Economic Analysis - Privatisation Drive: Overpromised, Underdelivered - 10 JULY 2017
BMI View: Despite significant efforts over the past three years to offload ailing public sector enterprises, the main loss-making PSEs continue to pose a major fiscal burden to the Pakistani economy. While continued support from the ADB may help to gradually improve corporate governance, the prospect for big bang reforms seems limited given that the ideal economic and political backdrop is unlikely to remain in place.
By all accounts the Pakistani government's privatisation drive has overpromised and underdelivered. The PML-N government, after coming into power in June 2013 initially planned to privatise 69 public sector enterprises (PSEs), which included loss-making Pakistan International Airlines (PIA), Pakistan Steel Mills (PSM), Pakistan Railways (PR) and several power generation and distribution companies. The privatisation drive was a major pillar of the economic reform programme agreed under the IMF's Extended Fund Facility (EFF) that began in September 2013.
However, not only has the government has failed to privatise any entities since August 2015, but the transactions that have taken place - the sale of minority shareholding in United Bank Limited, Allied Bank Limited, Habib Bank Limited and Pakistan Petroleum Limited, and the strategic sale of National Power Construction Company - have involved only companies that were already profitable. So, while this has provided temporary support to the country's fiscal accounts amounting to PKR172.9bn (USD1.7bn), the underlying problem remains wholly unaddressed.