Daily Times

The 1970s, the era of socialism and nationalization swept across Pakistan, with the state taking control of key industries and businesses to drive economic change and equal distribution. The seed planted by Prime Minister Zulfikar Ali Bhutto was meant to drive the country towards progress and social equality. This was based on his socialist ideology and was bound to fail since the very foundation of socialism is rooted in a prejudiced monetary system. Today, more than 70 years later, Pakistan’s state-owned enterprises have caused irreversible damage to the country. These enterprises, once intended to uplift the peasantry and bring about economic growth, have instead become a burden on the economy and hindered private investment and growth.

The inefficient organization and mismanagement of these state-owned enterprises have led to factory-dominated cityscapes, reminiscent of the failed experiments with socialist central planning in Eastern Europe and the Soviet Union. However, the state-owned enterprises in Pakistan are particularly plagued by political appointments and red-tapism. One cannot simply shy away from the fact that the majority of employees inducted into these organizations are a result of nepotism and favouritism rather than merit. If one was to interview a random sample of employees in these state-owned enterprises, it would likely reveal a generation of employees affiliated with various political parties. What is far more damaging and haunting is a clear division of identities of employees within these organisations. First is the political identity that would majorly associate with Pakistan Muslim League Nawaz (PML-N). Second, is the religious identity which many would associate with Jamiat Ulma-e-Islami (JUI). While these two form the majority of affiliations within the SOEs, the Pakistan Peoples’ Party (PPP) is also marginally present in some of them, although to a lesser extent. and in recent years we have seen a rising representation of Pakistan Tehreek-e-Insaf (PTI) affiliates in the mix. To sum up, no political party has steered clear of political inductions making SOEs the breeding ground for political loyalty and corruption. Also, to add I do not think that there is a religious group free which is not politically affiliated with a party. Hence as these mutually beneficial affiliations or associations grew in number, so did the nepotism in SOEs. Therefore, it would be insanely naive of anyone to expect that any political representative will ever resort to remediation and reform of these state-owned enterprises, as it would mean disrupting their own power structures and sources of patronage.

It is the role of the government to simply monitor performance. However, it is the responsibility of the private partners to drive innovation and profitability.

Now the extremely large footprint of SOEs is causing irreversible damage to the country. Titled ‘The Federal Footprint, SOE [state-owned enterprises] consolidated report for the fiscal year 2021 and 2022’, revealed several shocking insights about the state of state-owned enterprises in Pakistan. After reviewing the performance of over 130 state-owned enterprises, the report highlighted that while the incumbent government has given its undivided attention to the privatisation of PIA, it completely ignored the elephant in the room – the power sector all of which suffered losses in FY2022. These SOEs have become a burden on the national exchequer and are draining precious resources that could have been directed towards much-needed development projects. Not only this, but the National Highway Authority the golden project of the Sharifs was the highest loss-making entity in FY 2022 with Rs. 168.5 billion. While the total losses incurred by the 88 commercial state-owned enterprises in FY 2022 amounted to a staggering Rs. 10.4 trillion.

The saddening truth is that one could write thousands of words with eye-opening facts on the SOEs in Pakistan, yet there will be no action taken to address the deep-rooted issues plaguing these state-owned enterprises. The biggest damage these SEOs are causing is in the form of systematic failure, where worker unions are used as political tools, senior employees seek long leaves and furloughs at important times, and the mismanagement of funds that leads to financial losses on a massive scale. And the truth is all of the state-owned enterprises, regardless of their industry, are plagued from within. Truth be told these institutions will never change and the only thing successive governments will continue to do is increase pensions, pass more grants, increase perks and benefits and more.

Since no political party will ever get rid of the SOEs due to the benefits they offer the economy will continue to suffer from unplanned and unimaginable damages. If not addressed soon, these state-owned enterprises will continue to drain resources, hinder economic growth, and undermine the overall development of the country. Also, red-tapism is the product of unnecessary political intervention and the mountainous IMF loans are the proof of its management’s failure.

In a recent Think Fest event, I was flabbergasted to hear a pseudo-Marxist intellectual proclaiming the need for restructuring SOEs without liquidating them and turning them profitable. A big fat “how” was missing from the conversation, however. The only solution I keep on penning down is through an effective public-private partnership that promotes efficiency, accountability, and sustainable growth. This low-acumen Marxist also quoted China as an example and completely forgot to mention that China is in the first phase of detaining thousands of officers within the SOEs for nepotism and red-tapism. Soon the world will witness China operating under a public-private partnership model. There is a simple logic behind this, it is the role of government to simply monitor performance. However, it is the responsibility of the private partners to drive innovation and profitability. I do think that the government must only engage in public education and health projects and focus on ensuring the highest quality in both. the main objective should be to excel in these sectors without aiming to be profitable. As I said monitoring performance and ensuring quality should be the key focus of SOEs in health and education without the pressure of profitability.

The writer is Foreign Research Associate, Centre of Excellence, China Pakistan Economic Corridor, Islamabad.