Nexus between Reforming the Economy and Privatization of Public Enterprises: A Case Study of Pakistan

Abstract

A well-designed plan pertaining to the privatization of public institutions of any state makes possible achieving the macro-stability, lowering monetary deficits, decreasing inflationary financing, and improving the balances of payments driven by productivity gains, and helps attracting investment and avoiding quasi-fiscal losses, nevertheless, within concentrated sectors, where there are no guarantees of competition, the privatization may generate negative outcomes, further escalate public hostility, and create instability within reforms trajectories. While implementing a wider reformative agenda encompassing competitive markets, robust regulatory institutions, cost-sensitive network industries regulations, as well as sound governance mechanism of the state-owned enterprises (SOEs) with public ownership, the sustainable benefits of privatization could be materialized. In the case of Pakistan, privatization of public enterprises was necessitated chiefly by the budgetary deficits and need for the deployment of private sector in the managerial organization of the public institutions which has been successfully manifested in the case of banking and telecom sectors whereas the energy sector and the PIA are currently major problematic sectors for the Government of Pakistan which would be at the top priority during the forthcoming phase of privatization. This research study evaluates the interlinking of economic reforms and privatization in Pakistan and reviews the opportunities, challenges, and consequences that influenced the development of the economy with respect to the privatization process. The study concludes that Pakistan needs to have a compliant regulation regime for its privatization policy to resolve the deep-rooted structural problems faced by the economy of Pakistan. The state should ensure that reforms package would focus on the ultimate strengthening of the institutions, providing transparency while consolidating institutional solidarity, efficiency with social security of the workers avoiding at the same creation of capitalist monopolies since the end result of all these steps would have to be the protection of consumers. While adopting a gradual, sector-wise approach, along with good governance and inclusive policies, it could be possible to make privatization a functional strategy for Pakistan.