Hardly any day passes without news of public sector enterprises making huge losses. Some days ago news was circulating that the Pakistan railway has suffered a forty billion rupee loss in the fiscal year ending June, 2018. Similarly, PIA was in the news for making a historic loss prompting the Supreme Court to order an account audit of last ten years. Pakistan Steel Mills (PSM) has always remained in the limelight for making losses alongside many other state-owned companies. All these entities were hugely profitable at some point in time having enjoyed a monopoly or limited competition in their respective sectors, for decades. Then the question is why despite being gigantic in size and possessing innumerable resources, have they gone into a never-ending cycle of loss?
The answer lies in the fundamental way these entities are perceived and run. Despite being commercial entities meant to make a profit these entities are run like any other government department. Almost all of them are run by some government ministry making them attractive targets for politicians to milk them through various tactics. Politicians often stuff these entities with political appointments from their own constituencies.
These appointees lack the required skills and are often totally redundant, only adding to the salary and pension obligations of the respective organisation – besides being involved in corruption. Also when these people become part of the organisation they also become government employees making it next to impossible to dismiss them for corruption and incompetence. They also remain active politically, and often form powerful unions inside these entities, blocking the way of any reform as we have seen in case of PIA and PSM,where multiple attempts to privatize them have failed because of stiff resistance from employees and their political backers.
In a fast-changing business environment where critical decisions have to be made very quickly one cannot put their files in a bureaucratic process and wait for months, to get approval from secretaries and ministers, who work at a snail pace. Moreover they are not technically equipped nor have the relevant qualifications and experience to make such decisions. PIA has to get approval from the Prime Minister to buy new planes. Where on earth does this happens? All successful airlines around the world make their own fleet decisions, purely based on business needs without the involvement of politicians. So the question is can these entities become profitable while still being public property?
It can be hoped that the new government, having in its ranks successful business leaders like Asad Umar, can revive these white elephants
The answer is yes in my view. There are many airlines, railways and postal organisations around the world which are hugely profitable despite belonging wholly or partially to the public sector. In my view, all public sector commercial organisations in Pakistan can become profitable only if there is a political will to do the needful.
The first step towards this will be the de-politicisation of these entities. The state needs to understand that commercial enterprises cannot be run like other government departments and there is no room for political meddling in business organizations. In today’s world businesses are run by graduates of top-ranked business, engineering and technology schools and not by traditional civil servants hired though exams like the CSS. Independent entities will be able to get talented people by paying them in comparison with the private sector and tying their employment benefits with their performance. A CEO who is an industry leader in commercial aviation and is offered pay and perks in lieu with the international aviation industry benchmarks can surely turn the condition of PIA around, if given necessary powers to make decisions purely based on the business needs of the airline.
Besides running their core operations smoothly and profitably these independent entities will be able to utilize their huge resources to the optimum, for example, Pakistan Post owns prime land in almost all of the cities around the country.
A single high rise building built on one of its plots say at the location of GPO Rawalpindi Saddar can give it millions in rent every year. Similarly, all other organisations have an enormous amount of resources including land and other assets lying unutilised and wasted. Which if properly utilised can generate billions in profits. It can be hoped that the new government, having in its ranks successful business leaders like Asad Umar can revive these white elephants.
The write has obtained a masters degree in Public Policy from Carnegie Mellon University and is currently pursuing PhD at LKY School of Public Policy, National University of Singapore. Twitter @masoodthinketh
Published in Daily Times, August 3rd 2018.