A recipe for success
It is true that the business of the government is not to do business. As much as possible, governments need to move state- owned enterprises ( SOEs) into the private sector to cut costs and bring in more efficiency.
This is advisable because a private firm is always looking to make profits, which means it will always endeavour to be more efficient in terms of customer interaction, service efficiency and profitability. Many companies that were previously state- owned have followed this model, such as British Telecom and British Airways and have shown a marked degree of higher efficiency and better profitability.
Such a discussion is particularly relevant in the context of Pakistan where the process of privatisation has always been a hot subject and it has been found time and again that following the privatization route has proved greatly beneficial for the company in question as well as for the market or a set of customers who are served by the company.
There are the successful examples of Habib Bank, United Bank, Pakistan Telecommunication Company Limited and K- Electric, all of which have travelled the privatisation route and emerged as more efficient and profit- making outfits.
Both Habib Bank and United Bank have been transformed into more efficient outfits ever since they were privatised. These banks now make more profits, contribute much more than before to the national exchequer in terms of taxes and are more customer- friendly now than before.
PTCL had carried the rusty baggage of the Pakistan Telegraph & Telephone Department for a long time. This had followed the organisation even after it had been converted into the Pakistan Telecommunications Corporation. The apathy that PTCL had displayed in those days, both in terms of customer interaction and range of services, was synonymous with indifference and inefficiency. All this changed when PTCL was privatised to the extent that 26 percent of its shares were sold to the UAE’s Etisalat and 12 percent to private investors in Pakistan.
Since then and despite initial hiccups, PTCL has become stronger and made great strides toward becoming the information and communication technology giant as it stands today. It is now a customer- friendly organisation that efficiently attends to its customers’ complaints and fixes them without a much loss of time. It has also made great advances both in fixed line and wireless telephony and continues to expand its services and product spectrum in a very impressive manner.
K- Electric is another good example of privatisation. It is involved in generating, transmitting and distributing power to around 20 million inhabitants of Karachi and the surrounding areas. Its predecessor KESC ( Karachi Electric Supply Corporation) also suffered from customer’s apathy and chronic inefficiency. Ever since its privatisation and takeover of its majority shares by Abraaj Capital, the company has become a profitable entity.
On the other hand, prominent among those companies in Pakistan that have not been privatised and continue to be state- owned enterprises are the Pakistan Steel Mills and Pakistan International Airlines. The fate of both is for everyone to witness.
The Pakistan Steel Mills, after being in fits and starts, has finally ground to a stop. Its furnaces are not operating anymore as gas supply has been cut.
PIA has become known for its sloppy service, inefficiency and corruption. The airline is a sick enterprise in the state sector and if anything can cure its malady, it is privatisation of some of its equity in the shape of a strategic partnership that can inject the much needed funds to make it profitable again.
Competition, as a result of privatisation, can also bring about improvements in efficiency. As such, privatisation is considered to be a key component of structural reform and the right recipe to be adopted on the road to better profitability and enhanced service.