should pakistan privatized its state owned enterprises

Topics: Privatization, Public sector, Nationalization Pages: 12 (2694 words) Published: March 24, 2014

PRIVATISATION is a process of transfer of ownership of property or business from a government to a private entity. Privatization is not a new phenomenon in Pakistan. Since 1990, Pakistan sold off 167 state-owned enterprises (SOEs) at a price of Rs476 billion. The first phase of privatization in 1992-96 included partial privatization of banks; this was followed by the second phase (1997-2000), resulting in the complete denationalization of the banking sector. And the last phase of privatization from 2001 till 2008 selling off non-banking sectors. Currently, the government has selected sectors for the new phase of privatization policy 2013 are PIA, Pakistan Steel Mills (PSM) and public-sector power projects, including Pakistan Transmission and Dispatch Company (PTDC). Government sources suggest that more than 23 loss-making companies will go under the privatization in order to support a struggling economy.

Establishment of Privatization commission:
It is established under ordinance of 2000 by the president of Pakistan. The Commission is governed by a nine (09) member Board with Minister for Privatization as Chairman. The board is independent and is denominated by member of private sector. The private commission performs following functions;

Recommendation of privatization policy guidelines to the Cabinet; Preparation of privatization programme;
Planning, managing, implementing and controlling the privatization programme, approved by the Cabinet; Taking operational decisions on matters, i.e. Restructuring, deregulation and regulatory issues. Privatization Policy of Pakistan:

The privatization policy of Pakistan was based on the following principles: 1. Privatization will be conducted to provide benefit to all, not to give advantage to few.

2. Privatization should make local industries and services more efficient and competitive.

3. The whole procedures of privatization should be transparent and it should free from political influence.

4. In case of certain units such as major utilities or banks there will be a process of prequalification.

In to days modern age of internet, policy maker have great benefit ,as they can learn experience , policies of other countries in the field of privatization.

Objectives for Privatization:
Normally the state has one or more of the following objectives of privatization 1. Strengthening of private sector. This was the objective behind the first generation of privatization carried out in Pakistan in 1960s when state built factories in strategic and other important sectors and handed them over, at very nominal rates, to the businessmen who were reluctant to invest in these sectors due high risks involved. 2. Improving the efficiency and service delivery. Pakistan privatized a large number of its SOEs in the second generation privatization carried out in the 1980s and a990s, to increase efficiency and effectiveness of state owned enterprises. 3. Reducing the huge state subsidies The state owned enterprises that are going through loss, but cannot be closed because of social welfare considerations or their strategic nature even though better alternatives are now available in the private sector. This is the philosophy behind the third generation of privatization in Pakistan in 2000s. The major purpose of privatization in Pakistan to a maximize efficiency, investment, production, employment, physical and social infrastructures and debt Retirement.

4. To Encourage foreign investment.
One other objective of privatization is to encourage foreign investors for investment.

Disadvantages of Privatization

1. Increase in Tax Saving.
Private sector generally tries to avoid payment of taxes. Thus privatization of enterprises will result in the decrease of tax income. 2. Concentration of Wealth.
Privatization of large industrial units and services sector such as banks and insurance companies will increase concentration of wealth in private hands....

References: Fatima.M (1996). Privatization in Pakistan-I. Pakistan & Gulf Economist. 15(5): 35-37
GOP Pakistan Labor Gazette (1995). Report of July 1994 to June 1995, Ministry of Labor, Government of Pakistan.
ILO (1996). Pakistan Privatization, Employment, Retraining and Social Protection. A Report Prepared by ILO Seat under UNDP Technical Support, ILO Geneva.
Annual Reports Privatization Commission of Pakistan 2000, 2001, 2002.
Asian Development Bank, Impact Analysis of Privatization in Pakistan, October, 1998.
Economic Survey 2001-02, Government of Pakistan, Islamabad.
Annual Report of the State Bank of Pakistan, 2002.
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