Privatisation in Pakistan is an important economic reform policy tool, for generating growth and to expunge structural inefficiencies, by removing false barriers and opening up the economy to competition. The Privatisation program is part of the economic and structural reforms agenda of the Government of Pakistan that along with deregulation and good governance, seeks to enhance the growth and productivity of Pakistan’s economy, by harnessing the private sector as its engine of growth. It takes an integrated approach, towards enhancing the private sector’s role and goes beyond the transfer of public assets to the private sector, by identifying the linkages and role of regulation, good governance, market competition in fostering conditions that provide incentives for the private sector to invest in providing goods and services efficiently.
Pakistan had initiated a significant program of deregulation and decontrol in 1960s, when such policies were neither fashionable nor common in much of the developing world. After the announcement of an “Industrial Investment Policy”, industrial sector was partially deregulated.
After the announcement of Economic Reforms Order 1972, the Government took over from public sector 32 industrial units under ten basic categories i.e. iron and steel, basic metals, heavy engineering, heavy electrical machinery, assembly and manufacture of motor vehicles, tractor assembly and manufacture, heavy and basic chemicals, petrochemical, cement and public utilities including oil, gas and electricity. In September, 1973 another 26 industrial units were nationalized, producing vegetable oil, life insurance, shipping and petroleum making companies, followed by cotton and rice export trade. In 1974, banks were nationalized. The nationalization later extended to 3000, flour mills, rice husking and cotton grinning industries. However, most of the small rice and cotton units were denationalized and the government only retained large rice mills. Only textile and sugar sector remained untouched. Sooner or later, the state-owned enterprises (SOEs) exhibited the following characteristics:
- Mismanagement and over-staffing
- Inappropriate and costly investments
- Poor coverage and quality of services
- High debt and fiscal losses
- Increased corruption
“The transfer of Managed Established Order 1978” induced denationalization policy except for sugar and a tractor plant, and the same were transferred to private sector. Two further attempts of denationalization in 1985 and 1989 had little success. Nevertheless, government succeed in divesting 10% shares of PIA via Initial Public Offering in 1988.
The government was and is committed to bring itself out of the business of running businesses and this creating space for private sector to play a vital role in development process in realizing the dream of a prosperous Pakistan. The Government initiated the privatisation program afresh and offered 108 (SOEs) out of 128 and in less than 18 months, 66 (SOEs) were privatised. Thus, in 1991, Pakistan formally institutionalized the privatisation activity by establishing “Privatisation Commission (PC)”.
Many organizational changes took place from time to time, so that by end of 1993, there was one Commission to deal with the privatisation of industrial units, banks and financial institutions, another for privatisation of the power sector and separate Committees to look after the privatisation of telecommunications, transport and shipping companies. All these activities were subsequently amalgamated into one Privatisation Commission by the end of 1993.
Later, on 28th September 2000, the Privatisation Commission Ordinance 2000 was promulgated, concurrently; the Privatisation Commission was converted into an autonomous/ semi-autonomous corporate body. This strengthened its legal authority for implementing the Government’s Privatisation Policy. The Ordinance was further strengthened after the 17th amendment in the Constitution of Pakistan, 1973, whereby, it was ratified as a permanent law.
The Ordinance empowers the Commission to conduct following functions:-
- Recommend privatisation policy guidelines to the Cabinet;
- Prepare for the approval of the Cabinet, a comprehensive privatisation programme;
- Plan, manage, implement and control the privatisation programme approved by the Cabinet;
- Prepare and submit reports to the Cabinet on all aspects of the privatisation programme;
- Facilitate or initiate legislation as approved by the Cabinet by or on behalf of concerned Ministry in connection with the privatisation programme;
- Provide overall directions for the implementation of privatisation related activities including, restructuring, deregulation and post-privatisation matters in sectors designated by the Cabinet;
- Take operational decisions on matters pertaining to privatisation, restructuring, deregulation, regulatory issues including approval of licensing and tariff rules and other related issues pertaining to the privatisation programme approved by the Cabinet;
- Issue directions and instructions to the management of a business undertaking falling within the purview of the privatisation programme approved by the Cabinet on all major important administrative, financial, reporting and policy matters;
- Publicize the activities of the privatisation programme;
- Propose a regulatory framework, including the establishment and strengthening of regulatory authorities, to the Cabinet for independent and fair regulation of each industry sector falling within the purview of the privatisation programme;
- Advise the Federal Government in selection and appointment of the head and a member of a regulatory authority;
- Advise the Federal Government that monopolies are not created in the process of privatisation;
- Appoint advisors, consultants, valuers, lawyers and such other staff, both local and foreign, on such terms as it may determine to discharge its functions under this Ordinance;
- Approve and take decisions and perform all acts to implement pre-privatisation restructuring, labour rehabilitation and severance schemes, and all other related matters as approved by the Cabinet;
- Invite applications for the privatisation and ensure widest possible participation;
- Evaluate bids received according to criteria determined by the Commission from time to time and formulate recommendations for consideration by the Cabinet;
- Recommend to the Federal Government such labour and manpower rehabilitation programmes as may be necessary during privatisation and to develop a roster of such employees who may need rehabilitation;
- Advise measures to the Federal Government for improvement of public sector units till their privatisation;
- Assist in the implementation of Federal Government policies on deregulation and privatisation and advise the Federal Government on deregulating the economy to the maximum possible extent; and
- Perform such other functions that are incidental or ancillary to carry out the privatisation programme approved by the Cabinet.