According to a Business Recorder exclusive, the Cabinet Committee on Privatisation headed by Adviser to the Prime Minister on Finance Dr Hafeez Sheikh expressed dissatisfaction at the performance of the Privatisation Commission. Sheikh has consistently shown a commitment to the policy of privatisation (he held the portfolio during Musharraf's regime), a commitment reflective of his belief that privatisation of state-owned entities (SOEs) would not only enhance their performance and thereby impact positively on their financial health but also reduce the pressure on the national budget - a pressure that has been rising each year with allocations well over a trillion rupees in the current year.
However, time and again, attempts to privatise were successfully resisted by powerful trade unions compelling previous administrations to abandon the exercise due to political considerations. Nawaz Sharif, committed to privatisation more than any other head of government this country has had, including the incumbent, was forced to issue directives to relevant ministries by end 2016 to stop the process of privatisation of distribution companies due to strike action by workers. This in all probability accounts for the Pakistani authorities pledge in the July 2019 Memorandum on Economic and Financial Policies submitted to the International Monetary Fund (IMF), a prerequisite for Board approval of the programme, that "privatisation is a key component with a revised strategy to select SOEs with minimal operational financial and human resource issues." And ironically though understandably the authorities highlighted those entities for privatisation that were already identified by the PML-N administration notably: (i) two newly commissioned RLNG power plants - Balloki and Haveli Bahadur; (ii) SME and First Women Bank; (iii) Jinnah Convention Centre and Services International Hotel Lahore; and (iv) sell-off of residual 18.39 percent equity in Mari Petroleum.
The Memorandum further notes that monitoring of SOEs would be strengthened with preparation of a report that would provide an overview of the sector, list of government-owned companies sub-divided into industries/sectors, how the government exercises its ownership, the impact on government finances, information on individual companies (including financial statements) and decide by-end September (structural benchmark) whether to retain state management, privatise or liquidate. Enforcing the SOE legal framework as well as establishing a holding company (a key proposal aired by the then finance minister Asad Umar) and the Memorandum indicates that "we are consulting with IMF staff to ensure that adequate governance and proper safeguards are in place". And increasing SOE transparency the time bound action plan in the programme requires the submission by end September of financial statements (cash flow, income statement and balance sheet) and operational indicators of the three white elephants - Pakistan Steel, Pakistan International Airlines and Pakistan Railways.
To conclude, Pakistan's privatisation programme pledged in the current Fund's Extended Fund Facility is less ambitious than the one agreed in 2016; however one would assume that nonetheless it takes account of 'human resource issues'; and while the Adviser has few, if any, political considerations yet Prime Minister Imran Khan would be sensitive to trade union response to an attempt to privatise as well as to accusations of selling the family silver at throwaway prices - a charge that he levied against previous administrations. In other words, this pledge by Dr Hafeez Sheikh to the IMF would perhaps be the most challenging to implement.