State of privatisation
Less than a month after taking over power in November 1990, the Nawaz Sharif regime started to make good on its promises to rejuvenate the economy. To start with, they capitalised on the homework of the previous PPP regime and initiated the present privatisation process by putting Muslim Commercial Bank (MCB) on the auction block, confirming their determination to overcome bureaucratic obstacles by an early forcing of the issues. The next one to be disinvested was Allied Bank Limited (ABL), the Government then went into overdrive in their sales effort in what seems to be an ill-considered spree.
The process of disinvestment/privatisation was kept extremely quiet during the Junejo Regime, the main beneficiaries being some corrupt bureaucratic functionaries in the Ministries of Finance, Production and Industries. One of the greatest scams was the disinvestment of Pakistan Services Limited (PSL), which owned the Hotel Intercontinental chain, for a mere pittance. The actual negotiation and transactions were kept secret while valuable assets held in trust on behalf of the people of Pakistan were disposed of for a scandalously low price, this major fraud was then successfully covered up. The uppermost consideration to anyone given the mandate to disinvest/privatise public property must be that not only must the negotiations be above-board but by making them public, should be seen to be as such.
The intent to denationalise/disinvest was certainly sincere in varying proportions in all the three regimes, Junejo, Ms Benazir and Nawaz Sharif, there has been a marked upward progression in the seriousness of the effort. One classic mistake made by the present regime is in the choosing of the person to oversee this process. Senator Lt Gen (Retd) Saeed Qadir was one of the most powerful and longest serving Ministers of Production during the Zia Regime, he had acquired virtual Industrial Czar-status. While the National Logistics Cell (NLC) was one of his more brilliant creations, the “Cell” soon became a misnomer as it became a permanent public sector colossus. Senator Qadir is a dynamic functionary but has often perceived to be, rightly or wrongly, operating on a thin and fine line with respect to propriety, rumours abound about monopoly-favours given to family connections as well as those known to be his friends (one avoids the word “cronies” in good faith). Whatever be the truth, his has been a mind-set public sector approach, the leopard may well have changed his spots but his appointment as Chairman Privatisation Commission has tested public gullibility. In the paramount factor, therefore, that of credibility in the fairness of the process, the government has stumbled. Given that Nawaz Sharif is a businessman and his motivations could well be suspect, a sincere policy, initiated with the best of intentions, has been hamstrung to a great extent.
The second great blunder is in the manner of privatisation. No doubt that the public sector is inefficient and corrupt, it did serve a socio-economic purpose useful to the public at large. In a country where literacy rate is appallingly low and poverty is endemic even among the large middle class, the public sector has a definite role and it cannot be dismantled totally or its role completely circumscribed. A balance of sorts has to be maintained for the greater good of the masses, government cannot abrogate itself of this responsibility, whatever may be the deep-rooted ideological and philosophical considerations of its primary leaders. An impression has been created of selling off everything in sight in the fastest possible time, this post-haste method has meant that wherever and whenever public reaction has been intense, the government has had to backtrack.
The public sector has a large number of employees, the government has a responsibility to ensure their continued welfare. It is unreal to expect the Pakistan private sector to have a welfare-oriented approach to profitability, experience has shown that the private sector’s contribution to the welfare of their employees is negligible, if at all. Most industrial units avoid having employees on their payroll directly, relying on “contract labour” that is both inexpensive to obtain and easy to dispense with. In contrast to the private sector of advanced countries, very few entrepreneurs have invested in educational and medical institutions, or in transportation and housing for their employees. In contrast, the public sector has, to their credit, done fair service in this respect. At the same time, the employees had to be given a chance to turn their present relationship from employee status to that of owner-worker. The government must be congratulated in doing just that in respect of ABL and giving serious consideration to a number of Employee-Ownership Offers for various units being divested. Instead of handing over to Businessmen Consortiums, GoP could have divested shares to the general public a la Thatcher so that ownership could be made more broad-based.
MCB was the first financial unit to be privatised. For a government in a hurry, this financial institution was an ideal candidate to start the privatisation process. Within a few months, control had passed onto a group led by Mian Mansha, having a dozen or so investors in a Consortium. Since MCB was the first on the auction block, the bidding process was subdued. The original owners, the Adamjees, fell away from competition when it was discovered that they were only frontmen for other moneymen, besides the fact that their bid was not as responsive as that of the Tawakkals or the Mansha Consortium. The Tawakkals lacked credibility in describing the source of the money that was to be put in. Coupled with the fact that the Tawakkal Group had large credits from MCB, it almost went by default to the Mansha Group. Ostensibly a group led by Punjabi (Chinioti) businessmen, the actual coalition seems to be with elements of the Memon community, with Hussain Lawai, a dynamic banker as President and Bashir Jan Mohammad (one of the 12-member group) somewhere in the woodworks, but having a large enough clout in a case of being more equal than the others! Whatever it is, on the face of it, MCB is a privatisation success story. Though the deposits and profitability has not yet been publicised ahead of the Annual General Meeting (AGM), sources indicate that both may be in excess of 25% each. With the fullest possible authority and the least possible interference by the dozen or so investors, Hussain Lawai has managed excellent growth in contrast to previous years when the cautious bureaucratic approach achieved barely appreciable progress. A half dozen or so new innovative schemes have re-vitalized the present work-philosophy into one of dedicated profit-orientation even as investor confidence has reaped in greater bank deposits. Instead of retrenchment, as much as 200 fresh staff have been hired. There are a couple of lingering questions about a Rs 600 million Bank Guarantee supplied by the Faisal Islamic Bank to the Mansha Group and a cool Rs.300 million given by MCB to the Ittefaq Group, these need greater investigation before one can comment on them with any authority. The overall impression has been of force-multiplication of the benefits to both the bank’s customers as well as to the bank and its employees.
While one can count MCB as a privatisation success story, the Jewel in-the-Crown has really been ABL. Khalid Latif would have been an outstanding success in any discipline or profession, the Management-Employees take-over of ABL has been a most magnificent achievement for everybody, the Government and the public, the Bank’s customer and the owner-employees. In a faction ridden society, the unity displayed by the Allied Management Group (AMG), the management-employees buy-out consortium bidding for ABL, was simply awesome. Binding together everyone within ABL by the force of his personality and a genuine sincerity of purpose, Khalid Latif’s AMG has created corporate history of sorts for the privatisation process in Pakistan. Though the annual figures are not out as yet, the percentages are rumoured to equal MCB’s growth.
The government’s efforts to privatise all the banks is not appreciated, some financial institutions, particularly the DFI’s, should be kept under government control for socio-economic reasons. MCB and ABL have been lucky because outstanding leaders have motivated their staff in different ways in keeping with their diverse personalities and business acumen. The weight of argument must come down in favour of more Management-Employees Buy-Outs in the sales of government-owned assets, the impression one gets presently is that the present set-up favours certain well-connected robber-barons. If the privatisation process is not kept above board, it will ultimately fail in two important factors, the court of public opinion and in economic viability. We are going through a critical phase in our economic life as a nation, the government has a constitutional responsibility insofar the sale of public sector units is not perceived as largesse being dished out to favourites.
Did you enjoy this post? Why not leave a comment below and continue the conversation, or subscribe to my feed and get articles like this delivered automatically to your feed reader.
Comments
No comments yet.
Leave a comment