Undue litigation on banks privatisation unwise: Tariq

Privatization of banks and public sector entities are done to bring efficiency in the corporations in order to achieve sustainable profit and expansion in the operations but raising questions over the process through undue litigation is not conducive for investment climate in the country. This was stated by Tariq Iqbal Khan, former Chairman National Investment Trust and President Pakistan Banking Association while talking to journalists.

He said the government has no business to be in business and should confine itself to governance and regulation only, China and Russia have followed the privatization path and benefitted while Europe has stopped the industrial ownership by the government, how can Pakistan not benefit by following the same path?

The government officers are not trained to manage and operate businesses. The government works in a manner that there is a shared responsibility which is demonstrated in decision making through cabinet, assemblies, standing committees in assemblies, hence no single person makes a decision and the decision making is carried out through collective wisdom, he said.

In businesses, the boards are responsible for policy framework while the executives are responsible to carry out the day to day operations in the light of policy framework. Sometimes the decision making in the businesses is done where two to three people would make a decision in the light of policy framework laid down by board and rules and regulations made there under. Due to the above difference of working, nationalization has not succeeded in any country.

After 1973 when the banking was nationalized the services of the banks started deteriorating, the unions became strong, the depositors and customers continue to suffer and the banking industry in general started deteriorating. The banking industry was also being abused by the government due to excessive borrowing by the government and at the same time by getting the loans sanctioned to their cronies.

Khan mentioned that the non performing loans (NPLs) started multiplying which continued upto the period of next dictatorship when the unions were again harnessed. The banks were restructured and federal govt has to provide some relief in the shape of capital injections. Here, we can take the example of MCB, HBL and ABL. The MCB was privatized in the first instance and from number 3 bank in 1989 rose to number 1 bank in the next 4 years time. Currently, the cost of funds in case of MCB is much lesser than other competitors including HBL and UBL.

The banking industry was further reformed, the regulation became further stricter and vibrant. The consumer benefited as in the case of long term deposits the banks offered better rate and services in competitive environment, he added. Again, the example of ABL is very significant as the bank which was heading towards complete failure and was facing bankruptcy has now risen to number 4 after MCB, HBL and UBL after successful privatization.

The example of National Bank is also there being the only bank operating under the direct control of the federal government. The services of the bank are deplorable. If an ordinary person would like to get an account opened it is still impossible in NBP while in privatized banks as listed above, the customer is treated very well and all services are offered very efficiently.

Former PBA President quoted a survey conducted on privatization in Pakistan some years back in which materialized benefits of privatization were mentioned as: competition has increased; economic freedom has increased; quality of services has improved; Fiscal Deficit has been reduced; and job opportunities have been created.