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Privatisation in Pakistan

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The privatisation process in Pakistan,[1] sometimes referred to as denationalisation programme[2] or simply the privatisation in Pakistan)[3] is a continuous policy measure program in the economic period[when?] of Pakistan. It was first conceived and implemented by the then-people-elected Prime Minister Nawaz Sharif and the Pakistan Muslim League, in an attempt to enable the nationalised industries towards market economy, immediately after the economic collapse of the Soviet Union in 1989–90.[4] The programme was envisaged and visioned to improve the GDP growth of the national economy of Pakistan, and reversal of the nationalisation programme in 1970s— an inverse of the privatisation programme.[4]

The poverty expenditure rate statistically dropped to 34.5%—17.2% in 2008 as part of the privatisation programme.

In the period of the 1970s, all major private industries and utilities were put under the government ownership in an intensified programme, called the nationalisation programme that led the economic disaster in Pakistan. Since then, the demand for denationalisation gained currency towards the ending of the government of Pakistan Peoples Party in 1977, although a commission was set up by General Zia-ul-Haq government but no denationalisation programme began until 1990.

The privatisation programme was launched on 22 January 1991[5] by Prime minister Nawaz Sharif in a vision to promote free-market economic principles, private-ownership and the mainstream goal to attract foreign investment in the country.[6] But, as a result a good deal of the national wealth fell into the hands of a relatively small group of so-called business oligarchs (tycoons), and the wealth gap increased dramatically in the 1990s that halted the programme by Benazir Bhutto.[6] Revisions were made in 1999, and finally launched the much more intensified privatisation programme under the watchful presiding leadership of Prime minister Shaukat Aziz in 2004.[7] Finally, the programme was ended effectively at the end of 2007 when ~80%–90% of the industries were put under the management of private ownership of enterprises by Prime minister Shaukat Aziz.[7]

History

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1978 to 1988

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The momentum and demands for denationalisation gained currency towards the end of the government of Prime minister Zulfikar Ali Bhutto and Pakistan Peoples Party who under intensified their nationalisation programme had effectively the government-ownership management in the private industries of Pakistan; it had built a strong public-sector with priority on cement, steel and fertilizers.[8] After the end of government of peoples party, a white paper was issued by General Zia-ul-Haq's government, followed by setting up the commission under Pakistan Industrial Credit and Investment Corporation (PICIC) chairman N.M. Ukailie.[4] However, only three industries were returned to its rightful owners, namely Eittefaq Group of Industries to Mian Mohammed Sharif whilst others remains under government controlled.[4]

1989 to 1990

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The privatisation programme launched in Punjab which had the higher GDP growth than any province of Pakistan.

As an aftermath of 1988 general elections, Benazir Bhutto and the peoples party returned to power, promising to denationalised and replace with the industrialisation programme by means other than the state intervention.[9]

By August 1989, a committee was established under the supervision of the Minister of State for Finance to oversee this initiative.[10] With consultation from Rothschild's, the committee reviewed several state-owned enterprises for potential privatization, including Muslim Commercial Bank, Habib Bank Limited, Pakistan National Shipping Corporation, Pakistan International Airlines (PIA), Sui Southern Gas, Sui Northern Gas, and Pakistan State Oil.[10] The objective was to integrate the savings of numerous private investors into the stock market, enhancing its stability and standards, a necessity identified since the early 1980s.[10]

In May 1990, the government offered 10 percent of PIA's shares for Rs. 27.4 million, with a promise of a 12.5 percent minimum cash dividend for the following three years. Despite these efforts, other enterprises _targeted for privatization remained unsold due to limited interest from the private sector.[10] The process was interrupted when the government was dissolved by the president of Pakistan, resulting in new elections and the establishment of a coalition government.[10]

The partial privatisation was kick started by Chief Minister of Punjab Province Nawaz Sharif who presided the liquidation of many industrial units put under provisional government to private sector.[4] All industries based on Punjab government ownership were returned to its rightful owners on a mutual understanding; the prices on units returned to industrialists are still kept as "top secret" by the provisional government.[4]

1991 to 1993

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Nawaz Sharif.

A large-scale privatisation programme was launched on 22 January 1991 as the primary economic policy by Prime Minister Nawaz Sharif who came to national power after securing a flight-winning victory in the 1990 general elections.[11] The privatisation programme was inspired and influenced in its nature after witnessing the success of the privatisation in Great-Britain by British Prime minister Margaret Thatcher. The first phase of the privatisation programme covered the half of the public sector industries in terms of total employment,[12] and the programme was in a direct response to Pakistan Peoples Party and Zulfikar Ali Bhutto, and for instance Sharif's privatisation programme was swift as nationalisation programme.[12] During the course of first phase, Sharif presided the denationalisation of banking sector and industries to private sector, starting first with MCB limited.[12] Sharif termed his privatization programme as "turning Pakistan into a (South) Korea by encouraging greater private saving and investment to accelerate economic growth.".[13]

The second phase was promulgated by Sartaj Aziz with the goal to transform the enterprises into profit-seeking businesses, not depended to the government subsidies for their survival. The mega-energy corporations such as Water and Power Development Authority (WAPDA) and Karachi Electric Supply Corporations, and the Pakistan Telecommunication Corporation were set off to private sector. From 1990 to 1993, around 115 industrial units were hastily privatised, including the privatisation two major banks, 68 industrial units and 10% Shares of Sui Northern Gas Pipelines Limited.[13]

The privatisation programme came with great surrounding controversies with lacked competition as the programme was largely controlled by favoured insider.[14] The recklessness and favouritism shown in privatisation of the industrial and banking units by Prime minister Nawaz Sharif was to become the hallmark and the rise of strong business oligarch who have concentrated enormous assets, further increasing the wealth gap in Pakistan and contributing to the political instability.[15]

1993 to 1999

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In 1992, the Leader of the Opposition in the Parliament, Benazir Bhutto, vehemently criticised the whole policy measure programme at the public circles.[16] While Commerce minister Faisal Hyatt and Finance minister Sartaj Aziz enthusiastically projected the privatisation as a "success phase",[16] Benazir Bhutto had, with a touch of drama in the state parliament, maintained that "while one brother was selling, other was buying."[17]

After 1993 general elections, the second phase of the privatisation programme began in 1993 under the "disciplined macroeconomics policy"[18] of Prime minister Benazir Bhutto.[18] Her programme aimed to capitalise on the rising business oligarch class but the programme suffered with great difficulties and problems even inside the peoples party.[14] The second phase involves the privatisation of financial institutions, several telecommunications corporations, thermal power plants, oil and gas sectors.[12] Benazir's government did not privatize all state corporations, especially those who were collecting large revenues abroad; only certain industries were privatised which were at the brink of financial collapse.[16]

The first attempt was made to privatise the United Bank Limited but the proposal met with great hostility by the workers union and opposition.[19] Proposals were also made to put the private-ownership to Pakistan Railways but it was rebuffed by Prime minister Benazir Bhutto who quoted: "Railways privatisation will be the "black-hole" of this government. Please never mention the railways to me again."[16] The economic growth declined when the US embargo began to bite the government of Benazir Bhutto.[19] By the end of 1996, ~20 industrial units, one financial institution, one electric power plant and 12% shares of Pakistan Telecommunications Ltd. were privatised by Benazir Bhutto.[12]

The second phase remained continued until 1998 when it was abruptly ended by Prime Minister Nawaz Sharif after imposing economic emergency after ordering to perform capability of nuclear deterrence in response to Indian nuclear aggression.[20][21] All stock exchange, stock markets and the second phase of the privatisation programme were immediately halted by Prime minister Nawaz Sharif until his government was ended in 1999.[20]

1999 to 2008

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Shaukat Aziz.

After taking control of government from Prime minister Nawaz Sharif, Pervez Musharraf invited Shaukat Aziz to take the control of declining economy of Pakistan.[22] The GDP rate had declined from 10.0% in the 1980s to 3.6% in 1999, with foreign debt increased to 44% up as compared to 1986.[22] Major economic reforms were introduced by Shaukat Aziz who first consolidated the industries under one platform and restructured them before setting them to privatization market.[22] Numbers of controversial sales tex were enforced by Shaukat Aziz, mostly on import duties; and based on these reforms, patronage-based industries remained under serious threat and privatisation discussion began to take place on usual based.[22] Aziz consistently worked on to restructured the industries and provided a vital leadership and economic relief after 2001 also played an important role in strengthening the patronage-based industries financially and physically.[22]

In 2004, Aziz became Prime minister and initiated an intensified privatisation programme in order to grow the GDP rate annually.[23]

Aziz forcefully and aggressively pushed 100% privatisation of state-owned corporations while virtually planned to privatised 85% of banking sector.[24] Starting from 2003 until 2007, Aziz successfully privatized 80%[24] of the banking industry into private-ownership enterprises, while privatizing the numbers of shares of Pakistan International Airlines and other mega-corporations into the public circles.[24]

Nothing is sacred... We are packaging up our companies. (....).... These state-owned corporations (SOEs) have been well-run for the past few years.... and now we are offering them to investors from all over the world....!

— Shaukat Aziz, 2006, source[24]
 
The intensified privatisation programme led the economic boom of Pakistan's economy which was at the range of 8.96%–9.0% in 2004.

Intensified privatisation policies had major impact on public sector organisation which diminished with the privatization of the state-owned corporations. Prime minister Aziz defended his privatisation programme as he maintained that "these institutions viable while they were on the verge of collapse.". Aziz's privatisation programme subsequently improved the country’s growth rate by 6.4%—8.6% a year. Inflation rate dropped to 3.5% in last 3 years as against 11–12% in 1990. However, in the end of 2007, Aziz's privatisation programme suffered a major set back which initially halted the privatisation programme in the country.[25] The Supreme Court halted the privatisation of Pakistan Steel Mills after transferring the inquiry from FIA to NAB, while issued standing orders to keep the Steel Mills under the nationalization programme.[26] The proceedings and Supreme Court's decision initially halted Aziz's intensified and aggressive privatisation programme at the end days of his tenure.[26]

2021 to present

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The government will likely fetch Rs100 billion in fiscal year (FY21) through the privatisation of state-owned entities said Privatisation Minister Muhammadmian Soomro.[27]

Initial work for the privatisation of power distribution companies and State Life has been started while the privatisation of Haveli Bahadur Shah Power Plant in Jhang and Baloki Power Plant in Kasur, two RLNG-based power plants, was in the final phases.[27]

On 26 August 2021, Services International Hotel in Lahore was auctioned at the highest bid of Rs1.951 billion.[28]

Public perception

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The privatisation programme still marks the question of "big" controversies.[29] In public circles, it has generated much more heated debates where it is perceived to have more negative impact on civil society.[29] The general perception remains highly contentious and polarising issue in the civil society, gearing up the negative sentiments among the population, including the continued injection of public money in many privatised entities and less than expected improvement in the services.[30] Although, the programme produced a relatively faster[clarification needed] and efficient way of promoting competition and enhancing growth, on the other hand, the programme experienced the exponential increase[clarification needed] in unemployment, reducing the access of workers' class to the basic needs of life and contributed in declining the social status of workers' class in to poor get poorer.[29]

But on the other hand, a significant support for the privatisation programme has been raised in the media. In an editorial written in Dawn, it argues that the privatisation programme has been a key "constituent of structural reform" programmes in both, the developed and developing economies, in order to achieve greater microeconomic efficiency as opposed to macroeconomics.[31] Overall, the GDP rate grows smoothly with privatisation programme remains in effect as opposed to nationalisation programme that it had dropped the GDP growth rate of Pakistan, Dawn maintained.[31] Major proposals were made to privatise the major and most-profitable industries of Pakistan, namely the Pakistan Railways (PR) where The Express Tribune argued that the national railways' condition has gone from bad to worse under government ownership, and only privatisation programme can save the railways with the creation of sense of competition that would drive improvement.[32]

Adversary opposition

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Despite its success, the public sector organisations, labour and workers unions remained extremely hostile towards the privatisation programmes.[33] In 2005, major demonstrations and worker's revolt took place in Islamabad by the PTCL Workers Unions Action Committee, in an attempt to privatized the Pakistan Telecommunication Company Ltd (PTCL).[33] Despite the demonstrations the state-corporation was privatised by Shaukat Aziz which resulted in workers’ losing their jobs.[33]

In 2012, an unsuccessful attempt was carried out by current government of Pakistan Peoples Party when the government sought to privatise the mega-state corporations, particularly the power sector; major nationalised industries such as WAPDA, IESCo, TESCo, PEPCo were proposed by the finance ministry to privatise the power distribution companies.[34] Major worker's strike were initiated by the central labour unions, and after receiving much criticism, his government halted the privatisation programme of energy sector, and nationalised the remaining power sector industries due to public pressure.[35][36]

The Pakistan Peoples Party's intellectuals remains skeptical about the privatisation programme and _targeted the controversial implementation on numerous occasions.[37] The peoples party maintained that "an elitist or top-notch educational system" which exceedingly comprises private sector’s foreign affiliated schools and universities, has built the "sole source" of producing some proficient minds. While on the other hand, the privatised Madrassah system of education has been patronise different sects of religion, patronise different sects of religion, and further exploited as source of religious extremism and associated with terrorist outfits and their offshoot.[37] The private sector education system negative effects of private sector education and it hashas created a disparity between the rich and the poor.[38]

Dr. Professor Athar Maqsood of School of Business of the National University of Sciences and Technology (NUST), set forward his argumentative thesis that there are two reasons behind why the privatisation has not been successful as was originally perceived are economic reasons and socio-psychological and political reasons.[39] In the 1990s, the privatised enterprises have laid off employees by introducing schemes like golden hand shake.[39]

See also

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References

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  1. ^ "Privatization Commission". Ministry of Informationa and mass-media broadcasting. The Electronic Government of Pakistan. Retrieved 2 June 2012.
  2. ^ Khan, Mubbsher Munawar; Mohammad Zafar Yaqub; Farida Faisal; Muhammad Asim Khan (4 April 2011). "Privatization in Emerging Markets: Pakistan's perspective". Punjab University Department of Business and Commerce. Punjab University Press. Retrieved 1 June 2012.
  3. ^ Akbar, Bilal. "Privatization in Pakistan". Bilal Akbar. Retrieved 2 June 2012.
  4. ^ a b c d e f Press Release. "Nawaz Sharif's privatization". Nawaz Sharif's privatization.and Report. Retrieved 1 June 2012.
  5. ^ E-Govt. of Pakistan. "History". Privatization Commission of Pakistan. The Electronic Government of Pakistan. Archived from the original on 23 October 2012. Retrieved 1 June 2012.
  6. ^ a b Press. "Business Oligarch of Pakistan". Tripod nuclues. Retrieved 1 June 2012.
  7. ^ a b Malcolm Borthwick (1 June 2006). "Pakistan steels itself for sell-offs". BBC Pakistan, Malcolm Borthwick. Retrieved 30 May 2012. Pakistan has had the most broad-based structural reform of any country in Asia. Last year, we were the second fastest growing economy in the world after China. We grew at 8.4%
  8. ^ See Nationalisation in Pakistan
  9. ^ Farazmand, Ali (1996). Public Enterprise management. United States: Greewood publishing Group, Inc. pp. 182–250. ISBN 0-313-28025-8. Retrieved 10 April 2014.
  10. ^ a b c d e SAJID, MUSHTAQ A.; CHAUDHARY, A. R. (1996). "Historical Development of Liberalization Since 1947 in Pakistan". Pakistan Economic and Social Review. 34 (2): 179–192. JSTOR 25825145 – via JSTOR.
  11. ^ Bokhari, Syed Anwar-ul-Hassan (18 September 1998). "History and Evaluation of Privatization in Pakistan" (google docs). Pakistan Federation of Trade Unions. National Seminar on Privatization. pp. 5–8, 10. Retrieved 1 June 2012.
  12. ^ a b c d e Aziz, Sartaj (1990). Privatisation in Pakistan (google books). Paris: Organization for Economic Cooperation and Development. ISBN 92-64-15310-1. Retrieved 1 June 2012.
  13. ^ a b Abdus Samad. "The Economic Policies of the first Nawaz Sharif Government 1990–93:Privatization". Dr. Abdus Samad, Author of "Governance, Economic Policy and Reform in Pakistan". Author of "Governance, Economic Policy and Reform in Pakistan". Retrieved 1 June 2012.
  14. ^ a b Press unknown. "Big Cover up in Corruption in Privatization". Tripod Publishings. Retrieved 1 June 2012.
  15. ^ US Govt, United States Government (April 1994). "The Government of Nawaz Sharif". United States Government. US Department of State :Case Study. Retrieved 1 June 2012. Benazir and the PPP, criticized Nawaz Sharif's efforts at privatization, calling them the "loot and plunder" of Pakistan and saying his plan favored large investors and ran roughshod over labor
  16. ^ a b c d Dutt, Sanjay (2000). Inside Pakistan : 52 years outlook. New Delhi: APH Pub. Corp. p. 250. ISBN 8176481572.
  17. ^ Akbar, M.K. (1998). Pakistan today (1st ed.). New Delhi: Mittal Publications. p. 208. ISBN 8170997003.
  18. ^ a b Muhammad Ali Siddiqi (13 April 1995). "MOU worth $6bn signed". DawnWireService (April13th 1995; from the United States). Archived from the original on 9 June 2012. Retrieved 20 November 2011.
  19. ^ a b Staff Reporter. "Concern over UBL sale move". October 11, 1995. UBL Dawn Wire Services Management. Retrieved 20 November 2011.
  20. ^ a b Lieven, Anatol (2011). Pakistan: A Hard Country. PublicAffairs. p. 244. ISBN 978-1-61039-021-7.[permanent dead link‍]
  21. ^ "DAWN Profiles". Dawn. Retrieved 19 October 2011.
  22. ^ a b c d e Cohen, Stephen P. (2004). "General Musharraf, the Economist". The Idea of Pakistan (googlebooks). Brookings Institution Press (September 2004). pp. 255–290. ISBN 978-0815715023. Retrieved 1 June 2012. shaukat aziz and privatization.
  23. ^ Weber, Tim (29 January 2005). "Pakistan pushes India on pipeline". BBC Pakistan Business Editor, BBC News website, in Davos. BBC. Retrieved 1 June 2012. Better economic relations between India and Pakistan depend on both countries joining forces to build a gas pipeline to Iran, Pakistan's prime minister has said.
  24. ^ a b c d Borthwick, Malcolm (1 June 2006). "Pakistan steels itself for sell-offs". BBC Pakistan Asia Business Report editor, BBC World, Port Mohammad Bin Qasim. BBC Pakistan Directorate. Retrieved 1 June 2012. Pakistan's only steel company, created more than 20 years ago with Soviet technical expertise and financial help, has come full circle after being sold last month to a Russian-led consortium.
  25. ^ Ahmed, Naveed (27 March 2007). "Privatisation of Pakistan Steel Mills". Political deception. Retrieved 30 May 2012.
  26. ^ a b Mudasser Aziz (16 May 2012). "Steel Mills corruption case: SC transfers inquiry from FIA to NAB". The News Tribe. Archived from the original on 21 May 2012. Retrieved 30 May 2012.
  27. ^ a b TLTP (28 September 2020). "Privatisation likely to fetch Rs100bn this year: Soomro". Profit by Pakistan Today. Retrieved 30 September 2020.
  28. ^ Ahmed, Amin (27 August 2021). "Privatisation Commission auctions Lahore hotel for Rs1.951bn". DAWN.COM. Retrieved 27 August 2021.
  29. ^ a b c Zafar, Shaukat Masood (6 March 2012). "Globalization Pushing Towards Diseased Pakistan". The Pakistani Spectator. p. 1. Archived from the original on 13 April 2014. Retrieved 2 June 2012.
  30. ^ Kiani, Khaleeq (12 March 2012). "Privatisation questioned". Dawn Newspapers, 12 March 2012. Retrieved 2 June 2012. Pakistan has sold a total of 166 state-owned enterprises for Rs476.5 billion since 1990 to finance budget deficit, cut losses and improve efficiencies of the mismanaged entities through privatisation aimed at spurring economic growth and job creation.
  31. ^ a b Khan, Nasr Ullah (16 March 2011). "Privatisation needs to happen now". Dawn Newspapers, 16 March 2011. Islamabad, Pakistan. Dawn Group of Media. p. 1. Retrieved 2 June 2012. y Pakistan's economy is in dire need of privatisation which must also include large and inefficient public sector organisations that are depriving the national exchequer of huge sums of money year after year.
  32. ^ Ansari, Adeel (12 January 2012). "Privatisation can save Pakistan Railways". The Express Tribune, 12 January 2012. Retrieved 2 June 2012. It seems that the damage done to the railways system by our lack of leadership and management has not crippled the institution just yet – the prime minister has just announced a business class service to be offered from February 3, 2012. This is not a novel idea, but a good one nonetheless
  33. ^ a b c Vilani Peiris & Keith Jones (4 June 2005). "Pakistani workers revolt against PTCL privatization". World Socialist Organization. Retrieved 1 June 2012.
  34. ^ Staff Reports (24 January 2012). "Wapda staff goes on strike". Dawn News, 24 January 2012. Retrieved 13 May 2012.
  35. ^ Our Correspondent (6 May 2012). "Wapda workers' protest enters 6th day". Dawn News 6 May 2012. Retrieved 13 May 2012. {{cite news}}: |last= has generic name (help)
  36. ^ Press (13 May 2012). "WAPDA strikes ended". Jang News Group (Urdyu). Archived from the original on 13 May 2012. Retrieved 13 May 2012.
  37. ^ a b Akhtar, Suleman (2 November 2010). "Bhutto's nationalization policy: A response to PM Gilani's statement". The Directorate for Press and Public Relations of the Pakistan Peoples Party. The Directorate for Press and Public Relations of the Pakistan Peoples Party (Akhtar). p. 1. Archived from the original on 30 May 2012. Retrieved 1 June 2012.
  38. ^ Nishapuri, Abdul (1 November 2010). "Was nationalisation policy measure programme a mistake?". Abdul Nishapuri, Directorate Press for Public Relations of Pakistan Peoples Party. Directorate for the Press and Public Relations of Pakistan Peoples Party. p. 1. Archived from the original on 6 September 2012. Retrieved 1 June 2012. Under Nationalization programme, Zulfiqar Ali Bhutto gave hope and honour to Pakistan's poor and downtrodden people.
  39. ^ a b Staff reporter (2 March 2012). "If Rs300b spending on PSEs stops Govt can control budget deficit". The Nation (Pakistan). Retrieved 2 June 2012.
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  • E-Govt. "Privatization Commission". Ministry of Informationa and mass-media broadcasting. The Electronic Government of Pakistan. Retrieved 2 June 2012.

Sources

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