KARACHI, Pakistan, Sept. 10 -- Pakistan is planning to resume privatization of state-owned industries this month, but union leaders and at least one political economist are worried the move will bring large-scale layoffs, a contract system and low wages for already underpaid workers.
The government July 24 announced it would sell 64 of the 255 state-owned enterprises in the first phase. Finance and Privatization Minister Ishaq Dar said the ministry was completing terms and conditions, and that large state-owned enterprises – including Pakistan International Airlines, Pakistan Railways and Pakistan Steel – would be up for sale. The move could open them up to foreign investors.
Privatization of the airline "will be catastrophic for thousands of families," said Aijaz Ali Shah, vice president of the Flight Services Union.
Employees and associations, he said, "are determined to refuse any such move leading to privatization because private owners will lower wages and introduce an outsourcing system." He added that employees find the notion of privatization to be "a conflict of interest between the government and PIA."
Owners of companies previously privatized have introduced daily wage systems through contractors, Shah said.
"Workers were paid monthly salaries when these entities were under government control. There were payments for medical expenses and yearly bonuses. But the private owners have ended all these benefits."
Abdul Gaffar, a union leader at Pakistan Steel, said the privatization plan would be like the earlier plan, "during which some workers were offered golden handshakes and many more were terminated."
Manzoor Isran, a professor at the Shaheed Zulfikar Ali Bhutto Institute of Science and Technology in Karachi, said union concerns "are genuine because 600,000 workers were laid off during privatization in the 1990s,"
Isran said he also fears that privatization will raise electricity rates, hurting ordinary people.
He said the past privatization of Pakistan Telecommunication Corp. cost thousands of workers their jobs, and the situation is the same with Karachi Electricity Supply Corp., "where thousands of workers have been terminated and many more are facing job insecurity."
Pakistan's first privatization program was launched in 1991 by Nawaz Sharif, then and now the country's prime minister. He said then it would help promote "free-market economic principles, private ownership and foreign investment in the country." He also said it would generate jobs and bring economic efficiency.
His government sold 115 industrial units, including the Pakistan Telecommunication Corp. and Karachi Electricity Supply Corp., to foreign companies.
Privatization gained impetus during the rule of Gen. Pervez Musharraf from 2004 to 2007. His prime minister, Shaukat Aziz, privatized Pakistan Steel and 80 percent of the banking industry. The Supreme Court of Pakistan annulled the Pakistan Steel deal in 2007, however, and privatization has been on the back burner since then.
Now that Sharif, an industrialist, is back in power, he is acting on his often-expressed belief that state-owned enterprises are losing money because they are managed by government officials and could make a profit if managed by private owners.
Unions and civil rights groups have expressed fear that relaunching privatization might increase unemployment and cartelization, hitting the country's poorest.
Even the Senate has started a debate on privatization, and senators from the opposition Pakistan Peoples Party have criticized the move.
PPP parliamentary leader Raza Rabbani told the Senate his party would not let the government privatize the Pakistan Steel and threatened to block the National Highway if any such effort were made, the newspaper Dawn reported on Aug. 23. Rabbani said it seemed Pakistan Steel was deliberately being run at a loss, "since the rulers wanted to sell the national asset to their cronies and favorites," Dawn quoted him as saying.
The Privatization Ministry has sought recommendations about the enterprises on the sale list. So far it has received recommendations from the Ministry of Industries, which controls Pakistan Steel, about Pakistan Steel, suggesting that liquidation should begin immediately with the appointment of a liquidator, the daily Business Recorder reported Aug. 22.
The government has directed that recommendations on all other entities be finalized by Sept. 30 so that privatization may be completed within a year.
Since the government has not yet defined the rules, no one is willing to estimate how many jobs might be created, as the government maintains, or lost, as the unions fear.
Pakistan Steel, the country's largest steel-producing mill, was built and run for 16 years by the Soviet Union, which donated it to Pakistan in the 1970s. At first, it employed 25,000, but now it has only 14,000 employees.
Isran was doubtful about whether privatization could succeed in Pakistan.
Privatization works in countries with "rule of law, accountability, transparency and availability of information to the people about market activity," he said, "but in Pakistan we don't have anything like that."
"Instead of privatizing the state enterprises, the government should revamp these enterprises and encourage more investment and opening of private business."
He said political stability and the prospect of good returns on investment attract investment, both of which are missing in Pakistan.
"The size of the capital market is shrinking because of inflation and political instability, caused by militancy, and criminalization of politics where the business community is subjected to extortion."
He said most direct foreign investment is going to India, China and other Asian countries that are more politically stable and profitable.
"It looks, from the economic policies of the Pakistan Muslim League government, as if it is going to establish cartelization and monopoly business," Isran said.
"It is not good for the country. The government should take steps to promote small businesses and a new entrepreneur class by offering them more soft loans," he said, "Entrepreneur capitalism is way forward, not monopoly capitalism."