Government strategy on public-sector enterprises

By Mirza Abrar Baig Considering the colossal losses they incur and their inefficiency, there is a growing demand for our public-sector enterprises to be privatised. In advanced economies like the United States, Britain and Japan, the role of PSEs is minimal and the private sector is the most important instrument of socio-economic prosperity, and there is continued growth of privately-run corporations. The issue faced by our economic managers is privatisation of PSEs, such as Pakistan Steel, PIA, Pakistan Railways and Wapda. The significance of PSEs cannot be ignored, in view of the fact that they remain the most employment-intensive and capital-intensive organisations of Pakistan. In India, from coal and oil production to processing of iron ore and building of heavy machines, PSEs were the prime movers of the Indian economy until they adopted policies of liberalisation, globalisation and privatisation in 1991. Considering the current socio-economic problems of Pakistan such as growing unemployment, sagging manufacturing sector, inflation, illiteracy, absence of required healthcare, we cannot afford to take the approach of either privatising all our national assets or blindly continuing to pump our already scarce resources into PSEs, only to keep them on ventilators to keep them alive. The government must try to generate employment opportunities and ensure better standards of living in terms of providing quality education and minimum healthcare facilities to all its citizens. They should also take all aspects into consideration before deciding to retrench those currently employed in PSEs. Unlike in the case of the private sector, profit generation is not the only motive of PSEs. They are a part of long-term economic planning to steer the country’s economy in a direction that prevents aggrandising the country’s wealth in fewer hands. While pursuing their agenda of economic reforms, the government should revamp PSEs to make them competitive with better performance. PSEs, which are consistently failing over the years with no hope of their revival, or if their continued existence is not crucial for the country should either be disinvested or shut down without further loss of time and resources. The government could consider appointing a committee of experts to revisit its strategy and adopt methods which provide a new impetus to the PSEs. The committee should go deep into the broader political philosophy and vision under which the PSEs will be required to play their role in the new competitive environment. In view of the nature of PSEs and the government’s social responsibility, PSEs are necessary for the building of an industrially strong Pakistan to make it self-sufficient in the long run. It will help in creating a sustained indigenous capital goods sector, which cannot be taken by the private sector, as they are mostly engaged in trading business. We may adopt a mixed economy, as India did immediately after independence in 1950, in which both the public sector and private sector will be encouraged to play their respective roles. A policy should be formulated for development and support to domestic industries, in both the public and private sectors, which are meant to substitute imports to save foreign exchange by way of imposition of high tariff on imports and promulgation of other necessary statutory regulations. All steps have to be taken for improved efficiency of PSEs. Political and other outside interference must be stopped forthwith to allow them to run their affairs independently. Simultaneously, they should also be asked to reduce their dependencies on the government and get listed in the stock exchanges for raising funds from the capital market. They must be able to compete in the local as well as international markets to provide quality goods and services at competitive prices and remain viable and profitable. PSEs should continue to remain the backbone of our economy and therefore their revival is critical to our economic survival. Presently there is considerable decline in investment in the manufacturing sector by the private entrepreneurs affecting our growth rate. PSEs are the only industries that the nation can depend on to check further decline in our growth rate. Hence it is all the more necessary for the government to increase its efforts for revival of our PSEs. Greater autonomy and non interference in their functioning have to be guaranteed so that the country can fully reap full the benefits of PSEs. They are not only industries for short-term economic and commercial gains but are our national assets. The writer is the former senior executive vice president/group chief of NBP