Privatisation Stimulates Economic Growth
Jabir, Rafique, Economic Review
Through experience the world has learnt that privatisation is a must for speeding up growth and investment. The fall of the Soviet Union has thrown into bold relief the inefficacy of the socialist system to solve the economic problems of a country. It rather drove the giant nation to the edge of precipice. Nearer at home, Pakistan lost the golden opportunity to emerge as the Asian giant in the seventies consolidating the gains of 1960's when large scale nationalisation by the then PPP government put the economy in the reverse gear. Investment stagnation, flight of capital, production slow-down and growing labour-indiscipline became the order of the day. As a result the economic scene was characterised by mounting inflation, growing unemployment, low productivity, falling exports, increasing indebtedness and growing hardship of the masses. In a nutshell, complete bankruptcy and insolvency gripped the economy, thanks to bureaucratic ineptness, non-chalance and corruption. The public sector units became a permanent liability whose recurring deficits had to be picked up by the government every year. This alone constituted a serious drain on the government resources. Falling output and increasing loss deficits led to the loss of revenue to the government. The concerns which were earning handsome profits in private sector, became sick and showed huge losses after being nationalised. The bulk of the industrial units were in the red constituting a serious drain on the government resources. Yet the successive governments did nothing to put these units back on the rails by undertaking a vigorous disinvestment programme.
All the plans and programmes for denationalisation of the public sectors remained a non-starter until the advent of the present IJI government. Soon after coming into power Prime Minister Nawaz Sharif called for giving much greater attention to policies and programmes that promote social development in Third World countries. Drawing strength and inspiration from widespread enthusiasm for policies of privatisation and deregulation in the world, he emphasised that they were necessary in order to accelerate growth and investment. Hence he initiated a series of measures to ensure speedy privatisation of the projects in the public sector so that the government may concentrate on infrastructure and social action programme such as education, health care, population planning, supply of drinking water and rural electrification in order to improve the living standards of the broad masses.
For this purpose, a comprehensive strategy for social development had to be formulated and implemented simultaneously to ensure that the gap between rich and poor, urban and rural areas and between developed and developing countries did not become wider.
In mid-1960s, an attempt was made in Pakistan to supplement the economic strategy with proposals for the development of the social sector and human resources but these programmes were not implemented in practice. As a result, there was a strong politial backlash on such issues as concentration of industry, banking and insurance companies in the early '70's. Thus a very dynamic economic strategy which had yielded a growth of 7 per cent per annum in 60's was effectively derailed. Pakistan had to learn a lesson from the unfortunate experience.
The present government therefore embarked on a vigorous privatisation programme to enable the economy to regain the buoyancy of 60's. A liberal package of incentives has been given to the private sector to set up industrial units. The economy has been completely deregulated in order to remove all the hurdles in the way of prospective investors. Above, a process of denationalising nationalised units has started which is likely to be completed soon.
Side by side the government has taken measures to strengthen social development as the second wheel of the cart. These include:
* An improved legal and fiscal framework to protect the interests of shareholders, the depositors and the consumers, to guard against monopolies and to ensure that the business community paid its taxes. …