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Pragmatism in privatisation

To reinvigorate the moribund economy, it is necessary to carry out privatisation, denationalisation and deregulation. It is an accepted fact that this activity will create unemployment and there will be a time lag of 2-3 years before the economy picks up and employment opportunities are created. This government is as committed to this exercise as the regimes before them, the emphasis being much more pronounced at this time.

The primary aim of the aforementioned exercise being to creating employment, there are primary and secondary objectives to be achieved simultaneously but most important is the maintenance of the AIM selected. Given the sorry state of the economies in the socialist world, Adam Smith is more in fashion, Carl Marx has been consigned to the dustbin of economic history. While no one questions the basic premises set forth by the present regime, what has been called into question is whether the implementation is being processed through a well thought out plan and whether the disinvestment of public assets comes under the qualifications inherent in basic fair play. Unfortunately on both counts, there is definite lack of confidence about the government’s credibility, both among the intelligentsia and the masses, the swinging of the pendulum from one extreme to another without proper planning or sincerity may result in the economy going from the frying pan into the fire.

People mistake Zulfikar Ali Bhutto’s sweeping nationalisation to be a blind adherence to the concepts of socialism. Bhutto was anything but a dogmatic socialist ideologue as his closest socialist-inclined aides, Shaikh Rasheed, J.A.Rahim, Dr Mubashar Hassan, Meraj Khaled, etc soon discovered. Their leader was inherently a political animal and it suited his genius to sway with the mass aspirations of the 60s against the so-called “21 families” and their “robber baron” sobriquet. Capturing political power was his main plank and in accomplishing this platform he followed a pragmatic policy that led to his becoming the elected leader of a truncated Pakistan. Once in power, he had a three fold political objective in nationalisation, insofar as (1) it fulfilled his promise to the masses in taking the economic and industrial power from private entrepreneurs into the hands of the State (2) it provided his political party an opportunity to give jobs to his loyal cadre despite the fact that this would mean increasing the overheads of the taken over and state-owned units to an uneconomical proposition and (3) giving such socio-civic facilities to the workers that were denied them in the hands of private entrepreneurs.

Bhutto was an avid student of political history and his populism was more in line with that of Huey Long of Louisiana and some notable mayors of major US cities whose answer to unemployment was to create jobs in the public sector by launching huge civic infrastructure projects such as highways, buildings, bridges, etc as also jobs in the Services sector. In third world countries, as long as matching funds can be found locally for funding such projects (provided that foreign aid is forthcoming) such schemes are economically viable and politically bankable because the social infrastructure is modernized along with the employment slots created.

Unfortunately, the nationalisation was too sweeping, the State encroached into areas that it had no earthly business in being. The Government has no real role in commerce and industry except regulation and that in third world countries it has to keep certain vital sectors in its own hands. At the same time nationalisation was taken over lock, stock and barrel by the bureaucracy, it is at this watershed that the whole exercise came to grief. While during the PPP’s rule, the sincere intent to make nationalisation work for the social benefit of the worker was gradually eroded, during the Martial Law Regime, starting in 1977, the units belonging to the State went completely under bureaucratic control and the worker was essentially seen as a necessary prop that was anarchist in nature but had to be tolerated, with the built-in promise that his services could be dispensed with at will. His rights were further abrogated down the road under MLR 52. In 1985, with the advent of the Junejo Regime, the process of wholesale recruitment to the point of economic overload began once again till during the second PPP regime (and its compulsions after being out in the cold for over a decade) it reached an uneconomic peak.

The simple end result of over-employment was sick production and commercial units, whose survival mostly depended upon regular infusion of money from the States coffers. For those units that continued working, the drain on the exchequer was bearable, for these units stopped production completely and the workers were paid even though they did nothing, it became a dead loss. There was some silver lining however, besides employment the money paid by the State to cover the losses of the units was recycled into the economy as salaries to workers. There are those who decry the salaries paid to our large Defence Services, in a manner the employment provided therein eases the burden on the economy as their salaries go to pay for food, clothes, medicine, transportation, housing etc which is recycled again and again. That is the concept of the “Food for Work” Programmes developed by US and other western governments for third world countries, insofar as the work initiated on the strength of the money provided is usefully utilised for socio-economic projects, while the money is recycled back into the economy.

As regards social obligations to the masses, the contribution of our private entrepreneurs in the field of subsidized housing, food, medicine, transportation and education has been extremely negligible, not even keeping pace with our neighbour India. In this respect, the public sector has been far ahead of the private sector and we do not see any great sea-change in the hearts of our business elite to the end. Given that nations do not exist just by having geographical boundaries only but are entities consisting of a mass of living human beings, it is necessary to concern ourselves with the welfare of the blue collar workers in a direct relationship between their lives and their place of work.

All in all, the public sector is not a washout as it is made out to be socio-economically. It is just that in the wrong hands it became an unbearable social and economic disaster. Compounded by endemic corruption in our bureaucracy, the state-owned units were bled white and the blame for this sorry state can be laid at the door of a merciless clique within the bureaucracy who made money and lived comfortably off their public responsibility to the detriment of the economic life of the general public.

The problem is very simple. At this time there is employment but it is a drain on the exchequer. Privatisation is not going to create more employment at the outset, before the slack of two/three years catches up what will the millions of unemployed do? With anarchy already picking at our national seams, this is a situation prevailed for violent revolution, without a political maestro of the calibre and stature of Zulfikar Ali Bhutto to pull our chestnuts out of the fire this would result in absolute chaos. We have to ask ourselves, do we really have the ability to ward off potential disaster or is this risk really been calculated and thereby worth undertaking?

With aid from western sources drying up because of a number of reasons, we have to rely on domestic mobilisation of resources. Our local resources have finite value and the Hobson’s choice is whether to recycle this money in revitalizing our dormant nationalised sector or invest in new projects. Our problem is that both areas are important and we should draw out a plan that will incorporate both avenues without detriment to either while accomplishing our primary aim, providing more employment opportunities. While Senator Lt.Gen (Retd) Saeed Qadir, the Chairman Disinvestment Commission, spoke with pride about his major role in the disinvestment of MCB in the shortest possible time, the emphasis and priorities was wrong. At the same time, suspicions have arisen about the lack of honest award being made which has eroded the confidence of the public in the whole denationalisation process. While the nationalisation of banks by Bhutto was a grievous mistake, the denationalisation of these financial institutions two decades later is a bigger mistake.

The government should have been well advised to allow private banks to be incorporated to compete with the nationalised sector and thus allow market forces to govern their future viability. Without efficiency, above par service and imaginative outlook to match private entrepreneurship these banks would come to grief or given that competition would have to raise their performance to survive. We are not really contributing to the economy by diverting funds that could have created more employment opportunities into an existing employment reality. Senator Saeed Qadir gave statistics about 115 units out of 150 in the Ministries of Production (42) and Ministry of Industries (73) to be privatised. He had no rational explanation about the process coming to a dead stop and the low bids received. Instead of spinning off non-profitable units to Management-Worker Consortiums buffered on the Employee Stock Ownership Plan (ESOP), he has opted to shed off on a priority basis the profitable ones to private entrepreneurs thereby giving an impression of selling the family silver while leaving the broken furniture behind.

A non-partisan view is that the Government has done well in the last 210 days by its deregulation uptil date as well as its NFC and Water Accord achievements. Instead of going pell mell into disinvestment, it should have taken stock of other third world countries that have done well economically, like the Four Tigers, S.Korea, Taiwan, Hong Kong and Singapore as well as the ASEAN countries of Malaysia, Indonesia, Philippines, Singapore (again) and Brunei. None of these countries have totally disinvested the railways, major public transportation, telecommunications, TV, electricity, water, etc. Gen (Retd) Khalid Mohamad Arif, former VCOAs, recently wrote an excellent article about the jeopardizing of national security by trying to privatise telecommunications, particularly when it is financially healthy. By trying to model ourselves on countries that have different conditions or economically are resurgent being adjacent to economically viable regions, we are doing ourselves a great disfavour.

We must privatise but the privatisation must be implemented by mature well thought out plans, tempered by local conditions as then exist in Pakistan, not by blind haste that will undo the whole process besides putting it into disrepute. If countries like Finland, Sweden, Denmark, Norway, etc besides the prosperous Asian models can survive as mixed economies then we must not rush in where angels fear to tread. Without any great literacy among our masses, lacking in financial resources, with under-developed energy potential and a basic shortage of skills and technology, our objectives to accomplish our aim must be modulated in a pragmatic result-oriented fashion.

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