‘Government has no business to be in business’

KARACHI: The privatisation of banks and public sector entities are done to bring efficiency in the corporations in order to achieve sustainable profit and expansion in the operations but raising questions over the process through undue litigation is not conducive for investment climate in the country.

This was stated by former National Investment Trust chairman and Pakistan Banking Association (PBA) president Tariq Iqbal Khan while talking to journalists.

The government has no business to be in business and should confine itself to governance and regulation only, he said, adding that China and Russia have followed the privatisation path and benefited while Europe has stopped the industrial ownership by the government, how can Pakistan not benefit by following the same path?

He said the government officers are not trained to manage and operate businesses. “The government works in a manner that there is a shared responsibility, which is demonstrated in decision making through cabinet, assemblies, standing committees in assemblies, hence no single person makes a decision and the decision making is carried out through collective wisdom,” he added.

Khan said in businesses, the boards are responsible for policy framework while the executives are responsible to carry out the day-to-day operations in the light of policy framework, adding that sometimes the decision making in the businesses is done where two to three people would make a decision in the light of policy framework laid down by the board and rules and regulations made there under.

Due to the above difference of working, he said nationalisation has not succeeded in any country.

“After 1973, when the banking was nationalised, the services of the banks started deteriorating, the unions became strong, the depositors and customers continue to suffer and the banking industry in general started deteriorating. The banking industry was also being abused by the government due to excessive borrowing and at the same time by getting the loans sanctioned to their cronies,” he explained.

Khan mentioned that the non-performing loans (NPLs) started multiplying, which continued up to the period of next dictatorship when the unions were again harnessed. The banks, he said, were restructured and the federal government has to provide some relief in the shape of capital injections.

“The Muslim Commercial Bank (MCB) was privatised in the first instance and from number 3 bank in 1989, rose to number 1 bank in the next 4 years. Currently, the cost of funds in case of MCB is much lesser than other competitors including HBL and UBL,” he said.

The banking industry was further reformed, the regulation became further stricter and vibrant. The consumer benefited as in the case of long term deposits the banks offered better rate and services in competitive environment, he added.

“Again, the example of ABL is very significant as the bank, which was heading towards complete failure and was facing bankruptcy, has now risen to number 4 after MCB, HBL and UBL after successful privatisation. The example of NBP is also there being the only bank operating under the direct control of the federal government. The services of the bank are deplorable. If an ordinary person would like to get an account opened it is still impossible in NBP while in privatised banks as listed above, the customer is treated very well and all services are offered very efficiently,” said the former PBA president.

He quoted a survey conducted on privatisation in Pakistan some years back in which materialised benefits of privatisation mentioned that competition has increased, economic freedom has increased, quality of services has improved, fiscal deficit has been reduced, and job opportunities have been created. “We have seen a lot of maligning recently in the case of privatisation of MCB which was privatised in 1991 and was awarded to the highest bidder of that time. What the NAB is inquiring nowadays is very interesting, why a group of 20 people joined for the bid from where the amount was paid by them, what were their resources, why they sold their shares subsequently and such other irrelevant issues.”

He said the government must safeguard interests of investors and ongoing privatisation by prudently following the prescribed rules and regulations. It will help the government to pave the way in restoring the confidence of business community and will re-shape the image as a business friendly country, he emphasised.

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