Nepali Times
Economic Sense
Privatise privatisation


The economy bleeds as it props up badly haemorrhaging public sector units Public discourse about privatisation seems to occur in inverse proportion to political instability. As soon as governments get a bit shaky, there is less talk about privatisation. You can expect the same thing to start happening now.

Have the ambitious privatisation plans been shelved, or are politicians just too busy saving their political skins to pay much attention? Probably both.

But one wonders at the silence from the Ministry of Finance. The Ninth Five Year Plan lists 30 state-owned enterprises to be privatised between 1997-2002. Two more years to go, and only one enterprise has so far been handed over to the private sector. I guess you could argue that things could have been a lot worse. In the past 10 years since the Government began divesting public enterprises, only 17 have gone. At this rate it will take another 20 years to privatise all the enterprises in the Ninth Plan list and 30 years before all state-owned enterprises can be sold off.

According to our bureaucrats and politicians, privatisation is the panacea that will cure inefficiency and reduce state expenditure. But despite successive commitments in the annual budget, nothing suggests privatisation is taken seriously. Part of the reason could be that the privatisation efforts are supported by grants from donors and foreign consultants set the agenda.

Not that there is anything new in all this. In fact, it would be surprising if even half of what is planned was achieved. With privatisation, like everything else, there is no coherent strategy and there are no targets. Everything, it seems, is left to fate, and the delay costs the economy dearly as it gives transfusions uselessly to the badly haemorrhaging units.

The privatisation process now resembles the state enterprises themselves-no accountability and no process of penalising nonperformance. Nobody is hauled up if no progress is made. Of the three enterprises that were put up for privatisation in 1998 only one, the Nepal Tea Development Corporation, has been handed over to the new owner. But because of the way it was handled, people don\'t even trust the privatisation process itself. It is done at the whim and fancy of the politicos who happen to be in government at the time.

Out of the total investment of more than Rs 100 billion, last year\'s returns were only Rs 1.8 billion. In the last decade alone the exchequer poured in over Rs 40 billion to prop up state enterprises. Of the 43 public enterprises, more than half of them have not recorded profits in the past five years.

It takes no genius to figure out why: they are badly managed, they are saddled with a huge cumulative workforce of about 50,000, and there is incessant government interference in management. Some of these companies have not had their accounts audited for more than six years. The indication is that since the government itself is the problem it has no business keeping them under its control.

It has been proved the world over that privatisation is the best way out for the national coffers to stop pouring money into these black holes. However, the process of disinvestment also needs to be really given serious thought. What is the point of it all if the process itself is so fraught with corruption that it makes the enterprises sicker, and the investor is not really interested in the company but the real estate where it is located.

Identification of enterprises and the process of privatisation needs to be made more timely and effective, there should be no political interference, although that\'s easier said than done. The privatisation cell in the Ministry must be made more powerful as well as accountable. Privatisation should be treated in a business-like manner. May be the first point to start off would be to privatise the privatisation process itself.

(11 JAN 2013 - 17 JAN 2013)