Accelerating pace of privatisation
Wednesday, 7 November 2007
THREE decades of the country's experience with privatisation calls for its close scrutiny. What other than a dose of scepticism does the outcome of it create at the end of 30 long years? The programme for privatisation, or reassigning the control of state owned enterprises (SOEs) to the private sector, pursued by successive governments in Bangladesh from the second half of the 1970s, only raises a host of questions and not without reasons. A painfully slow pace of implementation made achievement of the objectives a difficult proposition. Where did it go wrong, the implementation process or the policy inputs? It can be considered a positive experience in the right direction, but only partially.
Privatisation has been limping for more than thirty years. Many of the industries and services, under government control, continue to be run by a bureaucracy known for its lethargy and lack of efficiency. Underutilisation of capacity and chronic losses remain the obvious results. Renewing the lease of life for the SOEs requires massive injection of subsidies, from time to time, from the public exchequer.
With the SOEs divested to private sector, the government would be relieved of the need to provide huge funding support to the losing concerns which have no sound reason for retention of 'public' ownership. The resources, thus saved, would be at hand for the government to reallocate to pressing developmental activities in different sectors of the economy. An estimate suggests that a project of the size of the bridge over the Jamuna could be built every two years with the money, now required to keep the SOEs afloat. Riddled with corruption and other ills, including having to bear the expenses of excess employees, most of the SOEs are in a dire straits. Under better supervision and accountability system, their production cost could be lowered Their goods and services could then be sold at much more competitive prices. The consumers would have been relieved of the extra burden of paying more and the trouble of inefficient services.
Privatisation, therefore, became the obvious option to get rid of the white elephants as quickly as possible. By transferring the ownership of such enterprises to the private sector to run them more efficiently, the government could shake off the liabilities. But the task has proved to be not so easy. An oversimplified view of privatisation can hardly produce the desired result. That only a small number of SOEs could be disinvested over the last thirty years suggests that the task was not so efficiently handled. The post-privatisation scenario also caused disappointment in a number of cases. Entrepreneurs, who bought the disinvested SOEs, either failed to run the units or deliberately stopped their production, preferring instead to sell their land and other assets for quick returns. They knew that the market value of the SOEs with assets was much higher than the prices they were required to pay to the government for buying them. But such privatisation frustrated the declared objectives of the government as in a number of cases it did not get the full payments, the units ceased production and the workers lost jobs. There are also allegations that rent seeking in the Privatisation Commission led earlier to the undervalued sale of some SOEs. Sold at market prices or close to that, it would yield hefty resources for the government for spending on the needed development projects in thrust areas for public investments.
Therefore, it is important to make policies afresh in the light of the experiences of the last thirty years. The new policies ought to accelerate privatisation and effectively address the issues for which it stumbled so long. It would be equally important to ensure that the disinvested units provide more and better services to the consumers and the economy, instead of swelling the pockets of the privileged who buy the units for windfall gains alone.
Privatisation has been limping for more than thirty years. Many of the industries and services, under government control, continue to be run by a bureaucracy known for its lethargy and lack of efficiency. Underutilisation of capacity and chronic losses remain the obvious results. Renewing the lease of life for the SOEs requires massive injection of subsidies, from time to time, from the public exchequer.
With the SOEs divested to private sector, the government would be relieved of the need to provide huge funding support to the losing concerns which have no sound reason for retention of 'public' ownership. The resources, thus saved, would be at hand for the government to reallocate to pressing developmental activities in different sectors of the economy. An estimate suggests that a project of the size of the bridge over the Jamuna could be built every two years with the money, now required to keep the SOEs afloat. Riddled with corruption and other ills, including having to bear the expenses of excess employees, most of the SOEs are in a dire straits. Under better supervision and accountability system, their production cost could be lowered Their goods and services could then be sold at much more competitive prices. The consumers would have been relieved of the extra burden of paying more and the trouble of inefficient services.
Privatisation, therefore, became the obvious option to get rid of the white elephants as quickly as possible. By transferring the ownership of such enterprises to the private sector to run them more efficiently, the government could shake off the liabilities. But the task has proved to be not so easy. An oversimplified view of privatisation can hardly produce the desired result. That only a small number of SOEs could be disinvested over the last thirty years suggests that the task was not so efficiently handled. The post-privatisation scenario also caused disappointment in a number of cases. Entrepreneurs, who bought the disinvested SOEs, either failed to run the units or deliberately stopped their production, preferring instead to sell their land and other assets for quick returns. They knew that the market value of the SOEs with assets was much higher than the prices they were required to pay to the government for buying them. But such privatisation frustrated the declared objectives of the government as in a number of cases it did not get the full payments, the units ceased production and the workers lost jobs. There are also allegations that rent seeking in the Privatisation Commission led earlier to the undervalued sale of some SOEs. Sold at market prices or close to that, it would yield hefty resources for the government for spending on the needed development projects in thrust areas for public investments.
Therefore, it is important to make policies afresh in the light of the experiences of the last thirty years. The new policies ought to accelerate privatisation and effectively address the issues for which it stumbled so long. It would be equally important to ensure that the disinvested units provide more and better services to the consumers and the economy, instead of swelling the pockets of the privileged who buy the units for windfall gains alone.