Industrialisation is the key to the development of any economy and while small and medium enterprises play an important role in providing jobs, technological intensive heavy industries, such as shipping, auto manufacturing, electronics, aviation, are essential for the industrial and economic progress of any country. However, these industries are capital intensive and require government patronisation especially in a developing country.
Thus, in the 1960’s, the government helped the private sector establish capital-intensive heavy industries, and what followed were years of industrial and economic progress. On the other hand, when capital heavy industries such as Pakistan Steel Mills and cement factories were established under government patronage, they were, generally, failure stories from their inception. However, these State-Owned Enterprises (SOEs) provided the necessary trained workforce when these sectors were opened to private investment in the 90’s.
Presently, a majority of our state-owned enterprises are inefficient, non-competitive and are incurring losses to the tune of billions of rupees; and providing monetary support to these loss-making enterprises hugely dents the government’s finances. The government’s financial kitty is sponsored by a small taxpayer’s base – a majority of who are salaried class, and thus it is unjustified that their hard-earned money is used to finance unproductive and wasteful SOEs. So what is the easiest option in such a scenario; throw in the towel and sell-off SOEs cheaply, which has been done by previous regimes. For instance, cement factories under the state cement corporation of Pakistan were sold off in a questionable manner; and buyers created a cartel, like the sugar mafia, which exploits the ordinary public at will.
The incumbent government also plans to privatise a large number of loss making SOEs. However, these SOEs are our national assets and their privatisation will only create further mafias and cartels in the private sector. The role of the Competition Commission of Pakistan (CCP) is to guard public interest against these industrial and business mafias and cartels. However, CCP has continuously failed to deliver on its front, thus adding to public woes. Therefore, an alternative solution is proposed.
Either each enterprise should be analysed for loss-making sections, which may then be offered to the private sector with controlling shares; or the private sector may be offered to run the loss-making sections with profits shared. This model could also be executed at the enterprise level with operations management handed over to the private sector and profits shared. The knock-on effects of such an initiative could be that the private sector, with experience gained through running these enterprises, establishes such enterprises on their won as well and bid for control/operations of similar enterprises abroad. Further, a more competitive workforce would be trained which would find jobs locally and abroad.
With the aforementioned proposal, our national assets will stay with the government but the financial burden on state expenditure would be off-loaded. The profits from SOEs can be used by the government to help laid off employees and maintain/upgrade national assets infrastructures. In short, these national assets should not be sold off but run on a public-private partnership for mutual benefit.