Should government again swallow the bitter pill?
Monday, 27 April 2009
Shamsul Huq Zahid
Sometimes, two events, opposed to each other in contents and in policies, do take place simultaneously. A few of those who take notice of such happenings express surprise at such events and most others ignore the same. It is, however, difficult to say which one of the two groups of people is right in its approach.
The reason for raising the issue is that a few contrasting developments involving state-owned enterprises (SoEs) are now taking place in Bangladesh.
Last Friday, the Chittagong Chemical Complex (CCC), an enterprise under the Bangladesh Chemical Industries Corporation (BCIC) was declared re-opened at a function held in the port city by Industries Minister Dilip Barua, who is the head of the Bangladesher Sammyabadi Dal, a left political party. The complex, which had been incurring losses years after years, was shut down by the BNP-led four-party alliance government in 2002.
Speaking at the function arranged to mark the re-opening of the CCC, Barua said the complex has been reopened as part of the present government's plan to restart the operations of all mills and factories closed by the previous government, meaning the BNP-led alliance government. He said during a meeting held at the industries ministry, Prime Minister Sheikh Hasina has directed him to reopen the closed mills and factories across the country ' for the greater interest of the nation and workers'.
The Financial Express carried a single-column report on the reopening of the CCC on its front page in its last Saturday's issue. However, on the same page the newspaper displayed another special report more prominently on the Privatisation Commission's preparation for transferring, at least, 38 SoEs to the private sector. It has made, of late, a new list of 12 SoEs under the jute and textile ministries and the same would soon be sent to the cabinet committee on economic affairs for vetting.
On April 26, Sunday, Barua, speaking at a function organized to discuss the draft Industrial Policy, 2009 in Dhaka, made yet another startling revelation that is most likely to trigger a major debate involving the government policy makers, independent economists and donors. He said the government has decided not to privatize any SoE in the future. Explaining reasons behind taking a reverse course, the industries minister said the bitter experience gained from privatization in the recent past has prompted the government to take such a decision. He claimed that the privatization programme had failed to achieve the desired objectives as buyers had kept many SoEs idle. Even some private owners have sold the vacant lands belonging to the privatized SoEs to the real-estate companies.
Here, whether the government should or should not reopen the closed SoEs or privatize the loss-incurring or profit earning public sector entities is not the issue. It is all about the activities of conflicting nature on the part of two government entities-the industries ministry and the PC.
If the government's policy is to reopen all the mills and factories closed by the immediate past political government and run those profitably there should be no reason for anyone to raise objections.
In that case the PC becomes a redundant entity. But the activities of the PC and the appointment of Dr. Mirza Abdul Jalil as its chairman by the Sheikh Hasina's government do not anyway indicate to the government's willingness to wind up the commission.
Since the present government is promise-bound to reopen closed public sector mills factories, obviously, it must have prepared a detailed plan on how to operate those under state ownership without imposing any additional burden, financial or otherwise, on the government. There is no denying the SoEs have caused enough financial haemorrhages to the country's economy. Most SoEs have incurred substantial financial losses for years after years.
Take the case of Adamjee Jute Mills, which was a glaring example of mismanagement, corruption and inefficiency in the public sector enterprises. Still some people are heard lamenting the demise of the 'world's largest jute mill', the Adamjee. It was not just mismanagement and corruption that had eaten into the vitals of the mill, its machinery became nothing but a large heap of junks. The government would have been left with no option other than paying wages worth billions of taka every year to thousands of idle workers if it had decided to keep the mill open.
It is still not clear how the government wants to proceed with its closed SoE reopening programme. There should be no valid reason for the government to impose additional burden on the economy on account of this programme.
In rare cases, the SoEs without having operational monopoly have succeeded in earning profits. It is most unlikely that the reopened SoEs would make profit without a change in the management. It could be that the government might enter into management contracts with private operators. However, in many cases in the past, such an arrangement failed.
The government does need to make public a detailed plan, if there is any, on the SoE reopening. Nothing should be done to get cheap popularity, which might prove too burdensome for the government later.
The exponents of controlled economy have gained strength, of late, because of the global economic meltdown triggered by the regulatory failures, primarily in the USA, the global leader of free-market economy. The subsequent state intervention in the USA and Europe in the operations of their financial systems has redoubled the strength of the forces opposed to market economy.
Whether the government in a poor country like Bangladesh should keep its intervention confined only in distribution of farm inputs, fuel and power at subsidized rates among the farmers or re-enter the areas of operations that once proved to be highly difficult to manage is an issue that deserves close scrutiny.
Sometimes, two events, opposed to each other in contents and in policies, do take place simultaneously. A few of those who take notice of such happenings express surprise at such events and most others ignore the same. It is, however, difficult to say which one of the two groups of people is right in its approach.
The reason for raising the issue is that a few contrasting developments involving state-owned enterprises (SoEs) are now taking place in Bangladesh.
Last Friday, the Chittagong Chemical Complex (CCC), an enterprise under the Bangladesh Chemical Industries Corporation (BCIC) was declared re-opened at a function held in the port city by Industries Minister Dilip Barua, who is the head of the Bangladesher Sammyabadi Dal, a left political party. The complex, which had been incurring losses years after years, was shut down by the BNP-led four-party alliance government in 2002.
Speaking at the function arranged to mark the re-opening of the CCC, Barua said the complex has been reopened as part of the present government's plan to restart the operations of all mills and factories closed by the previous government, meaning the BNP-led alliance government. He said during a meeting held at the industries ministry, Prime Minister Sheikh Hasina has directed him to reopen the closed mills and factories across the country ' for the greater interest of the nation and workers'.
The Financial Express carried a single-column report on the reopening of the CCC on its front page in its last Saturday's issue. However, on the same page the newspaper displayed another special report more prominently on the Privatisation Commission's preparation for transferring, at least, 38 SoEs to the private sector. It has made, of late, a new list of 12 SoEs under the jute and textile ministries and the same would soon be sent to the cabinet committee on economic affairs for vetting.
On April 26, Sunday, Barua, speaking at a function organized to discuss the draft Industrial Policy, 2009 in Dhaka, made yet another startling revelation that is most likely to trigger a major debate involving the government policy makers, independent economists and donors. He said the government has decided not to privatize any SoE in the future. Explaining reasons behind taking a reverse course, the industries minister said the bitter experience gained from privatization in the recent past has prompted the government to take such a decision. He claimed that the privatization programme had failed to achieve the desired objectives as buyers had kept many SoEs idle. Even some private owners have sold the vacant lands belonging to the privatized SoEs to the real-estate companies.
Here, whether the government should or should not reopen the closed SoEs or privatize the loss-incurring or profit earning public sector entities is not the issue. It is all about the activities of conflicting nature on the part of two government entities-the industries ministry and the PC.
If the government's policy is to reopen all the mills and factories closed by the immediate past political government and run those profitably there should be no reason for anyone to raise objections.
In that case the PC becomes a redundant entity. But the activities of the PC and the appointment of Dr. Mirza Abdul Jalil as its chairman by the Sheikh Hasina's government do not anyway indicate to the government's willingness to wind up the commission.
Since the present government is promise-bound to reopen closed public sector mills factories, obviously, it must have prepared a detailed plan on how to operate those under state ownership without imposing any additional burden, financial or otherwise, on the government. There is no denying the SoEs have caused enough financial haemorrhages to the country's economy. Most SoEs have incurred substantial financial losses for years after years.
Take the case of Adamjee Jute Mills, which was a glaring example of mismanagement, corruption and inefficiency in the public sector enterprises. Still some people are heard lamenting the demise of the 'world's largest jute mill', the Adamjee. It was not just mismanagement and corruption that had eaten into the vitals of the mill, its machinery became nothing but a large heap of junks. The government would have been left with no option other than paying wages worth billions of taka every year to thousands of idle workers if it had decided to keep the mill open.
It is still not clear how the government wants to proceed with its closed SoE reopening programme. There should be no valid reason for the government to impose additional burden on the economy on account of this programme.
In rare cases, the SoEs without having operational monopoly have succeeded in earning profits. It is most unlikely that the reopened SoEs would make profit without a change in the management. It could be that the government might enter into management contracts with private operators. However, in many cases in the past, such an arrangement failed.
The government does need to make public a detailed plan, if there is any, on the SoE reopening. Nothing should be done to get cheap popularity, which might prove too burdensome for the government later.
The exponents of controlled economy have gained strength, of late, because of the global economic meltdown triggered by the regulatory failures, primarily in the USA, the global leader of free-market economy. The subsequent state intervention in the USA and Europe in the operations of their financial systems has redoubled the strength of the forces opposed to market economy.
Whether the government in a poor country like Bangladesh should keep its intervention confined only in distribution of farm inputs, fuel and power at subsidized rates among the farmers or re-enter the areas of operations that once proved to be highly difficult to manage is an issue that deserves close scrutiny.