ISLAMABAD : The Advisor to Prime Minister on Finance, Shakat Tarin, has said that the government does not have the financial resources to pay huge subsidies, amounting to almost 5 percent of GDP, to Wapda and Railways alone. Addressing, as chief guest, the conference on 'Privatisation with Public Private Partnership' (PPP), he said that "these bleeding giants need to be privatised" so that the private sector could turn them around and make them successful business ventures.
"Although power sector is in urgent need of investment, the government is not in a position to spare any finances for this purpose," he said, adding that the only solution left "is to privatise the generation and distribution companies" so that the private sector could bring in the much-needed investment. The day-long conference, having technical sessions, discussed various aspects of the privatisation policy and way forward for privatisation program.
The Advisor said it was not the business of the government to manage factories, hotels, telephone companies, airlines or any other kind of business. "Pakistan has suffered over the years due to inefficiencies of inflated public sector where entities have been under performing due to underutilisation of available resources," he said.
Realising the need, he said, the first government of Pakistan People's Party introduced privatisation and public-private partnership for better management of public sector entities. The Advisor said that privatisation was initiated as an economic reform policy tool but later it was also used as an avenue for bridging the budget deficit, without any consideration to improve efficiency of the entities or to enhance revenue on sustainable basis.
The present government is aware of this distortion and has provided an apt policy response by bringing public-private partnership into the privatisation process. However, he said, privatisation alone was no solution to underdevelopment unless sectoral reforms were essential part of the prescription for improvement of the economy.
The government introduced far-reaching structural reforms in the banking sector during last 15 years. The government has already divested its major stakes in the banking sector and, consequently, 80 percent deposits are currently in the private banks as compared to 20 percent before privatisation, he said, adding that banking services had tremendously improved after privatisation and deregulation.
Tarin said that the number of scheduled banks increased from 5 in 1975 to 41 in 2008, with the consumers have more options in terms of service providers and banking products offered by different banks in a very competitive sector. Similarly, privatisation of the PTCL was accompanied by sectoral reforms in the telecommunication sector, which now has an efficient regulator in the shape of Pakistan Telecommunication Authority (PTA).
Adoption of international best practices in this sector has encouraged an investment of almost $9 billion as foreign direct investment (FDI), which has translated in a tele-density of almost 59 percent and the mobile telephony is being opened in still bigger ways, which will soon bring in 3G technology.
As Chairman of the CCOP, he urged the Privatisation Commission to focus its attention on privatisation of the public sector insurance companies, Pakistan Railways and PTDC so as to hand over these sectors to the private sector with a view to make their impact felt on the economy.
"We also need to develop our infrastructure by attracting private investment through public-private partnership (PPP). We must set our eyes on trade with our neighbours, particularly the Central Asian Republics, by developing our ports and road network. Long-term planning with a view to secure our energy needs from the oil and gas rich Central Asian Republics also needs our full attention," he added.
Tarin said that the perception about privatisation that family silver is being sold at throwaway price is also quite widespread among general public, media and other stakeholders. "I would like to state here that the process through which the Privatisation Commission divests public sector entities is a very elaborate one, and ensures transparency at all levels."
The Advisor said that the process of privatisation "is ever-evolving, and lessons are learned from each transaction". He said in his opinion an agreement with the owners of KESC guaranteeing supply of minimum power would have helped. Such an agreement would have bound the new owners to improve the system, which even three years after privatisation is still in doldrums, he added.
He said that the present government fully supports the privatisation process, and assured the conference that he had made efforts to support and assist all recommendations emerging out of this conference.
Minister for Privatisation highlighted the aspects of new privatisation policy and said that it cannot be accomplished in a vacuum without the support of all stakeholders including the various government agencies, departments and organisations and most importantly the people of Pakistan without whose continued support and understanding this process cannot be undertaken successfully. He said that in the history of privatisation, this is the first occasion that a conference of this magnitude has been arranged to invite views of so many learned and experienced professionals and other stakeholders.
Copyright Business Recorder, 2009
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