Chairman PC, Muhammad Zubair, is reported to have briefed the minister on the privatisation programme approved by the Cabinet Committee on Privatisation (CCoP) and presented the status of the ongoing privatisation transactions and post-privatisation matters. Unfortunately, however, the PML-N government has done little or nothing insofar as restructuring or privatisation of PSEs is concerned.
Pakistan International Airlines (PIA) has accumulated liabilities of over Rs 300 billion and an additional loss of over Rs 5.6 billion is being added to this amount every month as disclosed by the PIA management to a Senate Committee at a briefing this week. By the time, the government completes its five-year tenure in May 2018 the accumulated figure will soar to nearly Rs 400 billion. Senate was informed the airline earned around Rs 7.5 billion a month while its expenses were over Rs 13.14 billion, which is twice the amount of earnings. The Senate Committee is reported to have expressed its shock at the PIA mess. However, it could not come up with any concrete strategy aimed at finding a viable long-term solution.
Further, the National Assembly Standing Committee on Industries and Production chaired by Asad Umar of PTI took a presentation from the officials of Pakistan Steel Mills (PSM) this week. The losses of PSM have piled up to Rs 167 billion and its liabilities have reached Rs 178 billion. The current government had inherited accumulated liabilities of around Rs 120 billion and almost zero capacity utilisation in mid-2013. Since 2008, PSM has been surviving on bailout packages.
The government is now planning to go for a "lease-based transaction structure for PSM". An Iranian steel company and a Chinese investor have shown their willingness to acquire the mills. It is reported that after the approval by CCoP Expressions of Interest (EoIs) would be invited.
Same is the case with power utility companies in the public sector. The power generation and distribution companies are also causing a huge burden on the national exchequer. The never-ending circular debt is the consequence of the pathetic performance of these entities.
The Senate and National Assembly committees have debated extensively on PIA and PSM but could not agree on a joint strategy that could lead to a solution. While those in opposition advocated restructuring the entities to make them profitable others in the government were in favour of privatisation; they failed to evolve consensus on the future of these ailing entities. But all of them were unanimous in expressing their shock on the level of losses these units are making. This is what they could do. There has been no serious and result-oriented debate in the parliament on this subject of great public interest.
The Privatisation Commission of Pakistan (PC) started of well in 2013 with the privatisation process. They appointed well-reputed financial advisors through a transparent process of selection. The advisors and the PC did a fine job in a short period of time, but, just when the process was ready to be rolled out for privatisation, the government opted to pull out of privatisation under pressure from the opposition and the prospects of grim labour protest.
The majority of financial advisors have packed their bags while some have been issued notices of termination of agreement. The entire process of privatisation, by and large, stands aborted. Nothing worthwhile is likely to happen in the remaining tenure of the present government. If one reviews the structure and profile of the governing boards of management of the public sector entities it is not difficult to conclude that any attempt to restructure these entities with a view to making them profitable will be an exercise in futility.
The IMF has described Pakistan as a country which is at economic crossroads. But the Fund has warned that unless Pakistan puts in place a comprehensive strategy for reforms, investments, exports and growth, it will be unable to service the debt liabilities of the China Pakistan Economic Corridor (CPEC) and that this would lead to a debt trap that would be difficult to navigate.
The exports and investment are at their lowest, growth is sluggish and based on weak foundations and reforms are woefully in adequate. All these red flags constitute a sure recipe for a looming disaster.
(The writer is former President Overseas Investors Chamber of Commerce and Industry)
Copyright Business Recorder, 2017