PRI­VATI­SA­TION

A recipe for suc­cess

Enterprise - - Front page -

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.

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