PRIVATIZATION

(DECENTRALIZATION)

MUHAMMAD RAHEELMBA K.I.M.S

DEFINATION. BACKGROUND. PAKISTAN’S PRIVATIZATION HISTORY. IMPACT ON PAKISTAN’S ECONOMY. ADVANTAGES. DISADVANTAGES. UPDATES\NEWS. CONCLUSION.

OUTLINE.

Privatization is the process of transferring an

enterprise or industry from the public sector to the private sector.

The public sector is the part of the economic system that is run by government

agencies/(SOE’S) STATE OWN ENTERPRISES.

Sometimes referred to as De-centralization program or simply the

Privatization in Pakistan.

DEFINITION

Pre-20th century.

The history of privatization dates from Ancient Greece,

Services including tax collection (tax farming), army supplies (military

contractors).

Perhaps one of the first ideological movements towards privatization came

during China's golden age of the Han Dynasty. 

BACKGROUND(HISTORY)

In Britain, the privatization of common lands

occurred from 1760 to 1820, coincident with the industrial revolution in that country.

20th century onwards.

In 1950s, Winston Churchill's government privatized the British steel industry .

In 1961, West Germany's government selling its majority stake in Volkswagen to small investors in a public share offering.

In the 1993, In the UK this culminated privatization of British Rail under Thatcher's successor, John Major; British Rail having been formed by prior nationalization of private rail companies.

It was first conceived and implemented

by the then-people-elected Prime Minister Nawaz Sharif and the 

Pakistan Muslim League, in an attempt to enable the nationalized industries

towards market economy, immediately after the economic collapse of the 

Soviet Union in 1989-90.[4] The program was envisaged

and visioned to improve the GDP growth of the national economy of Pakistan, and

reversal of the nationalization program in 1970s— an inverse of the privatization

program.

PAKISTAN’SPRIVATIZATION HISTORY.

Starting first with MCB limited. Sharif termed

his privatization programme as "turning Pakistan into a (South) Korea by encouraging greater private saving and investment to accelerate economic growth."

1st Phase.(Prime Minister Nawaz Sharif)

“1990’’

To transform the enterprises into profit-

seeking businesses, Not depended to the government subsidies

for their survival.

2nd Phase(Sartaj Aziz)

(WAPDA),

The mega-energy corporations such as Water and Power Development Authority .

K.Electric.

P.T.C.L

  Around 115 industrial units were hastily privatized, 

68 industrial units ,

AND 10% Shares of Sui Northern Gas Pipelines Limited.

FROM 1990-93

After the end of government of Prime minister

Nawaz Sharif by Gen. Pervaiz Musharaf,

] The GDP rate had declined from 10.0% in the 1980s to 3.6% in 1999, with foreign debt

increased to 44% up as compared to 1986. Pervez Musharraf invited Shaukat Aziz to take

the control of declining economy of Pakistan.

3rd Phase(Shaukat Aziz)

1999-2008

In 2004, Aziz became Prime minister and

initiated an intensified privatization programme in order to grow the GDP rate

annually.[22]

Aziz forcefully and aggressively pushed 100% privatization of state-owned corporations

while virtually planned to privatized 85% of banking sector.[23] Starting from 2003 until

2007,

Aziz successfully privatized 80%[23] of the banking industry into private-ownership enterprises, while privatizing the numbers of

shares of Pakistan International Airlines and other mega-corporations into the public

circles.

IMPACT.

.". Aziz's privatization programme subsequently improved the country’s growth rate by 6.4%—8.6% a year. 

Inflation rate dropped to 3.5% in last 3 years as against 11-12% in 1990.

 However, in the end of 2007, Aziz's privatization programme suffered a major set back which initially halted the privatization programme in the country.

 The Supreme Courthalted the privatization of Pakistan Steel Mills after transferring the inquiry from FIA to NAB, while issued standing orders to keep the Steel Mills under the nationalization programme.

1992199419961998200020022004200620080

2000000

4000000

6000000

8000000

10000000

12000000GDP IN MILLIONS OF RS.

GDP IN MILLIONS OF RS.

GDP(1992-2008)

Improved efficiency. Lack of political interference. Short Term view. Shareholders. Increased competition. Government will raise revenue from the

sale.

ADVANTAGES

Natural monopoly. Public interest. Government loses out on potential

dividends. Problem of regulating private

monopolies. Fragmentation of industries. Short-termism of firms.

DIS ADVANTAGES

New deadlines have been set for the privatization

of Pakistan International Airlines (PIA), And Pakistan Steel Mills (PSM), government

official revealed. “We are in the process of separating PIA’s core

and non-core activities and will approve the transaction structure for offering a minority stake to a strategic partner and/or the general public by end-December 2016 and complete the bidding process by August 2017,” Pakistan’s government informed the International Monetary Fund (IMF).

NEWS/UPDATES

Apart from PIA and PSM, privatization of Kot Addu Power

Company (KAPCO), a major generation company, is also expected to be completed next year.

According to the government, it is expected that by February, an Initial Public Offering (IPO) will be conducted for FESCO(Faisalabad Electric Supply Company)

The IPO will follow for IESCO (Islamabad Electric Supply Company)

And also LESCO( Lahore Electric Supply Company), later that year.

NEWS/UPDATES

The conclusion drawn from this research

promptly highlights that privatization of SOE’s is extremely useful tool of extracting additional revenue that is later used by the state on various task accomplishment.

We have found that more that 60% of the revenue got from the sale of SOEs is kept by the Government of Pakistan .

CONCLUSION

QUESTION

IF ANY.