Privatisation back on track
The Government of Pakistan (GoP) has taken a landmark economic decision in transferring the ownership of Allied Bank Limited (ABL) into the hands of its employees. Management and Labour of ABL had banded together to make the Allied Management Group (AMG), GoP accepting their bid at a debatable Rs 70 a share in contrast to the sale of the much more profitable MCB at a bargain price of Rs 56 a share to a Consortium of private entrepreneurs. Over 700 employees of ABL have thus become shareholders in a unique arrangement which has all the elements of succeeding. This represents one of Nawaz Sharif’s finest economic initiatives. Following the 180 days of economic history, there had been a 60-day hiatus leading observers to conclude that the Government had run out of ideas (and steam). The Nawaz Sharif Regime is firmly back on track in the area of its great strength, economic affairs. Sound economic policies strengthen the political base, the priorities of the present regime are, therefore, correct. Economic reforms take some time before their results become apparent, two-pronged initiative is recommended for longevity of the government.
Pakistan has seen widely fluctuating economic policies within two decades. Before Zulfikar Ali Bhutto embarked on his odyssey of sweeping nationalisation, the economy was bedevilled by strikes and lockouts in industrial enterprises, a backlash reaction to the “robber baron” syndrome in vogue during the heady industrialisation of the Ayubian 60s. Instead of ownership to the workers, enterprises ended up in the hands of an elite handful within the bureaucracy. With a built-in penchant for corruption, nepotism and favouritism, inefficiency and basic indolence turned once profitable industries into a loss-making albatross around the neck of Pakistan’s economy. While one must commend some private entrepreneurs for their vision and competence, most had come into clover by bribing politicians and bureaucrats for permits and licences for establishing industries, large loans and credits obtained by them siphoned off systematically as kickbacks for machinery and equipment. This situation was not similar in the Services industry, yet the monopoly of the few gave the owners of the financial institutions overwhelming power to channel funds at their discretion to their relations, friends and associates to the exclusion of merit-based aspirants. With the inception of United Bank Limited (UBL) by Agha Hassan Abedi at the behest of the Saigol Group (who felt they were being discriminated against by the family owned-Habib Bank and Muslim Commercial Banks), the situation started to get better. Before the resultant competition could force the privately owned banks to be more responsive to the needs of the general public, nationalisation took the whole process into a different direction.
The most important factor that needs elucidation (and eulogy) is the formation of the Management-Labour Consortium in ABL. There have been suspicions and grievances about each other on either side, it speaks very highly of the workers that they have imposed faith in their management, it speaks even higher of the management of ABL that they have managed to retain the confidence of the workers. This mutual trust is an awesome responsibility for both, discretion and sincerity have to be exercised in continuing this mutual confidence and team effort into profitability for themselves. On the side of the workers, they will have to exercise restraint in their demands, even sacrificing perquisites to ensure that the Bank remains a viable financial institution. As regards management, they must ensure that their dealings are honest and above board. Any hint of wrongdoing would be economically disastrous, a feeling that management is siphoning off funds or living the life of potentates could bring down this coalition. Khalid Latif, elected head of the AMG, has led his people with great confidence and purpose into a first victory, down the line he will have to take tough decisions to retain their confidence in his ability and integrity. In any management group there are free-loaders whose services have to be dispensed with. In the first flush of success, the bank’s workers have pledged a freeze on their salaries and allowances for one year, this spirit of sacrifice must be emulated by executives up the line. This unique experiment is going to be watched by interest by all and sundry including the management and labour of other State-owned enterprises. The rich elite have aspirations for taking over these enterprises for a song along with their collaborators in bureaucracy. There will be thus a group of people who would love to see Khalid Latif and party succeed, many who would ensure that they should come to grief. AMG is an economic experiment that has much more than the ownership of one bank at stake, in balance is the whole direction of the economy, a comprehensive master plan for management-worker cooperation in maintaining industrial peace and thus a conducive economic environment for more investment. Cohesive management that can withstand internal and external pressures can only be successful by a judicious juxtaposition between the aspirations of the workers of an establishment in relation to the needs of commercial entity. In this respect one commends AMG in making a bid in contrast to the UBL workers who made a non-serious non-commercial offer for the ownership of UBL.
The phase-wise allotment of 51% of the shares to the employees and the rest to the general public through the stock market has been an extremely wise decision. Genuine privatisation must be broad-based, the concentration of wealth evokes the fear of “robber barons” ruling the roost. As aforementioned, the adversarial relationship between workers and management in Pakistan has been transformed in this entity into a working cooperation. With the masses taking a monetary interest in their success through the purchase of shares in ABL, the correct balance between entrepreneurship and social obligations will be created. As the sorry state of the social infrastructure in the private sector has shown, our entrepreneurs, with honourable exceptions, have not shown any great social responsibilities towards their employees. The public sector has had two great plus points over the private sector insofar as it has continued to provide employment even during a recession (albeit at economic cost to itself) and the employees have had reasonable access to medical, transportation, housing, etc (sometimes to the point of abuse to their privileges). Now a unique situation has come into being that extends the responsibility of apportioning socio-economic requirements onto the workers themselves who now have a prime responsibility to make the institution work even if it entails sacrifices down the line. The participation of the masses in share purchase was thus an important formula for implementation of the privatisation concept for the good of the general public. The decision by GoP that the shares transferred to the employees will be non-transferable for five years is also extremely welcome and wise, it discourages exploitation by brokers.
The performance of economies are dependent upon their financial institutions, this is the locomotive that propels the economy forward. In practical terms it creates cash liquidity that can be channelised into working capital or purchase of capital equipment, both for old enterprises and new investments. With the handing over of ABL to its workers a situation has been created where the new entity and the State-owned banks are going to compete with privately owned Banks, the healthy competition will be a tremendous boost for the economy while ensuring better facilities and services to the common man. This is an interesting triangulation where the government has taken a positive step in keeping industry and finance apart. Nawaz Sharif’s decision is thus a fulfilment of the promises made to the masses that he will keep their interests paramount to the exclusion of the benefits to his own class. The IJI has now seized the high ground by adopting the PPP’s socialist plank, turning philosophical promises into practical realities. The normal political penchant to proclaim benefits to the masses while lining of one’s own pockets is thus avoided.
Some other decisions in the past week have also been noteworthy, particularly the setting up of a four-member high powered committee to speedily develop a package of incentives and compensation for employees of public sector enterprises listed for privatisation. This committee is headed by a Minister and has other cabinet colleagues, it has been mandated that at no stage will the interests of the employees be compromised, the PM has been insistent that their welfare must be safeguarded. The PM has thus expressed his continued interest in a sound policy for privatisation while ensuring that the privatisation concept does not degenerate into a fire-sale from which only a few favourites would benefit. While the rights of the original owners have been kept paramount, the employees will probably have to bid higher than the owners to get the ownership transferred to them. All this is a clear manifestation of the fact that while the privatisation concept was necessary, the implementation procedure needed to be put back on the right track. Kudos are due to the Nawaz Sharif regime for being responsive to the media feedback, there are political points to be made by early noting of the direction of genuine public apprehensions and acting upon it.
There is a wave of renewed hope throughout the State-owned industrial and commercial sector, the limits of which cannot even be defined economically, the prospects are so effervescent. The hard working management and labour are the best judge of how their enterprises became loss-making, they will be able to rid themselves of any corrupt, indolent and inefficient individuals within their own midst in a democratic display of fairness. Every individual will be confident that his earnings will be commensurate with his input, the jury that will decide this will be that of his own colleagues rather than that his livelihood be made subject to arbitrary justice having no relevance to merit. Motivation is a strong factor in enthusiasm and performance, by creating the sense of ownership, in however small a degree, GoP has created unparalleled worker confidence. If GoP will persist with these policies, then we begin to see hope that merit will prevail over nepotism and favouritism. For the Nawaz Sharif Government this may be small step in ensuring social justice, for Pakistan this is a giant step in economic emancipation.
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