Home Editorial Editorial: Pakistan Cannot Delay Privatizing SOEs Any Longer

Editorial: Pakistan Cannot Delay Privatizing SOEs Any Longer

The PPP’s opposition to the privatization of loss-making SOEs is the wrong stance for a country engulfed in economic crises

by Editorial

File photo. Farooq Naeem—AFP

The incumbent government’s ambitious plans to privatize loss-making state-owned enterprises (SOEs) faced its first setback when coalition partner Pakistan Peoples Party (PPP) voiced its opposition, suggesting public-private partnerships to restore institutions like the PIA and Steel Mills instead of selling them outright. Unfortunately, the PPP’s stance is not surprising in light of its state-sector dreams of yore, even though it bucks economic wisdom and risks further dysfunction. In truth, a heavily-indebted Pakistan cannot afford to continue subsidizing unprofitable SOEs, and even the ones it retains require heavy restructuring in the form of layoffs and budgetary reductions.

No government wants to be responsible for dismissing government employees, especially in Pakistan, where such jobs have traditionally been used to favor political workers. But the economic crisis that has engulfed the country for several years now requires harsh measures, including but not limited to eliminating surplus employees. According to some estimates, keeping just 100,000 people employed in loss-making SOEs requires taxpayers to pay almost Rs. 100 billion annually, with little to no returns to show for it. Restructuring also improves productivity, reduces costs and makes institutions more competitive, further boosting their contributions to the national economy.

A state-run economy is a “command economy”—one in which a centralized government controls the means of production—that faces decline globally. Admittedly, such an economy has both advantages and disadvantages when compared to a free-market economy, but in reality no economy is purely free-market or entirely controlled by a government. Instead, economies exist along a spectrum with certain aspects favoring one type or the other. All states decide on “critical” industries that require government intervention, but for the economy to prosper, they must adopt the free market to avail the benefits of the capitalist world order. Even in China, the communist government has allowed special free-trade zones and cities to proliferate as a means to boost its economy.

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