Will privatisation programme make any real headway?

Shahiduzzaman Khan

Privatisation Commission (PC), according to the latest indication, is now poised to divest 23 state-owned enterprises as per its earlier plan. Its chairman Mirza Abdul Jalil said nobody can now raise any controversy over this move as the cabinet committee on economic affairs had given its approval to the divestment plan. Even Prime Minister Sheikh Hasina gave the directive to go ahead with the privatisation process, he added.

The PC chairman made this announcement at a press briefing this week. In the face of stiff resistance from some concerned quarters, divestment process of some loss-making entities has been delayed. The ministries of industries and jute and textile, according to the PC chairman, were not in favour of divestiture of loss-making state owned enterprises (SoEs) and such ministries did not extend cooperation to the PC. He reiterated that the commission would now go ahead with the privatisation of the selected SoEs, half of which are under the ministries of industries and jute and textile.

It is not clearly known how the functionaries of the concerned ministries were trying to reopen the closed down SoEs under them in recent times, although they were handed over to the PC for divestment. One wonders what could be the reason for reopening the SoEs that were closed down for sustaining losses for more than a decade? A survey says privatisation of the loss-making SoEs could annually save between Tk 3.0 and 9.0 billion of the government and that 44, out of 75 privatised SoEs, were running on profit.

According to the survey, the buyers of, at least, 16 privatised SoEs were trying to reopen the factories, but 15 others were completely shut down. The commission is planning to survey 492 other SoEs that were privatised since independence up to 1993. Besides, it drew up a programme to speed up the process of disinvestment over the next four years. The divestment of SoEs since early 1990s fetched Tk. 7.0 billion to the public exchequer while generating 90,000 jobs.

However, another survey conducted a few years ago found that almost half of the privatised mills and factories were closed. As the latest developments do indicate, the government is undertaking exercises to create a positive attitude about privatisation in order to push forward the process. If the government really means business, then there should be rigorous studies and comparative analyses about the contribution of the private entities and the SoEs in the same sector to the economy. And this should not only be measured in terms of profits or taxes but should also cover areas relating to extent and volume of economic activities generated as well as their contribution to the improvement of human resources through other services.

Meanwhile, the functional role of the PC still remains largely uncharted. This is partly because no firm signal about the future of the privatisation progress is yet available. After coming to power, some government functionaries did clearly express their firm position on not undertaking any further privatisation of public sector mills and industries.

In its election manifesto, the ruling party did, however, state that no industry would be privatised or closed down without creating alternative employment opportunities for the workers and employees. The government has already reopened some of the closed jute mills in order to rejuvenate the long-ailing jute sector. But many loss-making entities in the public sector are still responsible for haemorrhage to the country's public exchequer. Will the government continue to sustain such heavy losses year after year on account of such SoEs? Inefficient management, corruption and worn-out machineries have been sapping the vitality of many public sector mills and factories. Such industries have not been modernised with the change of time.

In this context, the "indecisiveness" on the part of the economic policy-planners of the government about the future of the privatisation programmes does have a strong bearing on investment activities in the economy. The pace of development activities in the public sector also yet remains to be accelerated to the desired extent, in order to help create favourable conditions to crowd in private investments. Furthermore, the actual operational side of the policy on Public-Private Partnership (PPP) for undertaking large infrastructure and power generation projects has to be made effective sooner than later, for the same purpose.

During the previous caretaker government, now-defunct Regulatory Reform Commission (RRC) had earlier made a number of recommendations, in conjunction with some other proposals that were mooted then to reinvigorate the Privatisation Commission (PC). Then, the updating of the old, ineffective and complicated laws was put on the agenda for actions to help boost investment and facilitate increased trade. The recommendations of the RRC, particularly, relating to privatisation, were termed by an important functionary of the incumbent government as 'brilliantly clustered'. But no worthwhile move in practice is yet come to implement such recommendations. The RRC exists no more. But there is no move to put another regulatory reform body in place to carry forward its unfinished work.

There is no denying that key institutions responsible for investment facilitation and promoting private sector-led growth, should be revamped at the earliest. Otherwise, it would be difficult to help boost production in industries on a sustained basis and to expedite the privatisation process in transparent ways. Policy flip-flops and fool-dragging on matters of consequence for facilitating expansion of new investment activities on a sustained footing do have huge economic costs, particularly in terms of lost opportunities. szkhan@dhaka.net