Pakistan’s economy is facing many challenges. To meet these, the government is reportedly seeking bilateral assistance from friendly countries, especially China and Saudi Arabia. They are looking to set up an Islamic banking facility that may attract large inflows of Foreign Direct Investment (FDI), privatising public enterprises and motivating the Pakistani diaspora to invest in Pakistan.
Pakistan’s external debt exceeded US$ 90 billion by June 30, 2018. Presently, it was hovering around US$ 100 billion. Some of these measures might further increase Pakistan’s external debt to over US$ 103 billion by June, 2019, thereby exceeding the limit prescribed in the country’s Fiscal Responsibility and Debt Limitation (Revised) Act, and further widening the macroeconomic imbalance.
Among other options, the new government is mulling to launch dollar-dominated bond and Sukuk bond to tap a favourable response from the Pakistan’s diaspora abroad who, according to PTI leadership, “wants to contribute.” The country has about five million expatriate adult Pakistanis abroad who, no doubt, feel concerned when their homeland is in political or economic turmoil.
Drawing upon their sentiments, the government could motivate them through incentives, like use of executive lounges at airports during arrival and departures and a fixed quota in new economic zones and government-floated housing schemes. As regards FDI, it may be noted that a number of factors inhibited the investors from making larger investments in the country in the past. These included investigations by NAB and non-civilian supra-agency of investors who announced to make investments in Pakistan, political instability in the country, rising clout of political religious groups, edgy relations with India and Afghanistan, energy shortages and high cost of electricity, bureaucratic inertia and corruption and finally, absence of long-term economic plans and frequent changes in the economic policies.
Before launching any campaign to attract foreign investments, the government would do well to take steps to remove known reservations of potential investors.
Furthermore, prudence demands that we live within our means and avoid excessive borrowing. As a first step, the government needs to cut down non-development and administrative expenditure so as to reduce fiscal deficit. It may be noted that post-1958, all successive governments have granted liberal subsidies to some classes and perks and privileges to top bureaucracy. Coupled with lavish furnishing of offices and homes, this has raised non-development expenses substantially. Can you imagine that the government has to dole out many hundred billions of rupees on the upkeep of cars that officials of various hues and colours and their families are allowed to use? Against this, there is no dependable public transport in most cities and wherever some schemes have been launched, the elite classes have questioned the expenses.
To promote austerity and simplicity, Imran Khan has set a good precedent by deciding to live in a minister’s house instead of the spacious Prime Minister House. We do hope that the provincial governors, chief ministers and top bureaucracy would emulate the example set by Imran Khan.
There are some major, but unavoidable expenses that every government feels impelled to defray. These include: public sector enterprises (PSEs) losses amounting to Rs1.1 trillion besides commodity operations and power sector losses to the tune of Rs450 billion and Rs500 billion, respectively. The authorities need to find some out-of-the box solutions to get rid of these huge losses and turn PSEs into profit-yielding ventures.
It is a happy augury that the PTI government wishes “to turn around state-owned enterprises (SOEs) by creating a Wealth Fund (pursuing) aggressive depoliticisation and through effective performance management of capable and autonomous leadership.” Most SOEs had turned into loss-making units, primarily due to management in non-professional hands, inefficiency, over-staffing, influx of political appointees and negative role of staff unions.
This point can be further elaborated if we take up Pakistan Steel Mills Limited (PSML) as a case study. The PSML turned into a loss-making unit primarily due to large-scale over-staffing and political appointments. Can you imagine a mill that could be efficiently run with about 8,000 persons had, at one time, a work force of 27,000? When one of its chairmen terminated the services of 3,000 daily contract wagers, the mill turned into a profit-yielding enterprise instantly. It may also be noted that after restructuring in 1998, the PSML had become a profit-yielding concern. During FY2002, PSML earned a net income of Rs4 million, which increased to Rs6,008 million in FY 2005.
The PSML is a supra industrial unit. In addition to a 165-MW power plant, the country’s largest and only integrated iron mill was equipped with finishing plants, coke oven batteries, billet-mill, blast furnaces, hot and cold rolling mills, galvanizing unit, grinding units, water supply and water treatment plants. It also possessed 40 locomotives of 100 HP each, over 100 railway wagons, and an infrastructure in the shape of a dedicated jetty, 110 kilometre metalled road and a 10 kilometre railway track. The PSML also owns four steel plants in Thatta, some 19,086 acres of land in Karachi and Thatta, an SMC factory over 33 acres in Lahore, city offices in Karachi, Lahore and Islamabad spread over 2230 square yards, 1900 square yards and 1640 square yards respectively. Besides, it has investments in Pakistan Steel Fabricating Company (Pvt) Limited, Abbas Engineering Industries Limited, Arabian Sea Country Club Limited, Multipurpose Industries Limited, Resource and Engineering Management Corporation, Envicrete Limited, Chiragh Sun Engineering (Pvt) Limited, State Enterprise Display Centre and FTC Management Company (Pvt) Limited.
If its assets located outside Karachi are disposed of as stand-alone companies or their management is entrusted to professionally sound, capable and credible private companies through open (national or international) tenders, keeping in view the size of each unit, on public-private-partnership basis, all these units can become profitable companies in no time. One condition for auction should be that the new management would run these units as efficient and modern ventures. Likewise, its 165 MW power plant, if operated efficiently as a commercial venture, can earn profits by supplying surplus electricity to K-Electric, WAPDA or any other company, in bulk.
Reverting to austerity measures, if the prime minister and cabinet ministers can live in one kanal houses, why can’t the bureaucracy? It is no secret that some officers continue to live in colonial-era huge bungalows built over large tracts of land. As a matter of policy, the colonial government provided to the British-origin minions of the state huge mansions with big lawns, playgrounds, horse riding areas and many annexes to serve as living quarters for their domestic help. For instance, the area of Commissioner House Sargodha is 104 kanals and 33 employees of the government look after its maintenance and security, while DCO house in Mianwali covers an area of 95 kanals and the house of DCO Faisalabad is spread over 92 kanals.
If properties in police custody in the Punjab, which cover an area of 860 kanal, are auctioned, they can easily fetch about Rs80 billion. The situation in Balochistan, Khyber Pakhtunkhwa, Sindh and other regions of Pakistan is not much different. Thus, if the colonial-era properties in possession of police officers across the country are auctioned these can easily yield around Rs160 billion. If one decides to put under hammer huge mansions serving as residences of commissioners, DCOs, railway officers these may also fetch around Rs160-170 billion. Alternately, these huge mansions may be used as housing, educational and training institutions or building staff colonies. Funds for constructing staff colonies can be raised by disposing of about 50-60 percent of the land of these bungalows on whose maintenance and upkeep the government has to spend a couple of billion rupees from the tax payer’s money every year.
Let austerity become the norm and let all minions of the state, irrespective of their hue and colour, learn to live in small houses or apartments like their counterparts in the West.
Alauddin Masood is a freelance columnist based in Islamabad.
E-mail: alauddinmasood@gmail.com
Pakistan’s external debt exceeded US$ 90 billion by June 30, 2018. Presently, it was hovering around US$ 100 billion. Some of these measures might further increase Pakistan’s external debt to over US$ 103 billion by June, 2019, thereby exceeding the limit prescribed in the country’s Fiscal Responsibility and Debt Limitation (Revised) Act, and further widening the macroeconomic imbalance.
Among other options, the new government is mulling to launch dollar-dominated bond and Sukuk bond to tap a favourable response from the Pakistan’s diaspora abroad who, according to PTI leadership, “wants to contribute.” The country has about five million expatriate adult Pakistanis abroad who, no doubt, feel concerned when their homeland is in political or economic turmoil.
Drawing upon their sentiments, the government could motivate them through incentives, like use of executive lounges at airports during arrival and departures and a fixed quota in new economic zones and government-floated housing schemes. As regards FDI, it may be noted that a number of factors inhibited the investors from making larger investments in the country in the past. These included investigations by NAB and non-civilian supra-agency of investors who announced to make investments in Pakistan, political instability in the country, rising clout of political religious groups, edgy relations with India and Afghanistan, energy shortages and high cost of electricity, bureaucratic inertia and corruption and finally, absence of long-term economic plans and frequent changes in the economic policies.
Before launching any campaign to attract foreign investments, the government would do well to take steps to remove known reservations of potential investors.
Furthermore, prudence demands that we live within our means and avoid excessive borrowing. As a first step, the government needs to cut down non-development and administrative expenditure so as to reduce fiscal deficit. It may be noted that post-1958, all successive governments have granted liberal subsidies to some classes and perks and privileges to top bureaucracy. Coupled with lavish furnishing of offices and homes, this has raised non-development expenses substantially. Can you imagine that the government has to dole out many hundred billions of rupees on the upkeep of cars that officials of various hues and colours and their families are allowed to use? Against this, there is no dependable public transport in most cities and wherever some schemes have been launched, the elite classes have questioned the expenses.
To promote austerity and simplicity, Imran Khan has set a good precedent by deciding to live in a minister’s house instead of the spacious Prime Minister House. We do hope that the provincial governors, chief ministers and top bureaucracy would emulate the example set by Imran Khan.
There are some major, but unavoidable expenses that every government feels impelled to defray. These include: public sector enterprises (PSEs) losses amounting to Rs1.1 trillion besides commodity operations and power sector losses to the tune of Rs450 billion and Rs500 billion, respectively. The authorities need to find some out-of-the box solutions to get rid of these huge losses and turn PSEs into profit-yielding ventures.
It is a happy augury that the PTI government wishes “to turn around state-owned enterprises (SOEs) by creating a Wealth Fund (pursuing) aggressive depoliticisation and through effective performance management of capable and autonomous leadership.” Most SOEs had turned into loss-making units, primarily due to management in non-professional hands, inefficiency, over-staffing, influx of political appointees and negative role of staff unions.
This point can be further elaborated if we take up Pakistan Steel Mills Limited (PSML) as a case study. The PSML turned into a loss-making unit primarily due to large-scale over-staffing and political appointments. Can you imagine a mill that could be efficiently run with about 8,000 persons had, at one time, a work force of 27,000? When one of its chairmen terminated the services of 3,000 daily contract wagers, the mill turned into a profit-yielding enterprise instantly. It may also be noted that after restructuring in 1998, the PSML had become a profit-yielding concern. During FY2002, PSML earned a net income of Rs4 million, which increased to Rs6,008 million in FY 2005.
The PSML is a supra industrial unit. In addition to a 165-MW power plant, the country’s largest and only integrated iron mill was equipped with finishing plants, coke oven batteries, billet-mill, blast furnaces, hot and cold rolling mills, galvanizing unit, grinding units, water supply and water treatment plants. It also possessed 40 locomotives of 100 HP each, over 100 railway wagons, and an infrastructure in the shape of a dedicated jetty, 110 kilometre metalled road and a 10 kilometre railway track. The PSML also owns four steel plants in Thatta, some 19,086 acres of land in Karachi and Thatta, an SMC factory over 33 acres in Lahore, city offices in Karachi, Lahore and Islamabad spread over 2230 square yards, 1900 square yards and 1640 square yards respectively. Besides, it has investments in Pakistan Steel Fabricating Company (Pvt) Limited, Abbas Engineering Industries Limited, Arabian Sea Country Club Limited, Multipurpose Industries Limited, Resource and Engineering Management Corporation, Envicrete Limited, Chiragh Sun Engineering (Pvt) Limited, State Enterprise Display Centre and FTC Management Company (Pvt) Limited.
If its assets located outside Karachi are disposed of as stand-alone companies or their management is entrusted to professionally sound, capable and credible private companies through open (national or international) tenders, keeping in view the size of each unit, on public-private-partnership basis, all these units can become profitable companies in no time. One condition for auction should be that the new management would run these units as efficient and modern ventures. Likewise, its 165 MW power plant, if operated efficiently as a commercial venture, can earn profits by supplying surplus electricity to K-Electric, WAPDA or any other company, in bulk.
Reverting to austerity measures, if the prime minister and cabinet ministers can live in one kanal houses, why can’t the bureaucracy? It is no secret that some officers continue to live in colonial-era huge bungalows built over large tracts of land. As a matter of policy, the colonial government provided to the British-origin minions of the state huge mansions with big lawns, playgrounds, horse riding areas and many annexes to serve as living quarters for their domestic help. For instance, the area of Commissioner House Sargodha is 104 kanals and 33 employees of the government look after its maintenance and security, while DCO house in Mianwali covers an area of 95 kanals and the house of DCO Faisalabad is spread over 92 kanals.
If properties in police custody in the Punjab, which cover an area of 860 kanal, are auctioned, they can easily fetch about Rs80 billion. The situation in Balochistan, Khyber Pakhtunkhwa, Sindh and other regions of Pakistan is not much different. Thus, if the colonial-era properties in possession of police officers across the country are auctioned these can easily yield around Rs160 billion. If one decides to put under hammer huge mansions serving as residences of commissioners, DCOs, railway officers these may also fetch around Rs160-170 billion. Alternately, these huge mansions may be used as housing, educational and training institutions or building staff colonies. Funds for constructing staff colonies can be raised by disposing of about 50-60 percent of the land of these bungalows on whose maintenance and upkeep the government has to spend a couple of billion rupees from the tax payer’s money every year.
Let austerity become the norm and let all minions of the state, irrespective of their hue and colour, learn to live in small houses or apartments like their counterparts in the West.
Alauddin Masood is a freelance columnist based in Islamabad.
E-mail: alauddinmasood@gmail.com