Privatisation
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Introduction
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Why privatisation?
When started?
Objective

Designed to cut the welfare role of the state and there was thinking in
1970’s that welfare role of the state was promoting the economic
nationalism around the world, especially in developing countries.
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By 1980’s around 100 countries embarked upon the privatisation

State controlled Economies like USSR and Eastern Europe and developing
countries of Asia, Africa and Latin America jumped on the bandwagon of
privatisation and handed over vast national assets to the private merchants.
Privatisation

Pakistan joined the process of privatisation
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According to Privatisation Commission Ordinance 2000,
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Privatisation have following objectives:
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Generation of revenues for debt retirement
Improvement of quality of and quantity of good and services
Reduction in corruption
Creation of employment opportunities
Reduction of poverty.
None of the above objective has been realised.
Privatisation
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Background.

1970s and 90s witnessed major upsurge in neoliberal ideas in the
context of development process and development strategies.

The development policy of ‘counter revolution’ envisaged:
a.
the greater role of market in place of state; it was accused of creating
b.
Primary function is to maintain law and order, ensure macroeconomic
stability and provide the necessary physical infrastructure.
c.
Widespread and excessive state intervention was seen as the major
cause of weak economic progress ( but this is not true)
Privatisation

The policies of the Counter Revolution got extra boost with the
induction of the conservative governments in the USA, UK, and
Germany.
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The world’s financial institutions like World Bank and IMF were
pressurised to abandon doling out aid to the developing countries and
basic need strategy.

They were asked to adopt more monetarist approach to correct the
global economic situation.

As a result, the MacNamara, the main architect of the basic needs
strategy, resigned from the presidency of the Bank.
Privatisation

The International Keynsianism, which dominated the global economic
scene for three decades, was rolled back, the role of the state in
economic policies was curtailed.

The New Political Economy (NPE) was created to shape the new
market, new society and state.

Under NPE, the universal policy proposal devised, of which aim was to
pursue a systematic programme of decreasing state involvement in
the economy through trade liberalisation, privatisation and reduced
public spending.
Privatisation
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Impact of Privatisation
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According to neoliberal economic critique, Joseph Stigliz,
stabilization prescriptions offered by IMF are
counterproductive and have totally failed to yield the result
initially expected.
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He further argues “the dreams of open market economy
have proved unrealistic and there is wide spread anxiety in
global economy due to privatisation.
Privatisation
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Transparency of Privatisation process
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
According to report, released by Auditor General of
Pakistan in 2002, whopping Rs 70 billion that the
government earned from privatization had gone missing and
no one has a clue to where the money has gone.
International experience or privatisation
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USSR, Chile,
Privatisation
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Privatisation as tool of class politics.
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Some studies and researchers consider privatisation as
move to exploit people by controlling the means of
production, that is services providing basic utilities of life
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to break the up public employee unions
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To reduce the provisions of services.
Privatisation
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Privatisation designed to promote market-oriented political values.
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Privatisation in developing countries.
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Socialism was one of the popular economic systems after Russian
Revolution.
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To check the tide of socialism, the strong role of the state in the
development process was envisaged, especially during interwar period
(1919-1939) just to control the labour movements.

This role of the state continues till 1980, a period marked with worst
economic crisis in which so many big economies of Latin America defaulted
on the debt payment.
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In the light of those policies, ‘Washington Consensus’ devised the tool of
privatisation with the aim to weaken the third world states by controlling
them economically.
Privatisation
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Pakistan joined SAPs in 1990s after being hit by economic downturn.
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Under SAP, it adopted the policy of market liberalisation, privatisation and
deregulation.
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Since then it has been hotly pursuing privatisation under plans have been
made to sell off a number of public sector institutions in sheer hurry, with
realizing the negative consequences on the socially marginalized classes.
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In the last 15 years, from 1991 to 2006, Govt of Pakistan has completed or
approved privatisation of 160 units at gross sale price of Rs 395.241 billion
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Only PTCL privatisation fetched 2.5 billion.
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According some studies since 1990, 0.6 million worker have been rendered
jobless
Privatisation
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Privatisation process in Pakistan
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If not fully, the partial role of private sector under the state
patronage was recognized soon after the creation of
Pakistan when in 1948, the statement on Industrial policy
emphasized the role of private sector

Except for few areas like manufacturing of arms, hydel
power, atomic energy, railways and telephones, all other
areas were left open for private investment.
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Further Pakistan Industrial Development corporations
(PIDC) was set up in 1950, with the objective to promote
such enterprises where private sector was hesitant to invest.
Privatisation
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The years form 1972-74 saw complete reversal in economic
policies and state moved into transfer private ownership to
public ownership
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The bigger role of state in the process of development envisaged.
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Under Economic Reforms Order 1974, major industries (steel,
cement, heavy engineering etc) were taken over by ZAB regime.

Banks insurance, shipping, petroleum, marketing and distribution
companies were nationalized.
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As a result of all these measures, the share of public sector
increased fro 48.9 percent in 1960-70 to 71. 5 percent in 1975-76.
Privatisation
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Zia and denationalisation of nationalised industrial units.
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The nationalised units were returned back to their original owner through
the promulgation of Transfer of Managed Establishment Order in 1978.
Objectives of Privatisation in Pakistan.
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According to PC Ordinance 2002, major objectives of privatisation process
in Pakistan are:
a.
b.
c.
d.
e.
f.
g.
h.
i.
Debt Retirement: 90% of the privatisation proceeds will be used for debt retirement
Poverty Alleviation: 10% for poverty alleviation.
Enhance the quantity and quality of goods and services.
Strengthen public finance
Broaden and deepen capital markets
Reduce opportunities for corruption
Maintain and create employment
Decrease misuse and corruption of public property by government officials.
Reverse flight of capital aboard and repatriate capital already transferred.
Privatisation
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First BB regime and privatisation.
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M/s N.M Rothschild appointed as consultant to undertake a study
on privatisation. It submitted a report to govt. in 1989,
recommending the widespread privatisation.
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After analysis of 50 companies, Rothschild shortlisted seven
companies as potential candidate for widespread offer.
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These were: Habib Bank, Muslim Commercial Bank, Pakistan
National Shipping Corporation (PNSC), Pakistan International
Airline Corporation (PIAC), Sui Southern Gas Company (SSGC)
and Sui Northern Gas Pipelines Ltd (SNGPL).

Govt. abandoned the privatisation of SSGC but disinvested 10%
shares of PIA amounting to Rs 274 millions, 30-40 % shares of
Pak-Saudi Fertilizer and 60% shares of MCB.
Privatisation
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Privatisation 1991-93
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Nawaz Sharif after assuming office of PM, declared
privatisation as its primary economic policy objective.
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The agenda of privatization covered a wide spectrum of
fields like industries, banks, development finance institutions,
telecommunications and infrastructure facilities.
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The period of Nawaz Sharif government saw massive
privatization in all sectors of manufacturing, cement, Ghee,
Rice and Roti plants.
Around 68 units handed over to private owner from 1991 1993.
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Privatisation
Privatisation performance in Pakistan (1992-94)
Sr.
Category
Better
Same
Worse
Total
1
PMEs*
9
13
16
38
2
Misc
3
10
1
14
3
Ghee Millis
2
12
5
19
4
Rice Mills
2
-
6
8
5
Banks
2
2
-
4
Total
18
37
28
83
Percentage
22
44
34
100
Source: Impact and analysis of Privatization in Pakistan: ADP Report October 1998.
*Public Manufacturing Enterprise
Privatisation

According to the study of Dr. Akhtar Hasan Khan “Is Privatisation purposeful”, many
industrial units were closed and assets stripped.
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As a result of that growth rate come down form 6% to 4%
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For example Al-Gazi Tractors was closed as buyer was not interested to run the
company. He removed the machinery and sold the land.

In other case cartels were formed. DG Khan Cement and Mapple Leaf Cement had
merger in order to exploit the consumer.
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Other case of Kot Adu Power plant, of which 36% shares were sold at the price of
US$291 millions
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Interesting thing about this was that the minority shareholder was given the
management of unit which was never been done in the corporate history of the
world.
Privatisation
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Privatisation from 1994-2000
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During this period 36 industrial units were privatised.
Chemical units remained at the top with 7 transactions, followed by
newspapers and textile with 4 each.
Privatisation in 2001-02
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During this entire financial period, the total value of privatised transactions
was Rs 19.6 billions but in the last three and half months before handing
over of power from military to civilian elected representative, the privatised
transaction amounted to Rs 15.billions
The other two in explicate transaction were related to UBL and Pak Saudi
Fertilizers.
Pak Saudi Fertilizer was one of the profitable industrial unit but sold to Fauji
Foundation.
Before the privatisation of UBL, GOP poured Rs 30 billion to cover its nonperformance loans and make it saleable.
Interestingly, it was sold to foreigners for mere Rs 12.35 billions. GOP lost
Rs 17.65 billions.
Privatisation
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Privatisation in 2003-2005
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During this period total of 19 transactions completed. The
total amount realised from these transactions amounted to
Rs 76.29 billions.
Pakistan as Hunting ground.
Privatisation

General impact of privatisation
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Diminished quality of life
Lower employee morale and productivity
Worker exploitation through lower wages
Increased discrimination against women and children
Loss of government control and sovereignty
Increased corruption, bribery and kickbacks
Increased conflicts, strikes, grievances, and arbitrations.
Privatisation
Chronology of workers alliances against privatisation (1990-2005)
No
Name of alliance
Period
1
Anti-Denationalisation Action Committee (ADNAC)
1990
2
All Pakistan Enterpirsed Workders Action Committee (APSWAC)
1991
3
Trade Union Action Committee(TUAC)
1993
4
Pakistan Workders Confederation (PWC)
1994
5
Union Action Committee (UAC)
2005
Privatisation
 Conclusion