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This blog is for students, managers and those lay people who are interested to contribute to, comment on or simply share their workplace problems and are keen to learn about issues relating to public finance, corporate finance and macro-economic management affecting their lives.

Friday, June 18, 2010

A few white elephants consume one fourth of total resources...can you believe that?

Despite the fact that government is spending 25% of tax-payers’ money to meet budgetary deficit of loss-making public sector corporations, it is in no mind to sell them off. Nice thinking… The government is, instead, undertaking restructuring of Pakistan International Airlines (PIA), Pakistan Railways (PR) and Pakistan Steel Mills (PSM) to make them turnaround, as this is not the appropriate time to sell our precious national assets for small discounts.

Although the government has no business to do business, yet all the three entities are national strategic assets and should not be thrown away for peanuts like PTCL. Experience has shown that PTCL privatization has not only brought the monopoly back totally defeating Telecom Deregulation Policy, 2003, it has destroyed private sector in telecom industry.But will it still be wise to bleed ourselves just in order to keep these white elephants? Pakistan Privatization Minister recently told a seminar that the total government expenses were Rs.160 billion while currently Rs.40 billion were being spent to run these institutions. The Minister's figures may not be correct, yet taxpayers are spending huge amounts of their hard-earned income on keeping these white elephants which are themselves supposed to be not only self-supporting but making monetary contributions to national coffers. This situation could be attractive for private investors as there was a vast scope for local and foreign private sector to come forward and bridge the gap through their positive contribution, he stated.

A report by Online quoted the Minister as saying that the government was in the process of hiring people of tremendous integrity and credibility from the private sector as MD, COO and ED to run the State Owned Entities (SOEs) efficiently, making them profitable and enabling each entity to function independently and answerable to the respective Board of Directors. Giving the current scenario of SOEs performance, he informed that Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipeline Limited (SNGPL) have not revalued their assets for the last 15 years whereas Pakistan Railways has no balance sheet. The impression regarding PIA expenditure in salaries was not correct, as it was only 9 % of its total expenditure.

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