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September 25, 2013, 12:55 p.m. ET
Privatizing Pakistan's Economy
Islamabad plans to sell 35 inefficient state-owned enterprises.
Sympathetic observers of Pakistan take progress where they can get it. So amid more outrage and tragedythe Taliban double suicide bombing that killed 85 Christian worshipers at a Peshawar church on Sunday; the Baluchistan earthquake that killed more than 200 on Tuesdayat least there is some good economic news. Prime Minister Nawaz Sharif has launched a major effort to privatize state-owned enterprises that have long stifled Pakistani industry.
Officials have announced plans to sell 35 public corporations over three years, including power companies, Pakistan State Oil, Pakistan International Airlines and Pakistan Steel Mills. These enterprises currently lose taxpayers some 500 billion rupees ($4.7 billion) a year, while delivering poor service. Inefficiencies in energy cause frequent blackouts, and the supply problem is exacerbated by government subsidies that have cost a further 1.5 trillion rupees over five years.
"Billions of rupees spent on government institutions functioning in deficit can be saved each year," Mr. Sharif said Saturday in a national address. He blasted state-owned enterprises for "nepotism, favoritism and financial mismanagement."
Now comes the implementation, which has proved difficult in every attempted round of reform since Islamabad established its Privatization Commission in 1991 (when the industrialist Mr. Sharif was first prime minister).
Already the opposition Pakistan People's Party has threatened to block the national highways in protest. In 2006, when the PPP was last in opposition, it successfully pushed the Supreme Court to scuttle a planned privatization of Pakistan Steel on grounds that officials executed the sale too hastily. Then as now, unions were loudly opposed to any change in the status quo. Since then Pakistan Steel has burned through tens of billions of rupees in losses and bailout funds.
This time around, helpful pressure may come from the International Monetary Fund, which agreed recently to lend Pakistan $6.6 billion over three years, subject to reform progress. Islamabad's new leaders are seeking an additional $6 billion or so from other foreign lenders.
To better impress outside investors and lenders (to say nothing of diplomats), the Sharif government could extend its reform agenda to trade with India. After New Delhi granted most-favored-nation trade status to Pakistan in 1996, Islamabad was supposed to reciprocate in 2012 but never did. The excuse was India's nontariff trade barriers, but in reality the government bowed to domestic agricultural interests.
Neither country is a hero here, but the upside is clear: Normalized cross-border trade could amount to $40 billion, up from $3 billion today, according to the Woodrow Wilson International Center for Scholars.
Mr. Sharif has a long and mixed political record, and terrorism of the sort seen Sunday could derail his third premiership. But with growth down since 2008, privatization is a laudable first step toward revitalizing Pakistan.
Review & Outlook: Privatizing Pakistan's Economy - WSJ.com
Privatizing Pakistan's Economy
Islamabad plans to sell 35 inefficient state-owned enterprises.
![pakistani%20stocks.jpg](/proxy.php?image=http%3A%2F%2Fwww.brecorder.com%2Fimages%2Fpic2012%2F11%2Fpakistani%2520stocks.jpg&hash=1a4018b50216df8f7459b061dc9ffd99)
Sympathetic observers of Pakistan take progress where they can get it. So amid more outrage and tragedythe Taliban double suicide bombing that killed 85 Christian worshipers at a Peshawar church on Sunday; the Baluchistan earthquake that killed more than 200 on Tuesdayat least there is some good economic news. Prime Minister Nawaz Sharif has launched a major effort to privatize state-owned enterprises that have long stifled Pakistani industry.
Officials have announced plans to sell 35 public corporations over three years, including power companies, Pakistan State Oil, Pakistan International Airlines and Pakistan Steel Mills. These enterprises currently lose taxpayers some 500 billion rupees ($4.7 billion) a year, while delivering poor service. Inefficiencies in energy cause frequent blackouts, and the supply problem is exacerbated by government subsidies that have cost a further 1.5 trillion rupees over five years.
"Billions of rupees spent on government institutions functioning in deficit can be saved each year," Mr. Sharif said Saturday in a national address. He blasted state-owned enterprises for "nepotism, favoritism and financial mismanagement."
Now comes the implementation, which has proved difficult in every attempted round of reform since Islamabad established its Privatization Commission in 1991 (when the industrialist Mr. Sharif was first prime minister).
Already the opposition Pakistan People's Party has threatened to block the national highways in protest. In 2006, when the PPP was last in opposition, it successfully pushed the Supreme Court to scuttle a planned privatization of Pakistan Steel on grounds that officials executed the sale too hastily. Then as now, unions were loudly opposed to any change in the status quo. Since then Pakistan Steel has burned through tens of billions of rupees in losses and bailout funds.
This time around, helpful pressure may come from the International Monetary Fund, which agreed recently to lend Pakistan $6.6 billion over three years, subject to reform progress. Islamabad's new leaders are seeking an additional $6 billion or so from other foreign lenders.
To better impress outside investors and lenders (to say nothing of diplomats), the Sharif government could extend its reform agenda to trade with India. After New Delhi granted most-favored-nation trade status to Pakistan in 1996, Islamabad was supposed to reciprocate in 2012 but never did. The excuse was India's nontariff trade barriers, but in reality the government bowed to domestic agricultural interests.
Neither country is a hero here, but the upside is clear: Normalized cross-border trade could amount to $40 billion, up from $3 billion today, according to the Woodrow Wilson International Center for Scholars.
Mr. Sharif has a long and mixed political record, and terrorism of the sort seen Sunday could derail his third premiership. But with growth down since 2008, privatization is a laudable first step toward revitalizing Pakistan.
Review & Outlook: Privatizing Pakistan's Economy - WSJ.com