the Multi-National pattern we have to depend upon a better quality of senior executives with due incentives given to that manpower. The three Corporations and EPB have, notwithstanding notable black sheep, excellent rank and file personnel, most of their problems have been inspired by those bureaucrats (or journeymen) who are posted in for three years tenures of literally living off the fat of the land as Chairman and Directors.

A full-time Chairman who should be an elected representative and a successful businessman must head PNTA, to be owned partially by the Government through the Ministry of Commerce (MoC), participation being invited from the various Chambers of Commerce and Industry as well as from the general public, with at least 15-20% shares owned by the employees of the proposed “Pakistan Trade Services”, bulk of whom must be drawn from the honest, hardworking and experienced employees of the three Corporations. PNTA’s role must be to (1) act as a Multi-National (MNC) for the national interests of Pakistan (2) be the holding company for TCP, RECP and CECP (3) coordinate all national trade promotion activities internally and internationally, especially exports (4) maintain a panel of inspection agencies for conducting quality checks on imports to Pakistan and exports from Pakistan (5) coordinate with all the other concerned ministries for imports and exports as well as Barter and Countertrade activities and (6) incorporate EPB and all its functions as an entity within PNTA.
While RECP and CECP should continue their traditional roles, TCP must (1) establish a chain of full-fledged commercial offices abroad and within the country on behalf of the PNTA, capable of trading and counter-trading activities (including encouraging investment in the country through OFFSET deals) (2) control the Commercial Attaches where commercial entities of PNTA are not established (3) import essential commodities and items against government allocations as per present role (4) establish imports for smaller private customers in Pakistan as per their requirement (5) export directly or through help of its commercial offices abroad as per its present role (6) carry out such Barter and Countertrade as is decided by PNTA (7) carry out Third Country trading for essential commodities or off load Countertrade obligations (8) establish firm quality control and inspection procedures for imports and exports, checking for over and under invoicing while doing away with the disastrous COTECHNA experience and (9) maintain stock levels of essential primary commodities to offset consumer price increases by regulatory releases on the market. Caution should be exercised by TCP, RECP and CECP to avoid politically motivated deals, though one must commend one CON ARTIST for an outstanding display of opportunism, successfully burrowing into the laps of each successive government, outstanding loans, scams and various shenanigans notwithstanding.

The MANAGING DIRECTOR of the PNTA should be a contract employee from the private sector with the rank of Federal Secretary. There should be three DEPUTY MANAGING DIRECTORS — one nominated by the Federation of Chambers of Commerce and Industry (FPCCI) for a term of three years, the other elected by the employees of the new Corporation, while the third DMD would be a senior officer of the rank of Brigadier or equivalent from the Ministry of Defence who must coordinate all such purchases of the Ministry of Defence which can be OFFSET or plainly Countertraded without adverse effect on our National Defence. TCP, RECP and CECP should each have contract employees as Managing Directors selected with advice from FPCCI from reputable business executives. The TCP (or PNTA) should have regional offices in Pakistan in Islamabad as well as the Provincial capitals and some other important cities, with more than 40 offices abroad in the commercial capitals of the world. Budgeting US$ 0.25 – 0.40 million per annum each international office, this would amount to around US$ 10-12 million annually, which alone can be earned many times over annually if only suitable quality checks are made on the import of sugar, palm oil, DAP fertilizer and other bulk commodities. The export performance must, at the very least, cover average office expenditures. PNTA’s funding can be done by giving them 1% commission on FOB value of all exports and imports of TCP, RECP, CECP as well as those private/public entities using the services of the PNTA for commercial transactions, from CECP and RECP alone this would exceed US$ 8 million annually.

On April 26, 1987, almost four years ago, THE NATION wrote, quote “With the arrival of Dr Mahbubul Haq to the MoC, a glimmer of hope for action and innovation exists which must be assiduously cultivated and exploited. Pakistan’s future generations will be the beneficiaries of such moves that we make now, positively or adversely. A democratically elected Government has a fundamental right to create economic opportunities for the people and it is behaving as such that the best and the brightest come to the fore and are counted upon to revitalise Pakistan’s economy which is stagnant and needs desperately to thrive as the pressures of our “demands” exceed “supply” of commodities, goods and the ability to purchase them”, unquote. Dr. Mahbubul Haq compromised his brilliance last time around at the altar of convenience, consigning advice on matters of commerce physically to the dustbin, being temperamentally loathe to listen to (or give deference or credence to) any advice except that which he could claim as his own. Unfortunately there is reason to believe that he is calling the economic shots from behind the scenes. Those who are fortunate that the people have raised them to the helm of the nation’s affairs but do not listen to sane and/or pragmatic commercial advice, end up consigning their countries economically to the garbage heap of history while heading themselves for greener pastures abroad.

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