KARACHI: Amid recent statements by the government and the opposition over the longstanding issue of privatisation of public-sector enterprises, economists and industrial experts have held that the issue involves several bottlenecks to be dealt with before any concrete progress can be made on the matter.
Recently, Prime Minister Shahid Khaqan Abbasi had said that the government would soon proceed with its plan to privatise the Pakistan International Airlines (PIA) and the Pakistan Steel Mills. The Pakistan People’s Party-led Sindh government responded to the announcement saying that it would oppose any such plans of the government.
When it was in power in the centre, the PPP tried to formulate proposals to turn around these cash-starved entities and to make them financially viable, without any concrete progress on the matter.
Several committees were formed under the secretaries of Finance and Production including the chairman of the PSM and heads of ailing PSEs.
A bailout package of more than Rs15 billion announced for the PSM by the federal government has yet to show any result.
By restructuring the PSM, the government hopes to save Rs56 billion per annum from the national exchequer.
Proponents of the privatisation plan say the PSM remains a white elephant, despite having a monopoly in Pakistani market.
PSM employs one worker for every 50 tonnes of steel it produces. The ration at the world’s largest steel maker, Arcelor Mittal, is one worker for every 410 tonnes.
Experts say that after liquidation, the land held by the PSM should be offered to the private sector, while its machinery can be sold to scrap dealers. The total annual payroll of PSM is of more than $100 million.
This will be a lot cheaper for Pakistani taxpayers than continuing to swallow the huge, never ending losses of running the organisation.
One or more small mills should be built. A relatively new technology called DRI has made such mills feasible.
PSM’s failure to settle its dues with several companies also put the gas utility in financial crunch. In the last four years, PSM’s outstanding balance has risen to more than Rs 45 billion.
In the case of the failure of PIA management to turn around the national carrier, the government will be left with just one option to privatise it.
Even the federal Minister for Planning and Development, during a press conference, said that the government could not waste billions of rupees annually on subsidising the PIA.
He said strategic partnership or privatisation of PIA was also under consideration, while another option would be to close down the organisation.
The PIA management has yet to give a solution to the government to deal with its chronic crises.
Privatisation is also imminent on directions of International Monetary Fund as it has asked Pakistani government to end the subsidy being given on energy and SOEs gradually.
Fazal Ahmad, an economist based in Houston, says that Pakistan has to chalk out an immediate economic recovery plan in order to support falling economic conditions. Fazal says privatisation of SOEs had been under discussion at IMF meetings with Pakistani economic teams in past many years. However, to safeguard strategic components in privatisation of SOEs, different aspects of the national-interest would be kept on priority.
Pakistan Railways, Pakistan Machine Tool Factory, and some engineering SOEs are eating up billions of rupees from the national kitty annually, these experts note.
More than once, IMF has put proposals before Pakistan including a proposal that our surplus cash crops may be kept under IMF supervision.
This will be done in case Pakistan fails to follow the dictation of IMF for levying different type of taxes and increasing cost of utilities.
The economist was of the view that whole-hearted efforts were required to accomplish these gigantic task.
The short answer remains privatisation.
The real cost of producing steel is $495 plus $390. We need to ask why we should pay $950 per ton of steel when we can import the stuff at current world price of $630 per ton.
The government should table a bill for selling agriculture before the Parliament in order to give it a clear cut approval from peoples’ representatives.
The government still seems in mood to offer more than seven million acres of farmland for long term investment and for sale to foreigners including Chinese.
Senior executive and economist Agha Saiddain of Pakistan Tanners Association says, “The United Nations also expressed its concern over issue and asked the government to prepare transparent and foolproof blueprint in order to avoid any involvement of extremist group in purchase”.
The Gulf and some Dubai based groups were showing great interest to acquire fertile lands for rearing livestock besides to produce crops for their respective countries.
It is in the process of acquiring farmland in Pakistan to export more food to Gulf region. Instead of selling land it would be better to sell its yield to the people in Gulf Region, he said.
Published in Daily Times, February 24th 2018.