Privatization has been a key constituent of structural reform programs in both the developed and developing economies. The target of such programs is to minimize public sector borrowing requirements through the abolishment of unneeded subsidies, to achieve greater microeconomic efficiency, to stimulate economic growth and to improve public sectors financial health. The problem with government owned enterprises is mismanagement, over-staffing and underinvestment. Public-owned companies management is inefficient because public managers face less monitoring as compared to their private sector peers and the idea of bankruptcy is not in their (public managers) dictionaries because they know in the back of their minds that in the scenario of financial trouble, their companies would be bailed out by the government. Private Managers do better management of their enterprises due to competition and threat of takeover, and due to the expectations of the stockholders for a return on their investments. Thereby, they reduce the production cost through dedicated supervision. Some school of thought has argued that partial privatization can solve the problems without the state having to deprive itself of control of the enterprises. But the fact is even partial privatization allows politicians to have an influence on the performance of the firm to attain political goals, and the subsidies also keep on flowing for the firms bailout. Moreover, the valuable tax-payers money that is disbursed in the shape of subsidies can be saved through the privatization of poorly performing enterprises. These saved resources can be reallocated towards social policy areas and reduction of domestic and foreign debts. Nationalization of enterprises had been a norm in socialist economies during the time period from 1950s to 70s. In 70s, Pakistan followed the Socialist model of economy. The reason underlying the then governments thinking for this extremely radical action of nationalization was the perception that national wealth was being concentrated in the hands of few families and the rich were getting richer and the poorer getting poorer. Two decades later it turned out that these assertions and assumptions that drove this particular line of action i-e nationalization were not only unrealistic and flawed but the consequences were exactly opposite to what the intentions were. In Pakistan, the fiscal deficit reached a high of 8.5 percent of GDP in 1987-88, which severely constrained the fiscal space available to the government. The collapse of the Soviet Union and the bankruptcy of the socialist model resulted in the wind flowing in the direction of privatization. There was a realization that private sector is more efficient because there are no bureaucratic hurdles involved in it. Then the trend changed all over the world. During the nineties, Pakistan started privatization of state controlled enterprises. For example MCB and Allied Banks were privatized in the early 90s. India followed Pakistan in the privatization process and implemented reforms of liberalization and deregulation when Mr. Manmohan Singh was the Finance Minister. The result of Indian reforms is quite evident before us. After having discussed the merits of privatization, we now focus on the specific case of Pakistan. In 2009-10, losses at government owned enterprises like Railways, Pakistan Steel, PIA, Utility Stores, TCP, NHA, Passco and Pepco caused a loss of Rs245bn to the national exchequer. Given the declining fiscal situation, losses on this scale are unsustainable. Therefore, it is evident that the need for privatization of these inefficient public-sector organizations can hardly be over-emphasized. The government instead of draining its scarce resources towards sustaining the large public-sector enterprises should concentrate on providing viable and conducive business environment. It should focus on providing basic infrastructure in the form of roads, airports, seaports, provision of inputs like water, gas, electricity and above all a pool of well-trained technical manpower and business managers. It should open universities and polytechnics to train the manpower and also ensure that the education sector is catering for these requirements. Its also governments responsibility to ensure that the economic interests of the country are not compromised by making unattractive deals while privatizing. Transparency and fair play should be insured at all costs so that bidders and private investors must develop confidence in the economy and the government policies. Having said that, during the privatization process, every country needs to adhere to certain sensitivities. There are certain strategic organizations which cannot be privatized. Such companies should not be privatized because of the danger of exploitation by the forces inimical to the interests of the country. NASR ULLAH KHAN, Islamabad, February 5.