Virendra Pandit
New Delhi: What India did without much resistance after 1991, a nearly-bankrupt Pakistan is trying to do once again: selling off the most government-owned white elephants.
Prime Minister Mohammed Shehbaz Sharif said on Tuesday that Pakistan will privatize all state-owned enterprises (SOEs), except strategic entities, thereby broadening the government’s initial plans to sell only loss-making state firms to shore up its crippled finances.
The announcement came after he chaired a review meeting of the privatization process of loss-making SOEs, according to a statement from his office, which discussed a roadmap for privatization from 2024 to 2029, the media reported.
“All of the state-owned enterprises will be privatized whether they are in profit or losses,” he said, adding that offloading the SOEs will save taxpayers’ money.
His statement, however, did not clarify which sectors would be deemed strategic and non-strategic.
His announcement came a day after an International Monetary Fund (IMF) mission opened talks in Islamabad for a new long-term Extended Fund Facility (EFF), following Pakistan’s completion of a USD 3 billion standby arrangement in April, which had averted a sovereign debt default last summer.
Privatization of loss-making SOEs has long been on the IMF’s list of recommendations for Pakistan, which is struggling with a high fiscal shortfall and a huge external financing gap. Foreign exchange reserves are hardly enough to meet up to a couple of months of controlled imports.
The IMF said SOEs in Pakistan hold sizable assets in comparison with most Middle Eastern countries, at 44 percent of GDP in 2019. Yet their share of employment in the economy is relatively low. The Fund estimates almost half of the SOEs operated at a loss in 2019.
This is not a new attempt. Past privatization drives almost failed because of a lack of political will.
Any organization involved in purely commercial work cannot be categorized as ‘strategic’ by its very nature. So, no commercial SOEs could be called strategic assets, former Privatisation Minister Fawad Hasan Fawad was quoted as saying.
“To me, there are no strategic SOEs,” he said.
“The sooner we get rid of them the better. But this isn’t the first time we have heard a PM say this. Nor would it be the last time until these words are translated into a strategic action plan and implemented.”
Islamabad has for years been pumping billions of dollars into cash-bleeding SOEs to keep them afloat, including one of the largest loss-making enterprises, Pakistan International Airline (PIA), which is in its final phase of being sold off, with a deadline later this week to seek expressions of interest from potential buyers.
The pre-qualification process for PIA’s selloff will be completed by end-May, the privatization ministry said, adding discussions were underway to sell the airline-owned Roosevelt Hotel in New York as well.
It also said a government-to-government transaction on First Women Bank Ltd was being discussed with the United Arab Emirates, and added that power distribution companies had also been included in the privatization plan for 2024-2029.
“The loss-making SOEs should be privatized on a priority basis,” Sharif said.