The minister of industries recently said that no state-owned mills or factories would be privatised by the present government. This is indeed disturbing and shocking news as far as governance is concerned. Bangladesh has suffered not only from confrontational politics, but also from mammoth losses incurred by state-owned enterprises (SoEs).
Is there any logic in having the Privatisation Commission if the government doesn’t want privatisation of any enterprise? It is fully contradictory with the government’s privatisation policy, which was formulated in 2001, and the privatisation regulations, 2007.
Privatisation is a process that goes with the government’s promised policy to ensure private sector-led economic growth. To better implement the privatisation program for benefiting the stakeholders, the privatisation board was constituted on March 20, 1993, through an administrative ordinance.
The board kept on discharging its obligations until July 2000, as per the prescribed guidelines and policies. Later, the Privatisation Act was formulated on July 11, 2000 to provide a massive thrust to the privatisation program. The privatisation board was replaced by the Privatisation Commission on July 30, 2000.
Sheikh Hasina, during her first tenure, surprised all by bringing a private sector man, to head the privatisation board with the rank and status of a state minister. Before that, the board used to be headed by the joint secretary or additional secretary ranked officials. The board elevated as it turned into a commission, the rank and status changed, but the commission remained a non-functioning one.
The Board of Investment, Privatisation Commission, and many other government websites say the role of the government is the role of a facilitator and not the controller. The withdrawal of the role of the government from the ownership, management, and control of commercial and industrial enterprises will leave more space for the government to focus on other important areas, such as the general management of the economy, the social and public sectors, basic health and education, law and order, defence, environment, and other areas of public non-entrepreneurial activities.
If the government really means it, can the industries minister say this? Or is there a policy shift? Do we need the Privatisation Commission if that is the policy of the government?
The economic reform agenda of successive governments since the early 90s include ensuring a congenial atmosphere for private investment and sustainable development, persuading new investments, both local and foreign direct investments, improving competitiveness and enhancing productivity through macroeconomic management and governance, encouraging the diversification of economic activities, and eradicating administrative bottlenecks and red tape.
The economic landscape of Bangladesh was significantly altered immediately after liberation with the nationalisation of domestic banks, insurance, service sector enterprises, and industries. By the end of 1980s, it became quite clear that the national socio-economic objectives sought to be achieved by nationalisation miserably failed.
Rather, the dominance of the public sector in banking and non-bank financial institutions resulted in large-scale corruption and a culture of inefficiency everywhere.
Since early 80s, investment in Bangladesh has emphasised the need to move away from regulation, nationalisation, and control. The government has also recognised the importance of private sector-led growth in our economy. The privatisation process of state-owned enterprises started with their transfer to their former Bangladeshi owners, and the sale of shares to investors and buyers.
The economic reform program was initiated by Saifur Rahman in the early 90s, who was the finance minister at that time. It gave the economy a real boost. When the Awami Leage came to power in 1996, it was further accelerated.
Finance Minister Shah AMS Kibria also opted for the same policy and allowed more banks and non-bank financial institutions in the private sector. The establishment of the Privatisation Commission matched that direction.
But the privatisation of loss-making state-owned enterprises over nearly the past 12 years is advancing at a snail’s pace due to non-cooperation by the ministries and divisions concerned.
The immediate past industries minister was religiously against privatisation. The commission (before January 5 elections) headed by Mirza Abdul Jalil failed to privatise a single unit in the five years.
The commission had a list of 21 ailing SoEs to be privatised. But complexities arose due to the lukewarm attitude of the ministry concerned in handing over the SOEs to the private sector. The complexities also frustrated the buyers of these units.
Public enterprises have proved to be unsuccessful firms, as their financial performances demonstrate. They incur chronic losses and continue to rely on state-funded equity injections and credit from the state-owned banking system.
Persistent losses of SoEs clearly suggest that they have severe management problems. This is a symptom of a malaise that affects the overall national efficiency. Good governance is simply impossible with huge loss-making public enterprises, as these are not only incurring losses, but also obstructing growth in other areas.
There are many reasons behind the failure of privatisation in Bangladesh. But that does not mean that the country can afford to stall the process. The privatisation of SoEs must be expedited to end the fiscal burden of subsidies.
To be more careful, the government can further define the goal of privatisation. The process must be transparent, as there are allegations of dubious deals in the previous cases. One of the major concerns is worker retrenchment, and the government must address the issue by providing reasonable termination payments. Investments in labour retraining and redeployment schemes are highly important.
There may be other options to expedite and make the privatisation process more acceptable. But the government can in no way take a decision to halt the process.
