Be­yond PIA

The Pak Banker - - EDITORIAL - Sakib Sherani

THE re­cent events sur­round­ing the govern­ment's nearly botched at­tempt to pri­va­tise PIA, and the of­fi­cial nar­ra­tive weaved to jus­tify the act, raise dis­turb­ing ques­tions that are 'larger' and more fun­da­men­tal than the is­sue of pri­vati­sa­tion it­self.

Here is what we know - or have been told: PIA is among a clutch of govern­ment-owned or con­trolled, poorly per­form­ing en­ter­prises that cause an an­nual loss of hun­dreds of bil­lions to the ex­che­quer. This an­nual loss oc­curs due to over­staffing, em­bez­zle­ment by work­ers, low pro­duc­tiv­ity and ef­fort in a pub­lic-sec­tor set­ting, and the in­abil­ity to re­ward per­for­mance or pun­ish lack of it that is typ­i­cal in govern­ment and the wider pub­lic sec­tor. In ad­di­tion, there is lack of in­vest- ment and in­no­va­tion stem­ming from the fact that the pub­lic sec­tor can­not charge cost-re­cov­ery prices.

The coun­try's en­tire power sys­tem, from gen­er­a­tion to dis­tri­bu­tion, its rail­ways, govern­ment-owned steel mills etc are all af­flicted by the same fac­tors listed above. But what is glar­ingly omit­ted from the of­fi­cial nar­ra­tive is the role of dif­fer­ent gov­ern­ments and dif­fer­ent prime min­is­ters since the 1990s, in­clud­ing Nawaz Sharif, in bring­ing th­ese pub­lic-sec­tor en­ti­ties, in­clud­ing PIA, to their cur­rent state of ruin through acts of omis­sion as well as com­mis­sion over the years.

Take the case of PIA. Con­trary to con­ven­tional wis­dom, its fi­nan­cial ruin has not been brought about solely by over­staffed, pow­er­ful and thor­oughly cor­rupt unions. While con­ven­tional wis­dom is quick to point to the nearly 600 em­ploy­ees per op­er­a­tional plane in PIA's fleet, the staffing costs em­a­nat­ing from this ex­cess ac­count for around 15pc to 20pc of to­tal costs.

The rest of the dam­age to PIA's op­er­a­tional prof­itabil­ity since the 1990s has come from ap­point­ment of cronies of one prime min­is­ter or the other, many with open con­flicts of in­ter­est, to head PIA; from un­der­hand deals, over­priced pur­chases, shady con­tracts and nepo­tism in ap­point­ments, pro­mo­tions and trans­fers. (And yes, the stuff­ing of party jiyalas too). It has also come from spe­cific ac­tions like the 'open skies' pol­icy pur­sued by Nawaz Sharif since the 1990s and, to a more con­tentious de­gree, from the mul­ti­ple code­shar­ing agree­ments the air­line en­tered into over the past five years or so.

The two sources of this mis­man­age­ment, mal­ad­min­is­tra­tion and mis­gov­er­nance are the wider political ecosys­tem (un­der both civil­ian and non-civil­ian set­ups) and se­nior man­age­ment of PIA and the other en­ti­ties run­ning in red - in­clud- ing their boards.

In essence, the fail­ure of the pub­lic sec­tor in gen­eral, and of spe­cific public­sec­tor en­ti­ties in par­tic­u­lar, re­flects the fail­ure of gov­er­nance at two lev­els: at the level of the political sys­tem, and at the level of the board of di­rec­tors. In­stead of the en­tire fo­cus on the 'havoc' caused by the ex­cess num­ber of em­ploy­ees, why haven't we heard enough of this fail­ure of gov­er­nance as an is­sue that needs to be ad­dressed? Shouldn't there be ap­pro­pri­ate ac­count­abil­ity of those in power whose ac­tions and mis­deeds have brought pub­lic-sec­tor en­ter­prises to their waste­ful state? And why does en­forc­ing ac­count­abil­ity mat­ter?

Dur­ing the de­bate on PIA's pri­vati­sa­tion, a lot was heard about some of the world's lead­ing air­lines, many rel­a­tively new and from this part of the world, that were state-owned or state-con­trolled. The ex­am­ple of Emi­rates, Qatar, Eti­had, Sri Lankan and Sin­ga­pore Air­lines was given to sup­port the case for not pri­vatis­ing PIA. The more rel­e­vant, and per­haps more trou­bling, ex­am­ple is from much closer-to-home: if PIA could be run as a world-class air­line three decades ago by em­i­nent and above-board Pak­ista­nis such as Nur Khan and As­ghar Khan and oth­ers, why could it not be by Asif Zar­dari or Nawaz Sharif? What has changed in Pak­istan that we are un­able to pro­duce men of hon­esty and val­ues - and com­pe­tence - to run our affairs, be it our na­tional air­line or our govern­ment?

So the larger point about the prime min­is­ter boldly declar­ing how he will de­fend the virtues of pri­vate own­er­ship from the ills of the pub­lic sec­tor is that the ills of the pub­lic sec­tor are not just in PIA or Rail­ways or Wapda or Steel Mills. They are in the way the pub­lic sec­tor man­ages the coun­try's education and health sec­tors, or its myr­iad gov­ern­men­tal or­gan­i­sa­tions, divi­sions, agen­cies, func- tions and in­sti­tu­tions.

If PIA, with its Rs100 bil­lion an­nual turnover, is rot­ten and Mian Nawaz Sharif's govern­ment can­not con­trol its mis­man­age­ment and cor­rup­tion and con­sid­ers sell­ing it to a pri­vate owner as the only so­lu­tion, can his ad­min­is­tra­tion be trusted with the man­age­ment of Rs3,018bn in tax rev­enue, Rs5,400bn in pub­lic ex­pen­di­ture, and Rs9,500bn in de­posits of the bank­ing sys­tem? An ad­mis­sion of fail­ure in run­ning PIA is an ad­mis­sion of fail­ure in run­ning the govern­ment.

A few days ago, a rep­utable in­ter­na­tional fi­nan­cial newswire ser­vice car­ried a highly mis­lead­ing and fac­tu­ally in­cor­rect story about Pak­istan's ma­tur­ing debt obli­ga­tions this year. Al­though the story was cor­rected later, by con­flat­ing do­mes­tic debt re­pay­ments with ma­tur­ing ex­ter­nal obli­ga­tions, it gave the im­pres­sion of a high pos­si­bil­ity of de­fault by Pak­istan on its debt.

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