The downside of privatisation
Having endured economic hardships because of all encompassing nationalisation in the early 70s and given the sorry experience of the devastated economies of the socialist countries, the people of Pakistan have come to expect too much from the privatisation plank of the present regime. Caution has to be exercised in the swinging of the pendulum from one extreme to another. While denationalisation, deregulation and privatisation is necessary to invigorate the badly stunted economy, care must be taken to ensure that the masses do not become captive again in the greedy clutches of a handful of “robber barons” motivated by profit-only orientation. In this respect privatisation brings mixed blessings, those who have not felt the pangs of hunger, deprivation and privations can hardly be expected to be sympathetic to the miseries of the overwhelming majority of our suffering masses.
One must not be simplistic in outrightly condemning Zulfikar Ali Bhutto’s sweeping nationalisation. The primary plank on which the Pakistan Peoples Party based its first manifesto, not much dissimilar to the present document, was to restore the semblance of social equality and justice to the masses, aspirations for which were deep-rooted among them. The 60s had brought tremendous industrial growth, an uneven socio-economic policy produced widespread resentment against the rich elite, made notorious by the “21 family” sobriquet. In association with Bhutto, born and raised in clover, socialism seemed to be the idle privilege of the rich, for the majority of the poor, socialism became an end ambition for sheer survival. Zulfikar Ali Bhutto captured the moment because he used his charisma to good effect to ride the crest of the mass desire. In trying to fulfil his promises, unfortunately he went too far in his sweeping nationalisation binge. Detractors, mainly industrialists, may claim that he was acting out of a targeted vengeance against them, in the final analysis he was basically sincere in his desire to ameliorate the economic miseries of the masses, thus attempting to break the handful rich may have been out of necessity to shackle their power, but not revenge.
The late 60s saw great industrial unrest, a classic progression towards anarchy and revolution. Unfortunately for Pakistan there were other centrifugal forces acting upon the body politic, economic problems took a backseat to other more momentous events. The great schism between the poor and the rich started once the vast middle class started to suffer privations normally associated with the poverty stricken only. The rich got richer, the poor simply knuckled under, ultimately the dichotomy had to give way. While nationalisation of some sectors was justified, such as rice and cotton (the economical lifeblood of our Third World nations), governments have no business trying to run industry and business. Rampant nationalisation destroyed the dynamism of private sector enterprise and forced industrialists to become traders while bureaucrats who had nothing at stake in the running of industrial and/or commercial units proceeded to live off the fat of the land, overburdening them with overheads. The Martial Law Regime was expected to turn the clock back, unfortunately the nominated Ministers of Production proceeded to fortify and even expand their fiefdoms, their penchant for glory fed by the vested interests of bureaucrats who, under the khaki cover, proceeded to loot the nationalised till blind. Having created the much touted National Logistics Cell (NLC) into a public sector colossus, Lt Gen Saeed Qadir presided over a diverse variety of nationalised and State owned industrial units as Zia’s Minister for Production, none of which should have been in the public sector. Gen Qadir is an able person, it must be graveyard humour to put him in-charge of the Disinvestment Cell, more like putting the fox to distribute the inmates of a chicken coop.
Accountability in the public sector went out of the window during the Martial Law period 1977-1985, many undeserving people became fabulously rich overnight while once profitable production units went rapidly down the drain into bankruptcy.
The nationalisation of private banks was a grave economic blunder. While only one bank was in the domain of the public sector, the National Bank of Pakistan, the private banks had perked up when Abedi was given free rein by the Saigols in forming United Bank Limited (UBL) to compete with the family-owned banks, the Habib Bank Limited (the Habibs) and Muslim Commercial Bank (MCB) discriminating against their interest. With professional management at the core and in the hierarchy, Abedi’s breaking of the family taboo brought about a social and economic revolution of sorts. For the first time the common man gained access to funds to engage in private enterprise. A great many branches proliferated as the other private banks woke up to the fact that the masses were honourable clients rather than as something that the cat had brought in off the street. While profit remained the primary bank motivation, Abedi completely changed the concept of private banking from that of service to privileged families only to the availability of a general banking service to all-comers, even Habib Bank started “serving us better”, the wonders of competition and incentive in the private sector.
The pendulum is now poised to swing back with the denationalisation of MCB. A lot of water has passed under the bridge in the last two decades, the previous owners of MCB have been reduced to being nominal front man for shadowy contenders in the present sale process. While one hails the Government’s bold step in completing the initial process, there could have been judicious accommodation between the new management and MCB bank workers in the manner now on the drawing boards for Allied Bank Limited (ABL). The workers should have been encouraged to pledge their future by risking the funds of their “golden handshake” as their package contributions to the bidding process while the Investors Consortium could have as “White Knights”, a meaningful partnership that would not only have made economic sense but would have ensured a basic commitment to the workers as well as social obligations to the masses.
While the economic future of MCB is assured, it remains a test case for privatisation. Barring a few chronic cases in debts of hundreds of millions that are real eye-openers for the rest of credit aspirants like us, there are no real problems except that the commitment to social obligations of the new management of MCB must be constantly monitored, their actions scrutinised to ensure that they do not go off on a profit-oriented tangent only.
The aim of business is to make money but if this money is to be made at the cost of social conscience or motivated parochial interests then the parameters must be revised or the recently passed Islamic Shariah Bill begins to look hollow. Kassem Parekh, former Chairman Pakistan Banking Council and a highly successful President of the nationalised Habib Bank, was widely suspected to have been more than partial towards his own community. While this may be the stuff of fairy-tale nonsense a computer run-down for the period of his incumbency and credits made against ethnicity should put an end to these rumours. His professionalism came into conflict with his basic instincts, or at least seemed to. The new owners of MCB consist of very successful businessmen, almost all of whom belong to one select community. It is highly creditable that they should have chosen a highly touted professional banker, Hussain Lawai, to be the first President of the newly privatised MCB, particularly because Lawai is from a different community. The confidence reposed in Lawai is thus reflective of the self-confidence of the 12 businessmen in the National Group in their own business acumen and abilities to preclude any hint of ethnic favouritism.
The Government continues to hold majority shares, it cannot abrogate its responsibilities and obligations to the masses, being responsible for their socio-economic well-being. The situation is made more acute because the owner management may have themselves ethically decided to step back from day-to-day control of the bank leaving Lawai in an Abedi-UBL sole monarch of all that he surveys type of situation, the catch being they cannot morally absolve themselves if Lawai decides that he is going to act like God, being in a unique all win position where he can do anything he wants, threatening to quit claiming interference if anyone questions his actions. Lawai may be a superb profit-maker, he is living in a 90s Pakistan where the populace is sensitive to social obligations and favouritism-oriented gerry-mandering is looked at skeptically. It is believed that MCB is beset with debts which are less than secured because of a proliferation of last minute credits approved and disbursements thereof. The inner hierarchy of any bank is essentially a bureaucracy that adjusts to change of management without falling out of step (like any self-respecting bureaucracy). While collaborating with the new management in unearthing skeletons in the closet they may gloss over their own misconduct and collaboration thereof with the previous mismanagement by acting more loyal than the king. To that end Lawai will have his hands full bringing the bank back to even keel, if his vision gets coloured along the way then he will fall into the classic bureaucratic trap laid out for all new incumbents, involve them as direct participants of any scam and thus compromise their capacity to interdict wrongdoing. Luckily the media has no inhibitions in exposing these crooked clowns. Those who fawn most, usually stab in the back most, as 5 Presidents of MCB before Lawai will have found out in the last 5 years.
If Nawaz Sharif is the architect of privatisation, his pointman is Sartaj Aziz. The Finance Minister must ensure that the primary end-objectives, creation and sustenance of badly needed employment is maintained. One does not really see Sartaj Aziz abrogating the concept of social conscience and governmental responsibilities to the masses at the altar of making money only for the few, to satisfy the vested interest of the few. If so then one must concede that despite one’s reservations, Zulfikar Ali Bhutto was right and the “robber baron” attitude must be ruthlessly eliminated from the economic psyche of the nation. In the early 70s, we were lucky that the social irresponsibility of the handful rich-elite did not degenerate into complete anarchy, because of the converting of that dynamism into a political movement and harnessing thereof by a political maestro. This time around the public anger may be targeted against callous individuals who live in a nether world of philosophies indifferent to the human aspect and real-life aspirations. If privatisation is going to lead to (crooked) business as usual then we can do without that privatisation. Let entrepreneurs open private banks and test their entrepreneurial mettle in a competitive world. Abedi accomplished this twice and is contemplating to do so a third time.
Social conscience and responsibility thereof is normally a part of oriental character, unfortunately usually this is more often than not confined within the parameters of ethnicity and religion whereas the benefits should be universal, all-pervasive. Essentially individuals in or around the seat of power sell off their conscience, shoving their responsibilities down the throat of humanity in exchange for a few pieces of silver. Those who run financial institutions should always remain under the closest scrutiny because they wield the power of economic life and death over corporate units, the individuals running them and the many thousands employed thereof. The punishment for nepotism and favouritism in such cases should be the same as for homicide. People who think that flippant remarks about individual philosophies can be glossed over (and/or fail to get noted by us) should think again, destiny usually catches up with them if frustration doesn’t. The Nawaz Sharif Government may try to bring about social and economic emancipation in all sincerity, if they cannot stop greed being the primary and only objective of private enterprise, then the PPP’s original manifesto was right and someone will come along who will implement it with greater care than the last time around. Justice begins with small incidents as basic reference points, as my friend Aitzaz Ahsan repeatedly used to point out, sacrificing principle at the altar of convenience does not set any yardsticks for morality. Those who wield economic power without commensurate conscience must remain in constant fear of street justice. That is the downside of privatisation.
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