Liberalization of the Economy
Robert LaPorte, Jr. and Bashir Ahmad Khan
For over a decade, the leaders of Pakistan have been attempting to liberalize the nation's economy through deregulation and through disinvestment and privatization of its state-owned enterprises (SOEs). 1 In doing so, the political system of Pakistan has been changed with the government playing a reduced role in managing the economy and in the production and distribution of goods and services. Economic liberalization efforts (and the accompanying deregulation, disinvestment, and privatization) are not just economic in nature but are also closely linked to politics. This chapter explores the nature of Pakistan's privatization policy, focusing on both the economic and political frameworks in which privatization was introduced and implemented. It emphasizes privatization as opposed to deregulation. However, deregulation is often a prerequisite for privatization, both for legal and structural reasons. To achieve economic liberalization, political support (or direction) must be present. This chapter examines why Pakistan has embarked on an economic liberalization course and what the consequences of these economic policies have been.
As with other developing countries, privatization in Pakistan is part of a global trend toward liberalization, which involves both deregulation and disinvestment. While no formal definition of privatization exists, in Pakistan it is construed to include disinvestment (with transfer of management and control) and some deregulation. Deregulation includes a major reform of prevailing rules and regulations concerning economic activity including the lifting of barriers to entry, the move to prices determined by the market, and a freer trade regime. Disinvestment focuses primarily on reducing the share of the government's investment in its