The disadvantage of Privatization in Developing Countries: The option of Privatization takes place to enable competition in the monopolized sector, however, this experience has been proved successful in developed countries only while in developing countries it allows, those having political connections, nepotism and corruption, gain large wealth unfairly, with no economic gain for society and little or no care for poverty or social impacts. Privatization of Karachi Electric is an obvious example that led to woes of the masses reaching new heights with govt a silent spectator and while the private owners brazenly earn more and more by exploiting the agreement that was drafted more to their favor and less to the public favor.
The Woes of Public Sector Companies
Public sector companies of Pakistan are accruing annual losses estimated to be a Pak Rupee half to one trillion now while Sovereign Guarantees (which Govt of Pakistan undertakes on behalf of these public sector institutions to their suppliers/vendors) has crossed over to Pak Rupee 2 Trillion. And if asked for only one reason that caused the systemic destruction of the above companies is “Indefinite Job Contract” as a result of Nationalization.
While the 2nd reason is “Over Regulation” in the form of different cumbersome rules tying the hands of management officers to run the business unlike the managers of private companies who use their discretion as per their fair business judgment.
I assume Institutional Reforms and Civil Servant Reforms are interlinked with each other. Hence the same reforms can treat both. The major problems are:
Overwhelming Lengthy Procedures
The other day i.e. on 1st May 2021, I saw a newspaper advertisement by the Federal Ministry of Law & Justice of Pakistan with the caption “Vacancy Announcement” and strangely the “vacancy name” was missing in the whole advertisement of 90 words. The public servants are so overwhelmed with procedures that they forget the purpose of the advertisement.
A ridiculous and hugely expensive example/victim of lengthy procedures is a PIA aircraft (ATR-42) bearing registration number AP-BHN which is parked at Karachi airport and has been dismantled completely (means it can never fly again) just to provide parts to other aircraft due to shortage of parts owing to lengthy procurement procedures introduced in 2004 by PPRA. For imagining the loss, ATR-42’s aircraft market price is around US$ 15 Million and these ATRs are a new brand that was purchased to replace old Fokkers.
— Tribune Business (@TribuneBiz) February 11, 2018
Most Vulnerable Human Resource
And in the dearth of competent officers, a capable Civil Servant has been discarded. Musharraf Rasool, a bureaucrat from DMG Group who stood first in the nationwide CSS exam in 1990, later getting Ph.D. in Economics from Georgia State University USA, was given the top slot of PIA and during his brief period of 11 months in service he was able to put the airline on track as he did his Ph.D. in an airline environment. Administratively, despite being a civilian, he was able to get hold of CBA. Musharraf Rasool was sadly embarrassed by the then Chief Justice for reasons other than corruption.
And such is the operational constraint of public officials that the same newspaper on 01st May 2021 (a well-read top newspaper) contained the news of Pakistan Civil Aviation Authority (custodian of civil airports of the country) that they, CAA, had written to Police regarding the laser light being flashed on 32 aircraft in one year (a major safety issue). I first heard this in the year 2011 for the first time that laser light was flashed on PIA aircraft in Malir, Karachi area while on approach to land. Had it been followed properly, even a single policeman would have spotted the culprit and prosecute/punish immediately so that it should have never happened again.
Two Points Solution
No matter who is the owner, the state or a private party, the following two issues make the companies thrive or struggle :
Ending Indefinite Job Contracts for Public Sector employees
This was the first direct impact of the Nationalization of the 70s. The staff started enjoying indefinite job contracts and never worry about their performance. They even secure such indefinite jobs for their children also. I know a PIA employee who has three daughters and all of them employed in PIA and there are so many others. There was once a record when 5 siblings joined PIA the same day.
The indefinite contract tends to stall the company. The state-owned companies can be turned around if employees’ indefinite contracts are converted into definite ones even without privatization.
Simplifying The Company’s External & Internal Procedures
This is the 2nd most devastating cause of public institutions’ rapid decline. Since corrupt officials are rarely punished hence govt/companies tend to make more and more rules/regulations. These over regulations slow down the operation to almost a halt.
I was once happened to travel in the same vehicle with an on-duty DIG Police in Karachi who was lamenting that they had to re-appropriate the office stationery budget for fuel etc due to different procedural reasons so that police patrolling should not be compromised but he was fearful of later audit due to procedural violation though it was done in public security interest.
Simplifying these sourcing rules to match the market practice will give the managers an option to utilize their fair discretion in the interest of businesses like that of managers of private companies.
Mushtaq Jumma is an Ex-Airliner and Business Consultant. The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.