May 17 - 23, 2010

Capitalism was introduced in the world by Adam Smith of Scotland who is popularly known as its father. He visualised a stable world with high morals and ethical society. His philosophy of giving freedom of thinking and activities across the board resulting in unleashing the capacity of persons to display their entrepreneurial abilities for socioeconomic development was relevant to earlier times. The system lasted for several centuries until it was challenged by Communism and Socialism. Its dawn started in the early part of 19th century. It was strongly believed that the state should control all the resources and distribute it in an equitable manner. However, it lacked financial incentives and could not last even for a century. It came to a grinding halt in the erstwhile Soviet Union (Russia) and Eastern Europe. Gorbachev played a great role in demolishing it and paved the way for starting a new era generally known as Free Economy.

Today the world is mixture of different economic models. Generally, it is known as mixed economy where private and public sector both are playing their roles. However, there is hardly any country which has a pure economic system. The world is in search of a socioeconomic system that can narrow the gap between haves and have-nots with an accelerated economic development to benefit the society at large.


The story of privatisation in Pakistan is very interesting. We emerged as a sovereign state on the political map of the world. The father of nation Quaid-e-Azam Muhammad Ali Jinnah strongly advocated the role of private sector in a vibrant manner to ensure socioeconomic development. Simultaneously, he also encouraged the retention of some enterprises of strategic interests which had great influence on the internal security and defence of Pakistan in public sector. However, he was against the introduction of Western Economic System. He was advised about the system on July 01, 1948 while he was inaugurating the State Bank of Pakistan. He gave two arguments in this respect. He said the Western Economic System was responsible for the two World Wars and it was also instrumental in widening the gulf between poor and rich. Specifically, he advised the Research Department of State Bank of Pakistan to develop a socioeconomic system based on injunction of Quran and Sunnah. This can be comfortably entitled as: The start of a journey towards Islamic Economic System. Till now, this program stands un-crystallized. We wonder whether any government of today or in future will ever adopt this as an agenda for implementation.

When Pakistan was born, there was hardly an industrialist in the areas constituting Western or Eastern borders of the country. At best, these were merchants, traders or shop-keepers. At that time, there was a crying need to help develop private sector so that they commenced their industrial activities. It is interesting to note that during 1950's Pakistan Industrial Development Corporation of Pakistan (PIDC) was established in the public sector with the agenda that industries should be set up and later handed over to the private sector. PIDC played a supportive role under the adept leadership of Ghulam Farooq who devoted his life for this purpose.

During 1960's private sector was given a big boost. Later due to all-round and comprehensive economic policies several types of industries were established in the private sector: banking, insurance, cement, sugar, textiles, pharmaceutical, food, leather and several others.

It is interesting to note that Pakistan in the World had a unique example where the GDP of Pakistan was averaging 8.3 per cent per annum and the country ranked second after Japan in Asia. The payback period of several industries was as low as eight months.

The government played a great role as facilitator and all supportive logistics were made available to give boost to economic development. The misfortune was that India forced the 1965 war against Pakistan and this turned the progress in to regression. Unfortunately, as the fruits of prosperity of the private sector were not equitably distributed, there were wild cat strikes and industrial peace was thrown out of the window. Lockouts and strikes brought the industrial development of the country to a grinding halt and due to several complex reasons the Eastern part of Pakistan broke away and emerged as Bangladesh. The story of 22 Families' dominating the socioeconomic scene of Pakistan became very famous and the private sector slipped in to degeneration.

Under the leadership of Zulfiqar Ali Bhutto who took over the political reign of the leftover Pakistan, massive nationalization was announced. Thirty-two industrial units were taken over by the government of Pakistan. The system of managing agencies governing the Joint Stock Companies was abolished. Insurance industry in toto was nationalised. Pakistani banks were also nationalised. Various distribution networks of petroleum etc. were also nationalised. Perhaps all these actions were taken in the back drop of social compulsions as economic growth took place and was not cushioned with social justice. Due to this massive act of nationalisation, private sector received a big jolt. Privatisation initiative was de-motivated. Outflow of funds from Pakistan took place. Talented people left the country and the irony of fate is that managerial talent was not available to man enterprises which were dominated by political influences and their accumulated losses continued to haunt us till today as these losses burdened the federal budgets of Pakistan.

The decade of 1980's started with pro-privatisation policies and a steady plan was introduced by the then government. However, during 1990's, under the inspirational and transformational leadership of Mian Muhammad Nawaz Sharif, the then Prime Minister of Pakistan accelerated efforts were initiated to privatise the hitherto nationalised industrial units, banks and other institutions. However, as his stay was short, though in two terms, privatisation policy in holistic manner could not be translated into reality for the benefit of the common man. During the first decade of 21st century, General Musharraf drove the country with his own agenda. Some of his efforts lacked transparency and even the Supreme Court of Pakistan had to step in to question the transparency and neatness of the transactions of privatisation with special reference to Pakistan Steel Mill privatisation of which was quashed by the Supreme Court of Pakistan.


Over two years have passed with a democratic set up in the country and the government is still struggling to stabilise itself. So far, no clear-cut privatisation policy has been announced. There is a need that these issues should be addressed and after holding a stakeholders' moot a popular and acceptable privatisation policy may be developed and implemented. Sense of urgency is recommended to initiate steps.


1. The government must realise that it is in the business of government and not in the business of industrial and related activities. The real role of a government is to provide law and order, friendly investment policies, internal security, foreign policy, and surveillance on monetary and fiscal policies of the country.

2. Accordingly, the government must pursue privatisation policy. Its objectives should clearly spell out the criteria with no question marks by the stakeholders and the society.

3. The primary objective of the privatisation policy must be to ensure rights of the consumers so that after privatisation prices of products are well protected and prices are not jacked up to the financial detriment of the consumers. Moreover, the labour right of retention of the job and their productivity with financial and non-financial incentives should be well protected.

4. Every time some provision is included in the federal budget with regard to expected proceeds from privatisation but for the last several years these have lacked implementation. Political will is the crying need.

5. Privatisation Commission must ensure transparent bidding. Divestment should be done through the stock market and use of other internationally practiced techniques to build up trust and transparency. The government must understand this to ensure its creditability and to concentrate on the real roles which it must play.

6. The success stories of privatisation of UK and Malaysia need to be carefully understood and comprehended so that privatisation policy package can be developed in comprehensive terms.

7. 1973 Constitution of Pakistan guarantees freedom of trade and business and therefore it gives cushion for private sector to be strengthened logistically. Accordingly, the requirements laid down in the above Constitution need to be carefully read and reflected in the proposed Privatisation Policy which should be evolved and later implemented on consensus basis.


It is high time that issues identified are carefully considered and stakeholders in Pakistan in general and the government in particular must address these issues and make sure that privatisation policy for the prosperity of the country across the board is firstly developed and later pursued for accelerating the socioeconomic development of the country with all round gains to be distributed in an equitable and fair manner so that the dividends are shared by all stakeholders and in particular by the common man. This will reverse the tide of frustration in the society and inject a new wave of happiness and prosperity which was the basic objective for establishing Pakistan.