Strange signals continue to emanate from the Privatisation Commission (PC). One gets the feeling as if the Chairman PC feels that the world is against him and he is on some kind of a self-assigned holy mission. Statements to the effect that he is not going to wait for or perhaps re-think vision for anyone is not mature behavior and losing one’s cool at briefings on television talk-shows does not help either. On one such talk-show was disappointed to hear him say things like, on why he needs no help in learning more about good corporate governance (assuming he knows it all); how he is working without any remuneration and sacrificing ‘lakhs and crorers’ which he could have earned otherwise working as a professional in the corporate world; and how anyone moaning about transparency or conflict-of-interest at the PC can just take his case to the top 500 corporations of the world for them to ascertain the quality of work in his organization, as all such notions sound rather childish and extremely un-professional. He needs to remember that these are public’s assets he is trying to sell and at the end of the day he is answerable to the people of Pakistan for any wrong sale of assets that rather have been retained than sold off!

Also, what will help PC’s cause is if it takes into account that its ambit is not limited to mere ‘selling’. The concept of privatization is in fact a much broader canvas which simultaneously takes into account optimizing government’s returns and retaining its healthy foot-print in the corporate world. And this in a manner that helps leadership in meeting national social objectives and discharging good governance by maintaining market equilibriums, ensuring equitable distribution of resources and growth, and last but not least, by harnessing partnering private sector entrepreneurial skills in achieving management efficiencies. All this requires vision, planning and formulating a long-term strategy. The 2000 Privatization Ordinance that they keep referring to as their ‘Bible’, is by the way a Musharraf era document, the mentor of which is ironically being tried for treason! The economic philosophies, post 2008 financial crisis, have undergone a paradigm shift and so has the thinking on the phenomenon of privatization. Under the new rules of globalization the earlier simplistic notion citing ‘states should not be in the business of running businesses’, is increasingly being shunned both by the developed and the developing world to instead opt for options on the need for public companies to build value for the long term.

In fact, since the state enterprises have to balance multiple functions other than just profit making, they are these days being increasingly encouraged to focus their new capital investments mainly on the long term. Meaning, they should not merely be seeking short term objectives, but instead be endeavoring to: a) Define long-term objectives and risk appetite, and then go on to invest accordingly. The managements should set a multiyear time frame for creating value, decide how much underperformance they can tolerate in the short term, and then align their investments and performance benchmarks with this agenda, b) Demand long-term metrics from respective governments. Implying that governments should seek to obtain and analyze data that indicate a company’s long-term role and health rather than just focusing on quarterly or annual results, and c) Structure institutional governance to support a long-term approach. Emphasizing that state enterprises must have competent board members committed to investing and structuring the organization for the long haul, as well as formulating policies and mechanisms to translate this philosophy into action.

Until 2008 going global seemed to make sense for just about every company in the world. Since then that reality has somewhat changed to one of guarded globalization. Governments, especially those of developing countries, are becoming wary of opening more industries to multinational companies. They are defining national security more broadly and perceiving more and more sectors to be of strategic importance, taking active steps to deter foreign companies from entering them and instead promoting domestic, mostly state-owned enterprises in their place. Indeed, the rise of state capitalism in some of the world’s most important emerging markets has altogether altered the global corporate mix. To factor new-globalization’s new risks governments these days are striving hard to identify every industry’s strategic importance to national governance and a nation’s interests. State capitalism tries to meld the powers of the state with the powers of capitalism. It relies on government to pick winners and promote economic growth by using capitalist tools such as listing state owned companies to ensure management’s accountability and by embracing globalization. Today this strategy of using the combination of state’s might and resources and blending it with professionally managed state enterprises in order to compete effectively and capture increased global market share is well and truly flourishing around the world. Dynamic and leading emerging global economies are freely using this tool to stride out onto the global corporate stage. State-owned companies account for 80% of the market capitalization of the Chinese stock market, more than 60% of Russia’s, and 35% of Brazil’s. They make up 19 of the world’s 100 biggest multinational companies and 28 of the top 100 among emerging markets. The challenge for our Privatization Commission also lies in coming up with a vision and strategy that optimizes the role of state owned enterprises in dispensing good economic governance. In first endeavoring to find ways and means to turn around the strategic national organizations and only in case a particular sale is absolutely necessary to then transparently share (with the public) its comprehensive disinvestment plan on how the sale will become a win-win for all stakeholders. Point being: Why should we be always swimming against the tide?

The writer is an entrepreneur and economic analyst.

Email:kamal.monnoo@gmail.com