INTERVIEW WITH FORMER LCCI'S SVP
'PRESENT ECONOMIC SITUATION IS NOT COMPATIBLE FOR PRIVATISATION'
May 3 - 16, 2010
In the wake of present economic situation confronted to the country, the scope of privatisation process is bleak, as both local and foreign investors are not ready to go for big deals. The current power crisis, security situation, high cost of doing business and rising prices of petroleum products, electricity tariff and raw material have caused manifold problems for the industry and trade.
This was crux of views given by leading businessman and former Senior Vice President of the Lahore Chamber of Commerce & Industry Abdul Basit.
While talking to Pakistan and Gulf Economist (Page) with reference to privatisation process in the country, he said privatisation commission had already sold out valuable assets, which instead of providing any benefit to the country as well as public at large has caused surge in rate of unemployment in the country.
He said, "The need of the hour is to restore the confidence of investors through introducing pro-business policies by the government which should play the role of facilitator for the industry and trade in real sense. The government is following the dictates of donor agencies which is not only heavily burdening the common man but also squeezing business opportunities both for the local and foreign investors."
Abdul Basit said that country's present economic situation does not suit for privatisation process. In present situation, if the government goes for privatisation of different state-owned entities, it would give nothing except losses. ěThe government should wait for conducive business environment so that proper return of different entities could be fetched," he said.
He further said, "It is very unfortunate that despite passage of well over half a century of our existence as a sovereign state, we are still crawling and making direction less moves because no lessons have been learnt from the successes of other nations. Depression is running in our veins like blood because everybody knows that we are fast heading towards the point of no return. We just need good governance to put the economy back on track."
Abdul Basit, who has a thorough command over the issues being faced by the business community, gave a few very practical suggestions as to how the things could take a positive turn. For instance, over the issue of electricity shortage, he said, "We are blessed with matchless hydropower resources but are not tapping the same. Rather we have made it controversial to the maximum. Let me tell you that our survival lies in hydro means of electricity generation and not in the thermal. Unless and until, we blend both the hydro and thermal with a ratio of 20 and 80, respectively neither we would be able to run our industries nor we will remain competitive in the global market."
He said that those who are talking of producing electricity through coal are actually living in fool's paradise. They are unaware of the fact the coal produces the smoke that causes acidic rain. Therefore, there is no point in initiating coal based power generation, he added.
Abdul Basit said that the business community was well aware of the fact that it was very difficult for the government to overcome the huge electricity shortage in a few days but it was unable to understand that why alternate energy generation options are not availed. He said that solar energy was an immediate solution to ongoing crisis and as a first step or as pilot project the government should convert all the tube wells operating in Punjab to solar energy.
As the conversion would not only ensure proper supply of electricity to the industrial sector but would also be providing relief to the domestic consumers, he added.
Abdul Basit also said, "If a decision on Kalabagh Dam was not taken immediately it would be very difficult for both the industrial and domestic consumers to utilize costly thermal electricity." He said that everybody could calculate per unit rate of electricity when the dollar would jump to higher prices and the prices of oil in the international market would surge. He said that an earliest decision on Kalabagh Dam would not only earn a good name for the present government but it would also be sending a very positive signal to the international community. He said that the Kalabagh Dam would generate electricity at the rate of 60 paisa per unit, which would be almost free if is compared with existing electricity tariff.
Rejecting six-percent increase in electricity tariff with retrospective effect from April 1, Abdul Basit termed it detrimental to both the trade and industry and asked the government to withdraw the decision. He said that trade and industry were already in a crisis because of multiple internal and external challenges and the recent hike was bound to aggravate the situation further.
He was of the view that the government should approach the international Monetary Fund for a waiver of increase in power tariff because the backlash from the masses on receiving the electricity bills of month of April would be bigger than expectations. He added that the people at the helm of affairs should convince the IMF that the time was not ripe for such an increase. He said that total impact of the recent 6-per cent increase in power tariff would be Rs 25 billion for the next three months that could be met by using Rs 25 billion subsidy earmarked in the budget for wheat import.
Under IMF conditions, the government had agreed to raise the power tariff by 24-percent during the current fiscal year in total, in three phases. Tariff was increased by six percent in the October-December quarter and another 12 percent in January-March, while another six-percent with retrospective effect had become effective from April 1, he said.
Talking about the necessity of good governance, Abdul Basit, while citing the example of China, said that China's economy during the past 30 years has changed from a centrally planned system that was largely closed to international trade to a more market-oriented economy that has a rapidly growing private sector and is a major player in the global economy. "Reforms started in the late 1970s with the phasing out of collectivized agriculture and expanded to include the gradual liberalization of prices, fiscal decentralization, increased autonomy for state enterprises, the foundation of a diversified banking system, the development of stock markets, the rapid growth of the non-state sector, and the opening to foreign trade and investment. Annual inflows of foreign direct investment rose to highest levels," he said.
According to him, China has reinvigorated its support for leading state-owned enterprises in sectors it considers important to "economic security," explicitly looking to foster globally competitive national champions. The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP since 1978.
Abdul Basit said, "Economic development has been more rapid in coastal provinces than in the interior, and approximately 200 million rural laborers and their dependents have relocated to urban areas to find work. The Chinese government seeks to add energy production capacity from sources other than coal and oil, and is focusing on nuclear and other alternative energy development. We simply need to adopt the successful models available in the world to break the shackles of poverty."
He also suggested that the markup rate should be brought down so that the business community that has been facing multiple internal and external challenges for the last many years could be able to initiate new business ventures.