Public Sector Companies, entities wholly or partially owned by the government, play a significant role in many economies worldwide. The extent of government involvement in these businesses is a topic of ongoing debate. Some argue that governments should limit their role to regulation rather than active participation in business enterprises to foster a more dynamic and efficient economy. In light of the above, it is important to examine the state of public sector companies in Pakistan and compare their performance and management to those in the United States, India, and Turkey. By highlighting the benefits of a regulatory approach over direct participation, we can better understand how different levels of government involvement impact economic outcomes and public welfare.
In Pakistan, public sector companies are a significant part of the economy, especially in sectors such as energy, transportation, and utilities. State-owned enterprises (SOEs) like Pakistan International Airlines (PIA), Pakistan Railways, and Pakistan Steel Mills have long been criticized for their inefficiencies, financial losses, and corruption. These issues arise primarily due to bureaucratic red tape, political interference, and lack of competitive pressures, which stifle innovation and responsiveness to market demands.
For instance, Pakistan International Airlines, once a prestigious airline, has struggled with massive financial losses, operational inefficiencies, and deteriorating service quality over the years. Similarly, Pakistan Railways, despite being a critical transportation provider, suffers from outdated infrastructure, poor management, and recurring financial deficits. The Pakistan Steel Mills, another major SOE, has faced similar challenges, operating at a fraction of its capacity and accumulating significant debt.
In contrast, the United States demonstrates a model of limited government involvement in business, primarily focusing on regulatory roles. Key industries such as technology, finance, and manufacturing thrive due to minimal direct government intervention. Regulatory bodies like the Federal Trade Commission (FTC) and the Securities and Exchange Commission (SEC) oversee market activities to prevent monopolies, protect consumers, and ensure fair trading practices. Examples of public sector companies in the U.S., such as the United States Postal Service (USPS) and the Tennessee Valley Authority (TVA), operate under regulatory oversight to ensure efficiency and public service without direct political interference. The USPS provides nationwide postal services, while the TVA focuses on electricity generation and economic development, both functioning effectively within their regulated frameworks.
India, similar to Pakistan, has a significant presence of public sector enterprises in key industries such as energy, banking, and transportation. However, India has been gradually shifting towards deregulation and privatization to improve efficiency and foster competition. Examples like the Oil and Natural Gas Corporation (ONGC) and the State Bank of India (SBI) illustrate this transition. ONGC, while state-owned, is regulated to ensure energy security and environmental standards, operating with a level of efficiency and innovation seen in private companies. SBI, although government-owned, competes with private banks under the regulatory oversight of the Reserve Bank of India (RBI), ensuring financial stability and service quality. India’s regulatory reforms in telecommunications and banking have spurred innovation and attracted foreign investment, contributing to its economic development.
Turkey presents a mixed model, where the government plays an active role in some sectors while the private sector thrives in others. Turkish Airlines and the Turkish Petroleum Corporation (TPAO) are key examples. Turkish Airlines, majority-owned by the government, competes in a global market, adhering to safety standards and international compliance under regulatory oversight. TPAO, focusing on oil and gas exploration and production, operates under regulations ensuring environmental and operational standards. Despite some inefficiencies and political interference in state-owned enterprises, Turkey’s private sector, particularly in tourism and manufacturing, demonstrates resilience and innovation, benefiting from a regulatory focus that promotes fair competition.
Comparing these examples, Pakistan’s extensive government involvement in business has led to significant inefficiencies and financial challenges. The need for a shift towards a more regulatory-focused approach is evident. By reducing direct participation in business and emphasizing regulatory roles, Pakistan can mitigate conflicts of interest, reduce corruption, and ensure that public resources are better allocated to essential services like healthcare, education, and infrastructure. This approach fosters a level playing field where private enterprises can thrive, driving economic growth, innovation, and efficiency.
The experience of the United States, India, and Turkey underscores the broader implications of government roles in business. A regulatory-focused approach mitigates conflicts of interest, reduces opportunities for corruption, and ensures that public resources are allocated to essential services. Moreover, it fosters a competitive environment where private enterprises can innovate and grow, leading to a more dynamic and resilient economy. By stepping back from direct business participation and emphasizing regulation, governments can facilitate sustainable economic growth, innovation, and public trust, ultimately benefiting society as a whole. For Pakistan, embracing this approach could be transformative, addressing longstanding inefficiencies and fostering a more prosperous economic future. After all, wouldn’t it be better for the government to focus on building the stadium rather than trying to win the game themselves?
Farhad Durrani
The writer is an Advocate of the High Court.