The economy of Pakistan has been through many phases over the last 67 years of its existence. While there have been long periods of recession, there were times when the country experienced economic booms. Presently, the economy has grown to a level where it can be rightly branded as one of the major economies of the world in terms of volume. However, it has swung from the extremes of nationalization to massive efforts of privatization. The nationalization programme was implemented for the first time as a policy programme by Prime Minister Zulfiqar Ali Bhutto in order to lay the foundations of socialist economic reforms to improve the growth of the national economy. The programme began in 1972 to promote economic democracy and liberalization through nationalisation of basic industries including life insurance companies, vegetable ghee units and commercial banks. Even flour mills, rice husking and cotton ginning factories were taken over by the government.
Despite some success in its formative years, and though this policy was believed to narrow the gap between the rich and poor, it practically proved disastrous. In a nutshell, nationalization led to inflation, a fall in GDP growth, loss of investor confidence, unemployment, and a great increase in corruption.
Although a start was made post 1978, it was not until 1990 that Prime Minister Nawaz Sharif set forward the privatization programme to turn the economy around. Nawaz Sharif implemented some of the economic liberalization and privatization measures that previous governments had hesitated to implement. He undertook aggressive policies in this regard and initiated disinvestment of 118 industrial units, which included 45 nationalized units taken over during the period 1972-74. The government approved the creation of a Privatization Commission in 1991 to implement the divestiture program within the shortest possible time. This resulted in reviving the country’s growth rate, in the reduction of poverty and inflation rates.
Privatization has been a long-lasting practice in Pakistan. Its history stretches over more than 60 years when in 1952, the Pakistan Industrial development Corporation (PDIC) was established to boost the managerial and production efforts of more than 50 industrial undertakings. When it yielded results, the government decided to sell these industries to the private sector. It was only in the 70’s when, influenced by the communist theories, the PPP government decided to nationalize the major industries and uproot the concentration of wealth from a few hands to the general public.
Privatization has firmly entrenched itself in economic thinking as well as policy the world over especially after the demise of the communist bloc. Because the internal stability of a nation cannot be achieved without economic stability, the Pakistani economy needs massive restructuring not only in terms of a structural revolution but also in terms of financial aid. This will include the liberalization of the economy, of greater incentives in investments and framework amendments. In order to boost economic activity, create employment and enlarge the export base, it is imperative to attract foreign investment by creating an investment friendly environment which in turn necessitates a prudent tax and incentive regime. The investment reforms presently introduced by the PML (N) Government are therefore a step in the right direction.
Today, Pakistan is faced with a host of problems; from terrorism and lawless territories to power shortages and polio, not to mention some 500 billion rupees (nearly US$ 5 billion) going down the drain annually in the form of subsidies and bailouts for failing enterprises. The sooner the government privatizes these “state-owned dinosaurs,” the better able it will be to divert these resources for development purposes. While the government is trying to deal with the security issues that threaten the very existence of the country, it has simultaneously embarked upon plans to privatize more than 30 public energy, transport and infrastructure corporations over the next three years. These include Pakistan State Oil, Pakistan International Airlines and Pakistan Steel Mills, which are major loss making entities. The process will be led by the privatization commission which will of course move forward in an independent and transparent manner.
It is worth mentioning here that during the elections of 2013, almost all political parties, including the PTI and PPP promised the nation in their manifestos that they would embark upon privatizing the bleeding SOEs and divert the resources to public sector development projects. Now that the present government has the opportunity to deliver on a longstanding promise to privatize and rid the economy of its huge losses (on account of subsidies dished out to loss making enterprises), detractors have become active in criticising the government on this front. Is this a national service or a betrayal of national objectives and the peoples’ aspirations? The critics must objectively think of national welfare and discard their personal agendas so that the nation can move forward.
The government has to prudently pursue a comprehensive and integrated plan of economic development that concentrates private-sector led growth through incentivizing innovation, quality and productivity enhancement. This necessitates creating an investment-friendly atmosphere, finding access for Pakistani products in foreign markets and developing infrastructure.