LAHORE (PR): The government is losing around Rs700 billion annually in the state-owned entities and after seeing the determination of the present government to go ahead with its privatization plan, the elements against privatization are diverting its attention by questioning privatization done 25 years back.
Tariq Iqbal Khan, former chairman of National Investment Trust (NIT), said that the government on its part has fallen in the trap and has not defended strongly the privatization done by the same prime minister.
“NAB inquiring a 25 years old privatization deal of MCB Bank is beyond any logic as there is no law that permits such an inquiry and bind the bank and/or its shareholders to keep decades old record,” he said and added that the only laws relevant to the issues are Privatization Act 27(b) which permits the investigation of privatization deals only up to 1 year old; and Income Tax Law which requires record to be kept for 10 years.
While giving his thoughts on nationalization, Tariq Iqbal Khan said that nationalization of banks in 1970s played havoc with the financial sector. Non-performing loans soared as the loans were sanctioned not on merit but on political grounds. The MCB was privatized in the first instance and from number 3 bank in 1989 rose to number 1 bank in the next 4 years time.
The banking industry was further reformed; the regulation became further stricter and vibrant. The consumer benefited as in the case of long term deposits the banks offered better rate and services in competitive environment. Again, the example of ABL is very significant as the bank which was heading towards complete failure and was facing bankruptcy was privatized and now it has risen to number 4 after MCB, HBL and UBL. The example of National Bank is also there being the only bank operating under the direct control of the federal government and the services of the bank are deplorable.
‘All major political parties including Pakistan Peoples’ Party concede that nationalization of industries services and financial sector was a blunder; still many are reluctant to correct that blunder by privatizing state owned enterprises,’ he added.
The government has a primary role of governance and regulation. The government officers are not trained to manage and operate businesses. The government works in a manner that there is a shared responsibility which is demonstrated in decision making through cabinet, assemblies, standing committees in assemblies, hence no single person makes a decision and the decision making is carried out through collective wisdom. In businesses the boards are responsible for policy framework while the executives are responsible to carry out the day to day operations in the light of policy framework.
‘Due to the above difference of working, nationalization has not succeeded in any country and any jurisdiction,’ he said, adding that no country is now following classical model of socialism or capitalism where the base is that all industrial production is carried out through nationalized industries.
In case of privatization, theoretically, the operator would end up making profit, while recurring losses will be nil. The taxes from private owner would further add resources for development.
Pakistanis have firsthand experience of the havoc caused to the national economy by the SOEs. Only a handful of those that derive huge benefits from these enterprises oppose the move.