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Nationalization and Privatization in Pakistan

Ramiz Amin 8979
Submitted to: Dr. Imdad Shah

Contents
Nationalization and Privatization in Pakistan ............................................................................................... 2 Introduction .......................................................................................................................................... 2 Brief History of Nationalization................................................................................................................. 3 The First Phase (1971-77) ......................................................................................................................... 3 The Second Phase (1988 to Present) ........................................................................................................ 3 How Nationalization was opposed?...................................................................................................... 4 Defensive Arguments ................................................................................................................................ 4 Privatization .................................................................................................................................................. 5 The First Phase of Privatization (1989-1993) ............................................................................................ 5 The Second Phase (1993-1999)............................................................................................................. 6 The Third Phase (1999-2012) ................................................................................................................ 7 How privatization is actually perceived? .............................................................................................. 8 How it was opposed? ............................................................................................................................ 8 Conclusion ................................................................................................................................................. 8

industries.Nationalization and Privatization in Pakistan Ramiz Amin 8979 Submitted to: Dr. and (3) to keep means of generating wealth in public control. Imdad Shah Nationalization and Privatization in Pakistan Introduction Privatization is the incidence or process of transferring ownership of a business. Common reasons for nationalization include (1) prevention of unfair exploitation and large-scale labor layoffs. (2) fair distribution of income from national resources. agency or public service from the public sector to the private sector whereas Nationalization is the opposite of Privatization which is defined as Takeover of privately owned corporations. and resources by a government with or without compensation. enterprise. .

Then the Government of PPP focused on the nationalization of cement. This very first phase nationalized engineering and electrical industries. The 3rd stage was introduced on July 1. and Power Sector. The First Phase (1971-77) This phase was first introduced by the then Prime Minister Zulfiqar Ali Bhutto. The Second Phase (1988 to Present) In November 1988. Imdad Shah Brief History of Nationalization Firstly. the nationalization programme was initiated by the then Prime Minister Zulfiqar Ali Bhutto in 1972. Shipping companies were also nationalized. The 2nd stage was initiated on 1 January 1974. with the purpose to focus on the banking sector of Pakistan. ginning and rice husking units under the control of public sector. His main aim was to free the market from the ownership of Business Tycoons and enhance the economic liberalization. This worsened the situation as consumers got low quality products and impure commodities at uncertain and shocking prices. the Ex PM Benazir Bhutto had clear intentions to end nationalization so as to enhance industrialization in Pakistan. steel and fertilizers in 1977. .Nationalization and Privatization in Pakistan Ramiz Amin 8979 Submitted to: Dr. 1976 which provided cotton. It was then for the second time implemented by Benazir Bhutto in 1988 and then by Yousuf Raza Gilani in 2012 who intended to nationalize Steel Mills and the Railway Sector.

the then PM Nawaz Sharif ordered the cessation of state owned enterprises and corporation under the ownership of Government control. Defensive Arguments However the Pakistan’s People Party defended the concept because they thought that it protected the rights of workers and gave high priority to the workers themselves. there was no nationalization phase until 2011. It also created a suitable. Benazir Bhutto which made her party strengthen the government control on Pakistan Railways and Pakistan Steel Mills. Chaudhry Shujat’s Gujrat Enterprises can be the second inclusion in the list. fair and healthy work environment. Most importantly.Nationalization and Privatization in Pakistan Ramiz Amin 8979 Submitted to: Dr. The reason behind it included the inclusion of government ownership in Pakistan Steel Mills. Benazir Bhutto did not completely carry out the process of denationalization programme. There was no privatization of the nationalized units. When the shipping companies were being nationalized. Then in 1998. . 2011. But somehow limited scale privatization occurred during her reign. From 1999 to 2010. Pakistan Railways as well as Pakistan International Airlines. Nawaz Sharif could be included in the list of affectee who lost his steel mill. Imdad Shah But Ms. The nationalization programme keeps on getting restructured to be made more profitable while remaining within the ownership of government control. the UBL Pakistan and railway association was nationalized during the reign of Ms. How Nationalization was opposed? Investors had no trust and confidence on such programme. it created a sense of realization of self-awareness among the workers. The nationalization programme was once again initialized by Prime Minister Yousaf Raza Gillani on December 15. Among the investors. then those who showed their discontent were imprisoned. Most importantly.

4. It was first initiated by Mr. This was then continued by Shaukat Aziz who privatized 80%-90% industries during the ending days of this tenure. After the end of his reign. Bhutto had formed a strong public-sector targeting cement. Ukailie. 3. Nawaz Sharif in order to strengthen the economy of Pakistan and profit seeking business. 6. steel and fertilizers. 2.Nationalization and Privatization in Pakistan Ramiz Amin 8979 Submitted to: Dr. Imdad Shah Privatization In Pakistan. General Zia ul Haq issued a white paper which instructed the setting of the commission under Pakistan Industrial Credit and Investment Corporation (PICIC) chairman N. At that time only three industries . Telecommunications Banks Thermal power stations Production. Investment Employment and fiscal deficit Privatization genuinely means denationalization of nationalized units. large number of public sector units have been privatized which include the following sectors: 1. The First Phase of Privatization (1989-1993) The government of Mr. 5. prices Efficiency.M.

stock markets and the . KESC and PTCL were privatized. the 2nd phase of privatization started under the reign of Prime Minister Ms. The Second Phase (1993-1999) After the general elections in 1993. The second phase remained active until 1998 when it was halted by Prime Minister Nawaz Sharif after imposing economic emergency to hinder or perform deterrence capability to Indian nuclear aggression. as many as 20 industrial units. The 2nd phase was initialized by the then Finance Minister of Pakistan named as Sartaj Aziz in order to transform the publicly owned enterprise to profit seeking business.Nationalization and Privatization in Pakistan Ramiz Amin 8979 Submitted to: Dr. starting first with MCB Bank Limited. On 22nd Jan. one financial institution. All stock exchanges. It was requested to privatize the Pakistan Railway sector but Ms. Privatization took place on a large scale. The government of Benazir Bhutto did not opt to privatize those state corporations who were generating sound revenue abroad but did privatize those industries which were at the risk of financial collapse. were privatized by Benazir Bhutto. Benazir Bhutto. The mega corporations such as WAPDA. one electric power plant and 12% shares of Pakistan Telecommunications Ltd. Imdad Shah were returned to the deserved owners which included Eittefaq Group of Industries to Mian Mohammed Sharif whilst others remain under government control. Benazir Bhutto did not approve the request of privatization of the Railway Sector because she thought this privatization would be the create utmost disturbance in her tenure. oil and gas sectors. thermal power plants. From 1990-93. telecommunication corporations. almost 115 industrial units were privatized which included the privatization of two major banks and 10% Shares of Sui Northern Gas Pipelines Limited. But still during 1996. This privatization programme was aimed at private savings and investment and to accelerate the economic growth. Firstly it started with the denationalization of banking sector. 1991. It included the privatization of financial institutions.

Imdad Shah second phase of the privatization programme were immediately ended by Prime Minister Nawaz Sharif until his government was ended in 1999. There was a great decline in the GDP rate from 10.6% in 1999 with foreign debt getting increased to 44% as compared to 1986.5% in last 3 years as against 11-12% in 1990 The end of 2007 initially halted the privatization programme in the country.Nationalization and Privatization in Pakistan Ramiz Amin 8979 Submitted to: Dr. The Third Phase (1999-2012) After Nawaz Sharif's reign. Aziz’s privatization programme brought the following changes: 1. The country’s growth rate grew by 6. he successfully did which is already mentioned while also privatized Pakistan International Airlines and other megacorporations. there was 100% privatization of state-owned corporations while managed to privatize 85% of banking sector. Shaukat Aziz wanted to create a major boost to economic growth of Pakistan. 2.4%—8. Mr. For that.0% in 1980s to 3. Shaukat Aziz to take the responsibility of sluggish growth in the economy of Pakistan. 2. Mr. Consolidation of patronage based industries. . Pervez Musharraf invited Mr. Enforcement of sales tax mostly on import duties. Mr. He emphasized the strengthening of industrial sector through restructuring so that it can be made available to the private sector.6% a year Inflation rate dropped to 3. From 2003 to 2007. This put an end to Mr. His major economic reforms are as under: 1. Aziz's intensified and aggressive privatization programme at the end days of his tenure. The Supreme Court issued an order for the denationalization of Pakistan Steel Mills.

This meant that privatization has deteriorated the social status of workers and has destroyed the balance of the workers environment and their work. Sale should be made of certain percentage of shares to public to create . There should be strong elite commitment for privatization at political and bureaucratic level. Conclusion There should be a strategy to promote Privatization in Pakistan. There should be awareness campaign about the privatization of an entity to the public and inform them of the pros of doing so.Nationalization and Privatization in Pakistan Ramiz Amin 8979 Submitted to: Dr. it can be said that privatization enhances the profit seeking business but it also disturbs the worker’s environment while creating discontent among the workers and this results in unemployment. In 2012. Then this commitment should be translated to vision and mission as to why Privatization is needed in Pakistan. the government of PPP made an attempt to privatize the three mega state corporation like WAPDA. How it was opposed? The privatization programme was not welcomed by those who favored nationalization. Imdad Shah How privatization is actually perceived? Though. TESCo and PEPCo as proposed by the Finance Minister which resulted in major worker's discontent and strikes were initiated by the labor union due to which the government ended the privatization programme of energy sector and did not hesitate to nationalize the remaining power sector due to increase in revolts and public pressure. The main intention would be strategic sale and management control while also serving the rights of workers and consumers.

.Nationalization and Privatization in Pakistan Ramiz Amin 8979 Submitted to: Dr. Imdad Shah private ownership. Hence there should be transparency to be the cornerstone of privatization process by strengthening the regulatory framework.