Tag Archives: privatisation

Turkey cancels $5.7bn highway privatisation tender

ISTANBUL: Turkish Finance Minister Mehmet Simsek said on Friday the government had cancelled a $5.7 billion tender for the privatisation of toll roads and bridges, after Prime Minister Tayyip Erdogan earlier said the result had not met expectations.

Turkey’s Koc Holding and Gozde Girisim and Malaysia’s UEM Group Berhad had won the tender in December.

The Istanbul stock exchange was closed when Simsek made the statement.

Copyright Reuters, 2013


Buswell rules out port privatisation

Posted December 14, 2012 14:39:25

The State Government has categorically denied union claims it plans to privatise Fremantle Port.

The Maritime Union has reached an agreement with the government over pay but negotiations over job security have stalled.

The Union wants a guarantee that jobs would be safe if all or part of the port was to be privatised.

It is now threatening an eight day strike starting on Monday and involving more than one hundred workers, which threatens to cause disruptions in the lead up to Christmas.

The union has accused the government of moving towards privatisation, but the WA transport minister Troy Buswell has ruled it out.

“That is a ridiculous claim, now the government has absolutely no plans to privatise Fremantle Port, it’s a state owned port, and as far as we’re concerned always will be a state owned port.

Mr Buswell says negotiations have been frustrating, and retailers and customers should not be held to ransom in the lead up to Christmas.

“They are incredibly difficult to deal with,” he said.

“Our response to them is keep the port open, accept a very generous pay rise and understand very clearly the fact, and that being that Fremantle Port is not and will not be privatised.”

Topics: industrial-relations, fremantle-6160, perth-6000

Economic liberalism: IBA dean delivers strong defence of privatisation

Husain spoke at a forum organi­sed by KESC on the 99th annive­rsary of its existe­nce. “The way to economic growth is to let markets, and not the government, dictate prices and allocate economic resources,” says Ishrat Husain


It was a fitting tribute to a privatisation success story: on the 99th anniversary of its existence, the Karachi Electric Supply Company hosted a “Thought Leadership Forum” where the former State Bank governor Ishrat Husain delivered a clear, concise defence of privatisation as a means to sustainable economic growth.

At a gathering of corporate CEOs and bankers at the DHA Golf Club in Karachi, Husain spoke in his usual mild-mannered tone, listing each criticism of privatisation from economic populists before comprehensively dismantling it, using data and facts with incredible ease. Husain’s arguments were lent particular credibility by the fact that, as governor of the central bank from 1999 to 2006, he had a front-row seat at the table where many of the decisions about the nation’s economy were made.

“The way to economic growth is to let markets, and not the government, dictate prices and allocate economic resources,” said Husain, who currently serves as the dean and director of the Institute of Business Administration (IBA), a leading business school based in Karachi.

Husain touched briefly on the theoretical arguments in favour of privatisation before laying out in detail how – in the few cases where it had been tried in Pakistan – it had produced a roaring success.

He gave three examples: banking, the telecommunications sector, and the power sector. In each, he laid out the reasons why it had been a success.

In the banking sector, for instance, before privatisation, the largest banks in the country were all government owned. In the early 2000s, the three big banks that the government decided to sell cost the national exchequer about Rs41 billion in bailouts in order to ensure that they were adequately capitalised. By 2011, far from needing banks, those same three banks were paying in Rs25 billion in corporate income taxes.

Indeed, Husain argued that, had the banking sector remained in government hands, the 2008 financial crisis would have been much worse than it was, and would have crippled the financial sector. The privately run banks, however, were able to weather the storm reasonably well and now nearly all of the major banks, and certainly all of the Big Five, are profitable.

To contrast with this success, Husain brought up the example of the Pakistan Steel Mills, the privatisation transaction of which was stopped by the Supreme Court on allegations of corruption in 2006. Since the transaction was halted, Pakistan Steel Mills has cost the government about Rs100 billion in bailouts. “And this does not even include the amount of foreign exchange we had to spend on importing steel because PSM is so badly run that it cannot operate on more than 25% capacity,” said Husain.

In some case, privatisation helps break a government monopoly, such as that in the telecommunications sector. In the past six years, the country has seen the number of cellular phone service providers increase to five, with the competition pushing communications costs in Pakistan to among the lowest in the world while ensuring that nearly two-thirds of Pakistanis have phones, all while delivering Rs120 billion in annual tax revenues to the government.

“Had the government not privatised Pakistan Telecommunications Company, this revolution would not have taken place in Pakistan,” said Husain.

As for the energy sector, Husain was effusive in his praise for KESC, going so far as to say that he stood by his quote from many years ago that had aroused some controversy: “If KESC is privatised with the government receiving only one paisa for it, that would be a good deal for the people of Karachi,” he said.

He also addressed the concern that privatisation leads these companies to shed jobs, pointing out that many of them are too bloated in the first place, and that it is not the government’s role to employ everyone. “Of the more than 57 million people in the Pakistani workforce, only 2.5 million [less than 4.4%] work in the government and state-owned enterprises. Most of the jobs in this country come from the private sector, which is where the growth lies,” he said. So comprehensive was Husain’s arguments, that apart from two brief questions, nobody had anything left to ask him.

Published in The Express Tribune, September 14th, 2012.

Is privatisation the solution for state-owned enterprises?

Effici­ency improv­ement, restru­cturin­g may cut losses of SOEs.  Karachi Electric Supply Company which was handed over to UAE-based Abraaj Capital seems in more wretched condition after privatisation. PHOTO: FILE

KARACHI: The growing losses of state-owned enterprises (SOEs) in Pakistan seem to be a challenge for economic managers. Inefficiency, mismanagement, corruption, political influences and vested interests are considered responsible for the huge losses and poor performance of these state-owned corporations.

The government is spending Rs400-600 billion per year on these SOEs, reducing allocations for the social sector and increasing the country’s debt. What will be the way forward, privatisation?

The perception that a change in ownership will be the solution is not true. People who advocate privatisation argued that the private sector can manage corporations more efficiently due to its profit-oriented approach compared to the state, which is not supposed to do business.

Besides the debate who should do business and who should not, there are some questions. What is the capacity and priority of the state? What are the tools and tactics the private sector has to manage and efficiently run these enterprises which governments do not have? Is the state capable of running the enterprises on the pattern of corporate sector?

It seems irrational that instead of tackling corruption and other impediments, the state should sell public assets to the private sector.

Another view which opposes privatisation points to irregularities and corruption in the privatisation process. In Pakistan, effective privatisation started from 1991 after nationalisation in the 70s. Privatisation started with two primary objectives – payment of foreign debt and poverty alleviation. Now anyone can easily assess what privatisation has achieved. The external debt stands higher at $60 billion and approximately 43% of population lives below the poverty line.

According to the Privatization Commission, the privatisation process is aimed at selling government property in an open and transparent manner with a view to obtaining the best possible price. But how much transparency and openness have been observed during the privatisation process was evident from the steel mill case which everyone knows.

So, privatisation in an attempt to eliminate corruption is not appropriate in the sense that the same corruption problem emerges during the privatisation process as in running government organisations.

Another view that these corporations should first be reformed and restructured in order to make them profit-oriented and then privatised also seems to be rubbish because there will be no need to sell public assets when they are making profit. What has been achieved in the case of Karachi Electric Supply Company (KESC), which seems in more wretched condition after privatisation. Pakistan Railways, no doubt, is in its worst condition due to mismanagement and vested interests, but after the outsourcing of some operations, like the business train, to the private sector while using its infrastructure, nobody can favour privatisation.

There are certain examples all over the world where public utilities are running successfully under state control. The economic mechanism in countries like Pakistan does not favour privatisation, which itself is considered a source of corruption. Improving efficiency, restructuring and output-based evaluation may reduce losses of the state-owned enterprises.

The writer hosts business talk shows on FM 101 and Radio Pakistan and is pursuing M Phil degree in Economics.

Published in The Express Tribune, August 6th, 2012.