An intelligent person learns from others' mistakes and
nationals with futuristic outlook redefine their policies with the changing
environment. Privatization Commission of Pakistan has so far made outright sale
and/or the GoP stake in more than 100 entities. That is the first hand
experience. However, Pakistan was not the first country to undertake
privatization. Many developed countries and even those where the conditions were
worse than Pakistan have credible track record. Therefore, the efforts should
not to reinvent the wheel and to learn from the mistakes of others, to be more
However, it goes without saying that the GoP initiated the
process of liberalization, deregulation and privatization not at its own but
more under the pressure of lenders. Since there was not a clear cut strategy
various adhoc measures were made. The worst example of this was allowing the
establishment of power plants in the private sector. While the largest losses
were in T&D, both WAPDA and KESC were made to purchase electricity from
private power producers. According to an analyst, "The GoP put the cart
before the horse and the result is persistent increase in electricity tariff.
While consumers in other countries benefited from privatization, consumers in
Pakistan are forced to pay for the inefficiency of state-owned utilities.
Therefore, we should learn from our own mistakes and develop the future strategy
following a prudent approach."
Globally the countries which undertook privatization can be
divided into four categories: 1) Industrialized, developing, middle-income and
low-income countries. These best examples pertain to energy sectors which
incidentally Pakistan is also doing. Industrialized countries managed their
problem by liberalization of energy sector and succeeded in attracting large
investments. Developing countries faced direct competition with developed
countries and flows were sensitive to financial problems. Middle-income
countries were able to attract private investment but better off consumers
benefited most and little of the benefits reached the poor directly. In
low-income markets opportunities were perceived little by private sector, per
capita consumption remained either stagnated or declined and access to energy
supply by the poor declined.
According to Tjaarda P. Storm van Leeuwen of the World Bank,
there are some concrete examples relevant to Pakistan. He referred to two —
oil and gas privatization in Argentina and the Bolivia-Brazil pipeline.
Argentina demonopolized and deregulated oil and gas sector in 1990, eliminated
restrictions on imports, exports and pricing and privatization took place after
restructuring. The result is improved service delivery, exports and Argentina is
now a major player in international markets.
The Bolivia-Brazil pipeline is even more interesting story.
Bolivia had the gas resources and Brazil had the demand. Neither government had
the financial resources to develop the pipeline. Bolivia made legislative
changes to enable development of resources. Downstream market reforms and market
based pricing reforms in Brazil paved the way for the deal. The international
lenders provided innovative financing.
According to Tjaarda, "Private investment is needed
because of the GoP's inability to fund accelerated development of the sector.
Therefore, it should have good regulatory framework (transparent and
predictable). Pakistan also needs proper sequencing of reforms to address
downstream problems first."