In today's world both private and public sector firms can fail and both can also succeed. Ownership is not the sole factor; what matters is the efficient and effective performance of the enterprises in carrying out policies, controlling and improving the quality of work and output. But there is a general belief that private enterprise is more efficient than the state-owned ones, and that the state should limit its role to supervision and overseeing. Also, common perception says, the government is inefficient and bureaucratic, while the private sector is efficient and dynamic. So, the more we can get the private sector to run things, the better it is for the country.
In a recently held pre-budget discussion jointly organised by the Metropolitan Chamber of Commerce and Industry and Maasranga television, two leading economists of the country called on the government to immediately privatise state-owned banks except Sonali Bank and take drastic measures against public enterprises to stop them from bleeding the economy. "I think enough is enough. We no longer need state banks," said Mohammed Farashuddin, a former central bank governor, who was backed wholeheartedly by Sadiq Ahmed, a member of the central bank's board of directors.
The business community of the country was also voicing the same demand for last several years as there are number of state-owned enterprises (SOEs') in the country whose performance has been absolutely unsatisfactory. According to the World Bank's latest Bangladesh Development Update, the government provided Tk 26.17 billion for recapitalisation of state-owned commercial banks in fiscal 2014-15, and injected Tk 150.00 billion into the state-run banks to keep them functioning in the last five years. The Banking Division has further requested for an allocation of Tk 100.00 billion in the upcoming budget. According to reports aired by Maasranga TV during the discussion, the subsidies for 47 state-run enterprises are about Tk 50.00 billion a year.
Several reasons have been cited explaining the big loss that include-- persistent inefficiency, bad management, unrealistic business strategy, corruption and sheer indifference towards the national interest and so on. However, experts have pointed out that the losses not only show the incapability of managers, but also the lack of transparency in using the state money. The SOEs losses are in fact nothing but straight drainage of the government exchequer, due to the fact that the money is given to the SOEs either in the form of capital infusion or subsidies and/or write-off of bad debts. Industry experts say that high production cost and low productivity in addition to low performance in terms of quality and availability of the services and products are the main reasons for the SOEs being uncompetitive in domestic as well as international markets. And as such they think there is no logic for providing these subsidies to SOE's which is sheer misuse of taxpayers' money. Rather they should be privatised immediately.
Unfortunately, if we go back to the beginning of our privatisation programme we find that our experience was not without bitterness. Since the privatisation of state-owned factories began in 1993, 74 such factories were allowed to go into private hands, as of now. Many of the new owners bought the factories along with 'large amount of land' by paying a 'very little amount of money'. Most, if not all, instead of running the factories, sold off the raw materials, chemicals, machineries to quickly get back the money spent on buying the factories. As a consequence, many of the workers in those factories lost their jobs.
Therefore, time has come for government to take lessons from countries who have successfully implemented the privatisation process through different methods such as: Build-Operate-Own, Build-Operate-Transfer, Sale of Equity, Sale of Assets, Management Contracts, Lease of Assets etc. The privatisation programme should be transparent. While valuing a public sector enterprise, one needs to be very careful so as to not to overvalue or undervalue it, thus minimising the scope for malpractice.
The modern idea of privatisation as an economic policy was pursued for the first time by the Federal Republic of Germany in 1957, when the government eventually sold the majority stake of Volkswagen to private investors. Japan also pursued privatisation. The first three Nippon Telegraph and Telephone (NTT) offerings raised nearly US$80 billion for the Japanese government, with the second NTT offering alone hauling in $40 billion. China has undergone massive yet quiet privatisation since the mid 1990s. The number of state-owned enterprises (SOEs) fell by 40 per cent in the period 1996-2001 and most of the remaining SOEs were now scheduled for privatisation within a short period.
Privatisation is one of the major policies for improving the ill health of national economy. There are numerous economic and social benefits that are connected to the process of privatisation. According to Robert W. Poole, by privatising 'the role of the government in the economy is reduced, thus there is less chance for the government to negatively impact the economy' (Poole, 1996). 'Privatisation directly shifts the focus from political goals to economic goals, which leads to development of the market economy' (Poole, 1996). In fact, privatisation, accompanied by appropriate structural reforms, creates incentives to improve economic efficiency, increase investment, and adopt new technologies. Privatisation also helps to increase competition among all privatised enterprises, utilise full resources to promote productivity, profitability and create jobs with high salary and benefits. In the end, government ends up receiving more taxes and the nation improves itself economically and socially.
afsarulhaider@gmail.com
Socio-economic impact of privatisation of state-owned enterprises
Abu Afsarul Haider | Published: May 19, 2016 00:00:00 | Updated: February 01, 2018 00:00:00
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