Daily Times

Institutional reforms are in vogue again in Pakistan. Now, we have a federal advisor on Institutional Reforms and Austerity. There is also discussion of moves towards possible privatisation of loss making state-owned-enterprises (SOEs), if Pakistan has to decrease the budget deficit and comply with the IMF’s prognosis, should we formally seek another financial bailout for a few more years?

Institutional reforms are being discussed in Pakistan since the late 1980s, when the period of structural adjustment programmes started in Pakistan. The debate on institutional reforms might not move forward, unless there is an honest debate and rigorous evaluation, of the previous reform efforts; and a national ownership of the entire reforms process.

Under the structural adjustment programme from 1988, onwards, whenever Pakistan needs to seek the IMF financial bailout, there is a “reforms” package that is invoked and it has yet to achieve the desired conclusive results. There is need to analyse why the “reforms” have not led to conclusive results despite so much talk on reforms in the last 30 years?

The key reason is that discourse on reforms is not devised and owned at the national level. We agree on carrying out structural reforms to fulfil the conditionalities of the lending of international multilateral institutions to get balance of payments support. Some so-called reforms are implemented, such as the imposition of the general sales tax (GST) and liberalisation of the trade regime. However, institutions like the Securities and Exchange Commission (SECP) are made “autonomous” under the pressure of reforms; yet their autonomy is not actualised and the government controls the institutions through its appointed board of directors etc. Even if the regulatory authority is not under the direct control of the Ministry of Finance any longer. Similarly, various governments have also controlled the State Bank of Pakistan.

There is also need to link the debate on reforms process with the national planning and long-term development priorities. For example, the privatisation process should not have the short-term aim of selling the national silver to only deal with the current balance of payment process. It should be linked with strategies of long-term development and institutional development goals

Now, there is an increasing discussion on the privatisation of the loss-making SOEs. We know from literature that privatisation is no panacea and there are other ways of restructuring the SOEs to make them efficient by protecting the genuine labour as much as possible. Public-private partnership is another option. Even if SOEs have to be privatised, there is a need to study why such privatisation attempts were not successful in the past and how to overcome the resistance from various interest groups and institutions. An effort was made to privatise Pakistan Steel Mill in the past. However, the then Supreme Court struck down the deal.

In other words, just as there are political economy explanations for the enforcement of institutional reforms, there are also political economic reasons for the lack of implementation of reforms. Unless, the resistance of the entrenched interests groups and various state and non-state institutions to the reforms process is not analysed and understood, the process might not move forward much. Therefore, there is a need for a wider debate on institutional reforms and strategies to deal with the privatisation of SOEs in a nationally owned process.

The fact is that the entire discourse on institutional reforms in Pakistan since 1988, has largely revolved around either seeking support of international multilateral institutions or meeting the conditionalities linked with the disbursements schedule. The multilateral institutions also pushed the package of institutional reforms without building the much-needed national by-in and ownership of the process.

Therefore, there is a need to have a wider debate why institutional reforms are needed, how such reforms process is going to contribute to the well-being and welfare of citizens, how to achieve them, who are the winners and losers of the reforms process at the local and sub-national and national level and how to overcome the institutional and interest groups resistance to the reforms process. There is also need to link the debate on reforms process with the national planning and long-term development priorities. For example, the privatization process should not have the short-term aim of selling the national silver to only deal with the current balance of payment process. It should be linked with the strategies of long-term development and institutional development goals.

The writer has social science/development sector background and lives in Islamabad

Published in Daily Times, October 7^th 2018.