Pakistan, under the gospel of market reforms being pushed by the neoliberal ideology, associated with Washington Consensus, is aggressively pursuing the policy of market liberalization and privatization. The periods from the late 1970s and 1990s witnessed a major upsurge in neoliberal ideas in the context of the development process and development strategies.
The neoliberal market philosophy advocated a new development model based on the primacy of individualism, market liberalism, out ward-orientation and state contraction. The organizing principle of the neoliberal political economy was the notion of a minimal state, whose primary function was to secure law and order, ensure macroeconomic stability and provide the necessary physical infrastructure.
The new orthodoxy identified widespread and excessive state intervention as the major cause of weak economic progress. The natural implication of the diagnosis was that the market should be liberated from the distorting influence of large public sectors, pervasive controls and populist interventionism. Neoliberal thinking exercised important practical influence on the policy discourse of key Bretton Woods institutions such as the IMF and the World Bank. The central tenet of neoliberal thinking and the associated ‘Washington Consensus’ was to ‘getting the prices right’. The state itself was conceived as the problem rather than the solution. The universal policy proposal was to pursue a systematic program of decreasing state involvement in the economy through trade liberalization, privatization and reduced public spending.
Pakistan during 1990s after being hit by economic downturn was forced to adopt Structural Adjustment Program(SAP) under the IMF to reform economy suffering from macroeconomic instability. Under the SAP, it adopted the policy of market liberalization, privatization and deregulation. Islamabad, since then seems to have indulged in privatization binge under which plans have been set to sell off a number of public sector institutions in sheer hurry, without realizing the negative consequences on the socially marginalized classes. By June 2009, Government of Pakistan had completed or approved 167 transactions at gross sale price of Rs 476.421 billion. According to the Privatization Commission Ordinance 2000, 90 percent of the proceeds would be spent for debt servicing, 10 percent would go to poverty alleviation programs.
Privatization under BB
The privatization of State Owned Enterprises (SOE) became an important instrument of the state economic policy in late 1980s. In 1988, the new government of Benazir Bhutto appointed a British firm M/s N.M. Rothschild, as consultants, to undertake a study on privatization strategy and selection of prospective candidates. The consultants submitted their report to the government in May 1989.
The report recommended privatization on widespread ownership basis as an appropriate strategy for Pakistan. By “Wide Spread Ownership” the consultants meant development of Pakistan’s capital markets. After analysis of more than 50 companies, the consultants short-listed seven companies as potential candidates for widespread offers. These included Habib Bank, Muslim Commercial Bank, Pakistan National Shipping Corporation (PNSC), Pakistan International Airlines Corporation (PIAC), Pakistan State Oil (PSO), Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Ltd (SNGPL).
The government, following the advice of the consultants, undertook privatization of SSGC that was recommended as a leading candidate for privatization. However, after having done the entire spadework, the proposal to privatize Sui Southern was abandoned. Instead, it was decided by the government in January 1990 to disinvest 10% shares of PIAC, amounting to Rs. 274 million, 30-40% shares of Pak Saudi Fertilizer and 60% shares of Muslim Commercial Bank (MCB). Ten percent shares of PIAC were disinvested.
Privatization under Zardari
In its second tenure of on-going period under Gilani’s PPP government lately, Ministry of Privatization has been channeling most of its time and energy in following the IMF economic policies in devising an improved Privatization Policy. This new policy was approved by the Cabinet Committee on Privatization and then ratified by the Cabinet. The main objective of the new privatization policy (Public Private Partnership (PPP) is to disinvest 26 % equity stake with management rights through a PPP model.
This PPP model for privatization will not apply to the capital market and asset sale transactions. The Privatization Commission will put to consideration the practicability of bundling similar entities from the same sector for privatization.
After the registration of seven new Benazir Employees Stock Option Scheme (BESOS) Trusts in distribution and generation companies of Power sector for the disbursement of free of cost 12 % GoP shares and dividend under BESOS, the Privatization Commission (PC) has so far registered 49 Trust in the State Owned Entities (SoEs), which according to government will benefit more than 200,000 workers.
The newly registered Trusts have been established in Faisalabad Electric Supply Company (FESCO), Quetta Electric Supply Company (QESCO), Hyderabad Electric Supply Company (HESCO), Peshawar Electric Supply Company (PESCO), Multan Electric Supply Company (MEPCO), Central Power Generation Company (CPGCO) and Lakhra Power Generation Company (LPGCO).
According to government Rs.1.613 billion has been disbursed among 16044 employees of seven entities while PC has received Rs.1.452 billion in its Revolving Fund. These companies include Oil & Gas Development Corporation Limited (OGDCL), Pakistan Petroleum Limited (PPL), Pakistan state Oil (PSO), Mari Gas (MG), Pakistan National Shipping Corp (PNSC), Lakhra Coal & Development Co. (LCDC) and National Insurance Company Limited (NICL).
The new menu of privatization
The current PPP government decided to take Pakistan Steel Mills and PIA off the privatization menu. This amounts to a major reversal of the previous policy. The Cabinet Committee on Privatization (CCoP) approved a new menu of privatization based on public private partnership (PPP) with transfer of management control and 26 percent shares of 21 state owned enterprises (SOEs).The new policy also envisages transfer of 12 percent shares of all SOEs to the workers of these entities.
In view of the international financial turmoil and global recession, CCoP has not fixed any timelines or targets for the completion of privatization process of the said SOEs and these would be taken to market when feasible. According to the Minister for Privatization, CCoP has approved privatization of four electric supply companies—Peshawar, Hyderabad, Faisalabad and Quetta. Besides, National Insurance Corporation, Pakistan Reinsurance Corporation, and State Life Insurance Corporation will also be privatized.
The approval has also been granted to the privatization of SME Bank, National Power Construction Company, Pakistan Railways, Heavy Electrical Complex, Pakistan Machine Tool Factory, PTDC Motels and Restaurants, USC, Pakistan Post and Kot Addu Power Company. Similarly, Privatization of Pakistan Post would be based on PPP model and this important organization would be converted into a Post Office Bank after privatization. The Cabinet Committee on Privatization (CCoP) approved leasing out of Thermal Power Stations of Jamshoro Power Company Limited (Jamshoro and Kotri).
Though the PPP government wishes to go for privatization yet workers resistance has stalled the process. We need to build this resistance and defeat the entire process.
Khaliq Shah