Privatization: A Viable Policy Option

By Haider, S. M. | Economic Review, June 1991 | Go to article overview

Privatization: A Viable Policy Option

Haider, S. M., Economic Review

Privatization: A Viable Policy Option

Privatization mainly has become a pragmatic response to budgetary, problems. Economic realities are catching up with history. The centrally planned approach in Pakistan came with the dawn of Independence. The state dominated planned economy showed signs of deterioration during the 1980s. Pakistan has recently shown an inclination to introduce privatization because her budgets will not stand a high level of government expenditure. Privatization has been put on the economic map of Pakistan as a highly visible way of changing the balance between government and the private sector as far as determining where the nation's economic productivity makes the desired improvement. There is a growing feeling in Pakistan that some of the problems that have their origins in high government spending can be solved by moving them away from government into private sector.

Time and time again, experience has demonstrated that human talent, ingenuity and creativity are basic to development. It has also been demonstrated that human talent and endeavour adapt and improve in the presence of appropriate incentives and rewards. Human creativity does not come from machines or buildings or dams or electric typewriters or computers; it comes from people. They have to have incentives and rewards and recognition. Intrigues against talented people and secret efforts to deprive the institutions of the really competent persons by means of leg pulling and factional politics carry us nowhere. This explains the sudden urge for the insurgence of the private sector as a partner, a very important partner, with the public sector, in the developmental process.

Privatization is something specific, something people can understand, something they can deal with; it is the real world. Privatization brings government face to face with the fundamental question: "Is ours a country people want to invest in? If not, what can be done to improve it?"

The objective of privatization is to see that "good things happen". If good things do not happen, nothing solid can be accomplished. The move towards privatization is directed at attaining the requisite accomplishments. It is not an end in itself, rather it is a means to economic betterment for the country. The merit of privatization lies in the fact that state enterprises offer a big opportunity to expand capital markets. It would not be possible to accomplish privatization unless the policy reforms are made to improve the investment climate, to reduce government subsidies and other interference with free markets, and to encourage entrepreneurship.

The global nature of privatization and its acceleration in 1980s are the outcome of the tacit knowledge that socialistic approach to economy can lead to stagnation. Privatization offers the possibilities of raising living standards by introducing competition, which brings about efficiency, lower costs and better services. Privatization has appeared as a quite revolution that is sweeping around the world and around Pakistan. More than fifty countries have engaged in some form of privatization either by selling off state enterprises; or by deregulating agricultural and industrial sectors or by contracting out government services. Since 1981, the trend has accelerated, until now, it now impresses political systems of all ideologies as well as nations at all stages of development.

A principal motivation for the acceptance of the idea of privatization in Pakistan has been an awareness born of budgetary crises that state-run enterprises are usually "white elephants" causing loss of billions of rupees each year. Instead of accumulating surpluses or supplying services efficiently, these enterprises have become a drain on national exchequer. A policy is emerging that the role of the private sector should be enhanced.

Since the Federal and the Provincial Governments in this country are running out of money and the people are disenchanted with the performance of public enterprises, pragmatism is appearing on the national scene. …

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