Privatisation of SOEs


    The government’s privatisation is based on the premise that it is just not possible to turn around the state-owned and run enterprises. And that being so, instead of continuing to throw good money after bad, by way of continuing hefty subsidies, it is better to sell them off and prevent this perpetual burden on government’s meagre resources.

    Now, taking the case of PIA first, it is really surprising as to why, with a businessman Prime Minister in saddle, it can not be turned around, especially in the circumstances where a major cost of the airline, the aviation fuel, is down to $ 44 per barrel on 8-1-2016 from $ 127 per barrel on 29-11-2013 as quoted on the airportwatch website. This is in stark contrast to the situation where the PIA was once pride of the nation, and just because of sentimentality but for all the right reasons. In fact, it was PIA senior staff which had helped establish aviation industry in the Gulf.

    And as for Pakistan Steel Mills, we know that General Sabeeh Qamaruz Zaman turned it around, but civilian government could not even maintain that position, neither could the businessman Prime Minister, who is bent upon selling it off as well, despite Russian offer of rehabilitating and expanding it with a loan of $ 1 billion.

    Changing fortunes of the state-owned entities under different managements clearly show that there is nothing inherently wrong with the entities but their particular state at a point in time is a direct result of the intent of the government in power, which may deliberately run them down in order to facilitate corruption. And we know that like other governments, Sharif government is also guilty of stuffing party faithful into PIA, which already had a staff-to-aeroplane ratio which is the highest in the world.

    And that leads me to the inevitable conclusion, that rather than the state-owned-entities, fault lies with the governments. So, the answer lies not so much in privatisation of the SOEs but in reforming the government.

    And here what surprises me is that while pros and cons of privatisation is a popular topic for discussion at various forums, there hardly seems to be any emphasis on the reform of the governments. And whatever little effort is being made is more in the nature of treating the symptoms rather than curing the disease.

    Isn’t it a shame that the ineligible and most corrupt candidates are still allowed to enter the highest government office by amending the Constitution at will, and securing stay orders from courts in respect of serious cases/charges against them?

    And isn’t it surprising that the most powerful sector in Pakistan, which has taken upon itself the task of cleaning the country of corruption, starting with – and probably ending also with – Sindh, seems to be least bothered about the same ills, prevalent in a far greater degree, elsewhere in the country.

    And despite judicial activism of the recent past, no serious attempt has been made to define eligibility terms for the Assembly aspirants in a clear, easily enforceable form. And even the public-spirited individuals have not thought fit to file any petition at the court to get this matter sorted out.

    And the reason is quite simple:

    Being muddle-headed that we are, we spend most of our time barking up the wrong tree.


  • "The government’s privatisation is based on the premise that it is just not possible to turn around the state-owned and run enterprises...."

    as you have emphasized so clearly that "a businessman prime minister" should be able to turn PIA around, this is exactly what he is trying to do. No airline, no matter what fuel costs are could justify and survive with 18000 work force for the fleet of 50 odd airplanes. biggest drain is that. PIA has 370 odd people per airplane employed where as Emirates employ nearly half of that to a fleet 5-6 times in size. Only way you can survive in such dismal conditions is to let go of extra fat. In case of Pakistan that means nearly half of the work force has to go. That is the issue and ONLY way to turn around the airline with the budgetary limitations that PIA is facing. Another issue is the incompetency of extra-ordinary proportions. about 1000 HR assistance for 18000 employees!!!! i have known companies that have at max 10-20 HR people for 4-5K employees and they are managing it competently.

    So either way you look at it , whether it is by the public office or by private company, a lot of fat has to be trimmed. Irony here is that people who are providing solutions to turn around PIA in public realm are the very same people who are the cause of this issue

  • @ geelemitti

    My point was that the state-owned entities are owned, controlled, managed and mismanaged by governments. And if we find that an institution like PIA which was once pride of the nation, and for right reasons, gets to the stage that PIA has, it is surely due to the corruption of the successive governments which, instead of correcting the situation, put additional burden of their corruption on it, to submerge it completely, then surely governments are to blame for the situation.

    And while these SOEs are being placed on the chopping board, why no serious attempt is underway by any sector, official or unofficial, to at least ensure that the persons who enter the Assemblies and subsequently form a part of the government are vetted to ensure that only those who have a minimum acceptable level of integrity are allowed to participate in the process. Allowing cheats and scoundrels to enter the system on the strength of dubious ‘stay orders’ and other similar means is in fact the problem.

    You say that PIA has 1,000 human resource personnel to manage 18,000. This surely proves the corruption of various governments which overloaded PIA with their favourites. And the example further reinforces my argument.

    Also, transfer of control with 26 percent shareholding itself indicates undue favouritism, especially in the circumstances where PIA assets are grossly under-valued. For example, a house on 1,000 square yards plot in prestigious Mohammed Ali Society has been reported to be valued at Rs one crore sixteen lacs, which is more like the price of a house on a 200 square yards plot in a modest locality. There are doubts even about the valuation of Roosevelt Hotel in New York. And there could be other similar instances..

    While reduction in the price of aviation fuel from $ 127 per barrel on 29-11-2013 to $ 44 per barrel on 8-1-2016 may not solve all of PIA’s problems but it will surely reduce its losses significantly. Supplementing that with honest, cost-cutting measures including sale of PIA’s valuable assets in a transparent manner, at open market prices and creation of a fund to give golden handshakes to surplus staff could be done to trim excess staff. But the problem is that, far from inviting proposals from knowledgeable circles, the government is, in its familiar secretive manner, trying to bulldoze the deal using its majority in the National Assembly. Sounds like another MCB-type deal in the making.

    Well, that is how I see the situation.


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