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Privatization of SOEs in Pakistan

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Privatization of SOEs in Pakistan

  1. 1. An Assessment Of Privatization In Pakistan 1988-2009 & The Prospect For The Remaining PSEs
  2. 2. Introduction • History of privatization • Government consensus on the issue • Establishment of Privatization Commission
  3. 3. Modes Of Privatization Used In Pakistan • Divesture through Bids • Sale of shares through stock exchange • Sale to modaraba companies • Management contracts with MCs • Management contracts with workers
  4. 4. PRE 2000 PRIVATIZATION ERA
  5. 5. • Unmanageable increase in PSEs • Denationalization of Agro-based industries • PSEs offered on Management Contracts
  6. 6. Privatization & Fiscal Deficit • The stabilization and structural adjustment programmes of IMF. Rs. 59.6 B Receipts Rs. 2500 B Deficit
  7. 7. Privatization & Efficiency (MANUFACTURING SECTOR) Pre- Privatization, GDP, 5.44 Pre- Privatization, Investment, 5.55 Pre- Privatization, Employment, 2.1 Post- Privatization, GDP, 4.15 Post- Privatization, Investment, 1.82 Post- Privatization, Employment, 2.3 Pre-Privatization Post-Privatization GROWTHRATES
  8. 8. • The real wages have been stagnant thus indicating that the workers have been untouched by any growth.
  9. 9. Privatization & Banking Sector • The performance of the Muslim Commercial bank in the post privatization period has been somewhat better than that of the Allied Bank. However, any improvement in performance is overshadowed by the ballooning employment cost. Pre Paid Up Capital, ABL, 272 Pre Paid Up Capital, MCB, 576Post Paid Up Capital, ABL, 1063 Post Paid Up Capital, MCB, 1820Pre Paid Up Capital Post Paid Up Capital In Millions Pre-Deposits, ABL, 25 Pre-Deposits, MCB, 350 Post-Deposits, ABL, 63 Post-Deposits, MCB, 1024 Pre-Deposits Post-Deposits In Billions
  10. 10. POST 2000 PRIVATIZATION ERA
  11. 11. • Terrorist activities Stock market crashes • Investment deteriorated
  12. 12. • The major privatization which took place during this period included: – Sale of GOP “Working Interest” in six oil concessions – Sale of 51% GOP stake in UBL – Sale of Pak Saudi Fertilizer Ltd. – Two capital market transactions amounting to Rs13.6 billion.
  13. 13. Bad to Worse • GOP sold its “Working Interest” in the oil companies. • Privatization of Pak Saudi Fertilizer • Sale of UBL to Best Way Group • Privatization of KESC • Privatization of PTCL
  14. 14. Privatization & Employment • Privatization neither results in lower rate of inflation nor in the lower real prices of the products of the privatized industries. • WAPDA and PTA workers jobs were at stake. – PSEs employ labor in excess from there requirement while privatized ones get rid of them. – Opting for capital intensive products. – Hiring people on contract on need basis. – Forced retirement (golden hand hake)
  15. 15. Wage rates and social protection of the workers • Government should not interfere in commercial activities. • Privatization should be done through Stock Exchanges. • Workers disagree with facilities provided for workers in private sector. • Bonuses abandoning and lack of job security.
  16. 16. Privatization and Investment/Employment Projection • Short-term decline in employment but rising trend is projected in the future (long- term). • Confidence build up among investors. • Removal of entry barriers. • Rapid increase in investments in Private Sector and vice versa in Public Sector.
  17. 17. Conclusion • No significant impact on deficit reduction. • Privatization of large banks and telecom may have achieved the goal in 90s. • Privatization works best in competitive framework. • Restructuring of PSEs resulted in layoffs. • Huge layoffs forced government into action.

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