PRIVATIZATION/NATIONALIZATION/ISLAMIZATION/ IN PAKISTAN

Prepared By Sajida Rehman

CAPITALISM (FREE MARKET ECONOMY) –

IT IS AN ECONOMIC SYSTEM IN WHICH PRIVATE INDIVIDUALS OWN ALL THE MATERIAL MEANS OF PRODUCTION & ALL ECONOMIC ACTIVITIES ARE UNDERTAKEN FOR PURPOSE OF PROFIT.

FEATURES OF CAPITALISM

- Right To Private Property.- Right Of Inheritance.- Freedom Of Enterprise.- Freedom Of Choice For Consumers.- Profit Motive.- Competition.- Price Mechanism On Market Forces.- Less Role Of Government.

- MERITS OF CAPITALISM -

-EFFICIENT UTILIZATION OF RESOURCES.- RAPID ECONOMIC GROWTH.- CAPITAL FORMATION.- DEMOCRATIC NATURE.- INNOVATION.

-DEMERITS OF CAPITALISM --CONCENTRATION OF ECONOMIC POWER.- ECONOMIC INSTABILITY.- LACK OF MAXIMUM SOCIAL SATISFACTION AT MINIMUM SOCIAL COST.- SOCIAL WASTE.- RISE OF MONOPOLY.- SOCIAL DISCRIMINATION.- LOSS OF HUMAN VALUES.

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Socialism (controlled economy or communism)In this state owns & controls all means of production. Decisions pertaining to production, distribution are made through central planning. The state dictates the consumption pattern. It is based on the principle: “from each according to his ability to each according to his needs”.

FEATURES OF SOCIALISM -

- STATE OWNERSHIP OF MEANS OF PRODUCTION.- CENTRAL ECONOMIC PLANNING.- SOCIAL WELFARE.- EQUALITY OF OPPORTUNITY.- CLASSLESS SOCIETY.- ABSENCE OF COMPETITION.

MERITS OF SOCIALISM -- SOCIAL JUSTICE.- ECONOMIC STABILITY.- RATIONAL ALLOCATION OF RESOURCES.- HIGHER ECONOMIC GROWTH.- ABSENCE OF CLASS STRUGGLE.

-DEMERITS OF SOCIALISM -

-CONCENTRATION OF ECONOMIC POWER IN THE STATE.- LACK OF INCENTIVE & INITIATIVE.- LOSS OF CONSUMER SOVEREIGNTY.- LOSS OF OCCUPATIONAL FREEDOM.- INEFFICIENCY & LOW PRODUCTIVITY.- CORRUPTION.

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PRIVATISATION

“…. a transaction by virtue of which any property, right, interest, concession or management thereof is transferred to any person (entity) from the Federal Government or any enterprise owned or controlled, wholly or partially, directly or indirectly, by the Federal Government”.

( Ordinance 2000)

PRIVATISATION PHASES

1960s First Generation Privatisation

Objective Create / Strengthen Private SectorStrategy Build factories and Sell them

1990s Second Generation Privatisation

Objective Reduce Government LossesStrategy Disinvest, Deregulate

2000s Third Generation Privatisation

Objective Improve Efficiency & Profitability

Strategy Seek Strategic Investors

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NEED FOR PRIVATISATION Generally the state has one or more of the following objectives

of privatisation ;

1.Strengthening of private sector. This was the motive behind the first generation of privatisation carried out in Pakistan in 1960s when the state built factories in strategic sectors and handed them over, at very nominal rates, to the businessmen who were reluctant to invest in these sectors due to paucity of requisite resources at their disposal and high risks involved.

2. Improving the efficiency and service delivery of the SOEs, whether profitable or not, by bringing in the incentive and reward mechanism of the private sector who would inject capital, technology and better management practices. Pakistan privatised bulk of its SOEs in the second generation privatisation carried out in the 1980s and 1990s.

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NEED FOR PRIVATISATION

3.Eliminating/reducing the huge state subsidies being given to those SOEs which are continuously incurring losses but they cannot be closed because of social welfare considerations or their strategic nature even though better alternatives are now available in the private sector.

This is the philosophy behind the third generation of privatisation in Pakistan in 2000s and it is still being done under Public, Private Partnership (PPP).Here at least 26 % of the shares with management control of an SOE are given to a strategic investor who injects capital and improves the management 4.Raising funds in the local and global capital market by divesting shares of the profitable SOEs. This is resorted to when the state needs cash and starts selling shares of its blue chip SOEs in the global market or locally.

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MODES OF PRIVATISATION Outright sale of assets and business through open auction

Partial sale of shares through public auction or tender

Public offering of shares through a stock exchange

Management or employee buyouts Award of long term leases

Management or concession contracts

Global Depositary Receipts (GDRs): Euro Bonds etc

Exchangeable / Convertible bonds: Taking loans from

international funds against collateral of shares

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ACHIEVEMENTS Emergence of robust private sector Induced investment and transfer of technology

Improved management/productivity by introduction of international best practices

Fiscal space for social sectors and infrastructure development resulting in employment generation and poverty reduction

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SECTOR WISE TRANSACTIONSSector No of transactions Proceeds/Billion Rs.Banking 7 41.02Capital markets 22 133.12Energy 14 51.76Telecoms 4 187.36Automobiles 7 1.10Cements 17 16.18Chemical/fertilizer 23 41.92Engineering 7 0.18Ghee mills 24 0.84Rice and roti plants 23 0.32Textiles 4 0.37Newspapers 5 0.27Tourism 4 1.81Others 6 0.16Total 167 476.42 14

CHALLENGES Domestic and International financial crisis Huge losses of SOEs-how to attract investors Share values of many likely transactions at all time

low Managing public interest in industries with social

repercussions such as power, transportation etc Repercussions of 18th Amendment-seeking of

provincial concurrence in each transaction Regulatory dispute resolution framework needs

further improvement

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Nationalization in PakistanThe Nationalization process in Pakistan (or historically

simply regarded as the "Nationalization in Pakistan“ was a policy measure programme in the economic history of Pakistan,

first introduced, implemented by people-elected Prime Minister Zulfikar Ali Bhutto and the PPP in order to lay the foundation of socialist economics reforms to improve the growth of national economy of Pakistan.

Since the 1950s, the country had a speedy industrialization /privatization and became an industrial paradise in Asia. But, as time progressed, the labor trade unions and labor-working class had strained relations with the industrial business oligarch classes, completely neglected the work conditions and failed to provide healthy environment to the workers class in the industries.

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2nd phase of Nationalization (1988–present)

In November 1988, Benazir Bhutto and the Pakistan

Peoples Party came to power for a second time.[During the election campaign in 1988, Benazir Bhutto promised to the industrial sector to end nationalization programme and to carry out the industrialization by means other than state intervention.

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ISLAMIZATION Islamization is the process of a

society's conversion to the religion of Islam

Adoption of an Islamist social and political system in a society

Since the 1970s, the Islamic world has witnessed a phenomenon called "Islamic revival“

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Islamization by General Ayub

Family Law Ordinance 1961

Islamic Advisor Council 1962

Islamization by BhuttoOIC Summit 1972

Ban on drinking/gambling etc

Ministry of Religious Affairs

Islamization by Zia Ul Haq Eman Taqwa and Jihad –Moto of Pak Army

Salat Ordinance

Prohibition (of Wine) Order 19777

Hadood Ordinance 1979

Zakat o Usher Ordinance 1980

Ihteram e Ramzan Ordinance/Reverence for Fasting 1978

Hajj Arrangements

Bismillah Ceremony

Ulema o Mashaikh Convention19

CONSTITUTIONS OF 1956,1962 AND 19731956Name of the CountryObjective ResolutionSovereigntyState Responsible for Islamic way of LifeIslamic Ethical ValuesZakat and AuqafPrinciples of PolicyUnity of Muslim Ummah as Basic principle of Foreign Policy

Head of State to be Muslim

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CONT….Promise of imposition of Islamic System

1962Compulsory Education of IslamiyatNo law against Islamic conjunctionsIslamic Advisory Council 1962 now I.I.C

1973Islam is state religionAbolition of RibaNizam e Zakat o AuqafPM to be MuslimDefinition of Muslim

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1973• Article 62 and 63• Preaching of Islamic Values• Good relations with Muslim countries as Principle of Policy• Correct Printing of Quran• Education of Arabic Language• Quadiani as non-Muslim• Oath of various Constitutional PostsShrait Bench of SC• Active Role of I.I.C• F.S.C 1980• Qazi courts 1984• Shrait Ordinance 1988• Riba free Banking• Shriat Academy • Islamiyat and Arabic as Compulsory• Jihad against Russia• Rouet-e-Hilal Committee

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1990S TO DATEIslam as Political IdentityPolitical Parties and Alliance (I.J.I,M.M.A)Qasas and Diyat Ordinance 1990Recognition of Talban Govt. 1996Shariat Bill 1997Hasba Bill 2003Development of Rightist IdeologyNon recognition of Israel

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