Privatisation in Pakistan

Privatization (Spontaneous phase: 1989-1993)

The momentum and demands for denationalization gained currency towards the end of the government of Prime minister Zulfikar Ali Bhutto and Pakistan Peoples Party who under intensified their nationalization 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. 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. 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.

As an aftermath of 1988 general elections, Benazir Bhutto and the peoples party returned to power, promising to denationalized and replace with the industrialization programme by means other than the state intervention. But controversially Benazir Bhutto did not carried out the denationalization programme or liberalization of the economy. No nationalized units were privatized, few economic regulations were reviewed. The partial privatization began to kick off by Chief Minister of Punjab Province Nawaz Sharif who presided the liquidation of many industrial units put under provisional government to private sector. 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.

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

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 1990-93, around 115 industrial units were hastily privatized, including the privatization two major banks, 68 industrial units and 10% Shares of Sui Northern Gas Pipelines Limited.

The privatization programme came with great surrounding controversies with lacked competition as the programme was largely controlled by favored insider. The recklessness and favoritism shown in privatization 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.

Privatization phase (1993-1999)

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

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

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

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. All stock exchange, stock markets and the second phase of the privatization programme were immediately halted by Prime minister Nawaz Sharif until his government was ended in 1999.

Privatization (intensified phase: 1999-2008)

After the end of government of Prime minister Nawaz Sharif, Pervez Musharraf invited Shaukat Aziz to take the control of declining economy of Pakistan. 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. 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. 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 privatization discussion began to take place on usual based. 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.

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

Aziz forcefully and aggressively pushed 100% privatization of state-owned corporations while virtually planned to privatized 85% of banking sector. Starting from 2003 until 2007, Aziz successfully privatized 80% 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.

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....!

Intensified privatization policies had major impact on public sector organization which diminished with the privatization of the state-owned corporations. Prime minister Aziz defended his privatization programme as he maintained that "these institutions viable while they were on the verge of collapse.". Aziz's privatization 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 privatization programme suffered a major set back which initially halted the privatization programme in the country. The Supreme Court halted the privatization 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. The proceedings and Supreme Court's decision initially halted Aziz's intensified and aggressive privatization programme at the end days of his tenure.

Public perception

The privatization programme still marks the question of "big" controversies. In public circles, it has generated much more heated debates where it is perceived to have more negative impact on civil society. The general perception remains highly contentious and polarizing issue in the civil society, gearing up the negative sentiments among the population, including the continued injection of public money in many privatized entities and less than expected improvement in the services. Although, the programme produced a relatively faster and efficient way of promoting competition and enhancing growth, on the other hand, the programme experienced the exponential increase 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.

But on the other hand, a significant support for the privatization 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. Overall, the GDP rate grows smoothly with privatization programme remains in effect as opposed to nationalization programme that it had dropped the GDP growth rate of Pakistan, Dawn maintained. 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.

Adversary opposition

Despite its success, the public sector organizations, labor and workers unions remained extremely hostile towards the privatization programmes. 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). Despite the demonstrations the state-corporation was privatized by Shaukat Aziz which resulted in workers’ losing their jobs.

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

The Pakistan Peoples Party's intellectuals remains skeptical about the privatization programme and targeted the controversial implementation on numerous occasions. 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 privatized Madrassah system of education has been patronize different sects of religion, patronize different sects of religion, and further exploited as source of religious extremism and associated with terrorist outfits and their offshoot. The private sector education system negative effects of private sector education and it hashas created a disparity between the rich and the poor.

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 privatization has not been successful as was originally perceived are economic reasons and socio-psychological and political reasons. In the 1990s, the privatized enterprises have laid off employees by introducing schemes like golden hand shake.