Hasty privatization of SOEs to lead to monopoliesBreaking

April 30, 2024

The government of Pakistan has recently made significant strides in the privatization drive, particularly in addressing the financial woes of the state-owned Pakistan International Airlines (PIA) and outsourcing of three airports. Talking to WealthPK, Additional Secretary Finance Aamir Nazir Gondal said these advancements highlight a wider initiative by the Privatization Commission to overhaul the economy through a gradual privatization approach, targeting the entities considered peripheral to the national interests. The urgency to privatize stems from the staggering losses incurred by the state-owned enterprises (SOEs), which have reached a staggering Rs500 billion annually, contributing to a cumulative deficit of nearly Rs2.5 trillion. Such financial haemorrhaging not only burdens the taxpayers but also poses systemic risks to the financial sector, as highlighted by the World Bank.

"Despite successive governments' attempts to sustain these losses through borrowing, the current administration is compelled to pursue privatization as a remedy," he pointed out. He further said under the auspices of the Special Investment Facilitation Council (SIFC), Pakistan aims to attract substantial investments from the Gulf nations, with expectations of over $50 billion from the UAE and Saudi Arabia alone. However, the progress in this regard has been modest, with only minimal investments made thus far. As part of its structural reforms, the IMF has also emphasized the privatization of key entities such as the PIA, Pakistan Steel Mills, RLNG power plants, and electricity distribution companies. This aligns with the broader goal of curbing fiscal deficits and enhancing efficiency in the economy. Talking to WealthPK, former investment minister Haroon Sharif emphasizes the significant success achieved through privatization in sectors such as banking, telecom, and media.

However, worries about economic volatility, legal challenges, and opposition from the trade unions emphasize the importance of transparent and fair privatization procedures. Talking to WealthPK, Zafar Masud, President/CEO of the Bank of Punjab, emphasizes the importance of sustainable growth through private-public partnerships (PPPs) and cautions against hasty privatization that may lead to monopolies. He calls for stringent regulatory oversight and criteria which promote competition and long-term economic prosperity. Despite challenges, the government remains resolute in its privatization agenda; however, without comprehensive reforms and transparent practices, progress in this endeavor may remain elusive, he added.

Credit: Independent News Pakistan