There is a catch in the much awaited admission of Pakistan’s Finance Minister, Abdul-Hafeez Shaikh, who has stated that ‘government interference ruined state-owned enterprises’. He still believes that the official policy of public-private partnership, as envisaged and approved by the federal cabinet, can rescue these enterprises. I am afraid that the catchy phrase of public-private partnership can only do more harm, both to the state and to the market. When the ownership remains with the state, management restructuring of state owned enterprises such as PIA, will only yield more disappointments. A commercial firm delivers when it fancies returns and fears risk. When the ownership still lies with the state, like the erstwhile ministries of defense and industries, there is no risk of failure. It has been famously said that when a business fails, it closes down; when a state agency fails, it increases its budget. Thus even in the presence of an apparently efficient management, though without assuming complete control of assets, political leadership may be compromised to take anti-business decisions. If we look at the 20 years long history of privatization in Pakistan, it is evidently clear that 99% of proceeds of the $9 billion received so far have come from sale of assets through tender and public auction and sale of shares through stock exchange. If we take out the controversial transaction of KESC from this bundle, we cannot cite even a single dollar earned from management contracts except those given to the employees of state owned enterprises. Thus the trick is not just management restructuring, it is transfer of ownership. Economic freedom is freedom from the government. A public-private partnership may still be half truth!
Submitted by Ali Salman