Reinvigorate state institutions

Muhammad Farooq

Is privatization a solution to the bankrupted state run entrepreneurs? The answer is big NO! In the developed countries like China, USA and UK state own enterprises and businesses make huge profits and make the most of the tax, even in Pakistan OGDCL is the highest corporate tax payer rather than any private sector firm. Of course our public sector enterprises at one time made the profits and paid the huge taxes. But once you privatize those businesses you lose them from tax net as it is very hard to collect taxes from private sector due to weak and ineffective taxation system in our country. Secondly, none of the corporate sector companies or capitalists are so foolish that they will buy or hold the shares of the businesses that has been drown into debt and causes the yearly losses of hundreds of millions. So there are three possible solutions in order to privatize and catch the attention of capitalists. The first solution is very simple and has the maximum probability that these institutions and their assets will be for sale to some of overseas acquaintances and local relatives of the political elite and rulers of Pakistan, at the cheaper prices. The Second solution is that government has to give the assurance to the purchasing party that their losses will be paid by the government for a certain period of time. It means that even after the privatization government has to give the subsidy to these institutions like it was in the case of KESC. The final and the most difficult of all solutions is the initiation of reforms, eradicate the losses, pay the debt and make them profitable or apparently depict them as profit earning institutions to attract the private business firms. But the question is if these institutions can be made profitable then why government needs to sell them. Yet our mystery is that governments first destroy the profit earnings state firms according to planned strategy so that they can privatize them and earn their kickbacks.
—Via email

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