Here, it may also be indicated that the same EFF document indicates that Pakistan intends 'jumpstarting the privatisation process', but no details have been indicated as to whether the country will take the route of the so-called 'golden age of privatisation' from the time of end of 1980s to middle of 2000s, where mainly shares of SOEs were offered to investors with weak ownership of state retained under the overall assault of Neoliberal thought-process, but the same route, which in countries with weak economic institutions or regulation gave both a mixed bag of success/failure results, and also formed an important basis of the Global Financial Crisis [GFC] of 2007/08. Or instead, post-GFC 2007/08 route (or second era) of privatisation would be pursued where state retained significant control while listing big SOEs on stock-exchanges or by selling shares to strategic investors. There are important details to fill in subsequent EFF programme documents as follow-up over the privatisation process with regard to this.

Moreover, the same statement on privatisation (under the overall 'structural policies' section) from the EFF document (indicated above) needs to internalize the resurge in importance of SOEs globally post-GFC 2007/08, in turn- rethinking any unjustified euphoria towards the privatisation process, and only doing it where essential- as indicated by OECD's report (2019) 'A policymaker's guide to privatisation', 'These partially state-owned enterprises benefited from performance and efficiency improvements through the discipline of stock market listing or private ownership. On the other hand, mixed ownership allowed the state to maintain strategic participation in companies for which there remained a rationale for continued state ownership.'

Going back to the discussion of ownership models, the second type in this regard is the 'dual model' where 'two government institutions- in practice often one line ministry per SOE plus the ministry of finance- share in exercising the state ownership function'. The third model is the 'twin track', which is 'functionally equivalent to the centralised model, but with two different government institutions each overseeing a separate portfolio of SOEs. The model differs from the dual model in that for each SOE only one government body exercises ownership'. Many countries follow either of the two models in managing SOEs, and include Belgium, Brazil, Czech Republic, Germany, Switzerland, Estonia, Italy, Turkey, and New Zealand, among others.

Currently, Pakistan follows the fourth model of ownership, and that is the 'decentralised' model, where 'no one single institution or state actor exercises the ownership function. Usually individual ministries responsible for sectoral regularity functions exercise the ownership of SOEs in that same sector. Line ministries are perceived to be de facto running SOEs as an extension of their ministerial powers'. Other countries in Asia that follow this model include Vietnam and Myanmar. In Pakistan, given the lack of capacity of line ministries and any centralized oversight has meant that this model has not produced desired efficiency results for either SOEs or the overall economy. That is one of the main reasons why only one Pakistani SOE made it to the top 2000 largest companies globally in 2016.

On the contrary, the fifth model of ownership, the 'coordinating agency' model is an improvement over the decentralised model given extensive oversight aspect here for SOEs. In this model, 'a specialized government unit acts in an advisory capacity to shareholding ministries on technical and operational issues, with SOEs performance monitoring frequently being its most important mandate.' Having said, there is considerable overlapping with the decentralized model, yet for the reason indicated above there is indeed greater advantage that could be gained from the latter model. In Asia, countries that follow this model include India and the Philippines, where following the earlier example, 34 SOEs of India were in the top 2000 largest companies globally; although the Philippines had no company featuring in that list.

(Concluded)

(The writer holds PhD in Economics from the University of Barcelona; he previously worked at International Monetary Fund). He tweets @omerjaved7

Copyright Business Recorder, 2019