on the privatization agenda of every successive government since then. the short term political expediency may dictate a different behaviour at present, but i am quite sanguine that the ppp and pml ( n ) would have pursued the same path were they at the helm of the affairs. thus, there is a broad political consensus in the country that privatization is in the larger national interest of the country. privatization has to be seen in the overall context of the respective roles of the state and markets. the state has to be strong to combat the excesses of the market and cope with market failures. it is not that the state should play a lesser or reduced role but a different role in so far as it provides an enabling environment for equitable development and creates necessary conditions for growth through investment in human development and infrastructure. the government ’ s effective role in regulating and monitoring the market has to be strengthened to promote healthy competition and avoid the rigging of the market by a few. markets are the best known vehicle for efficient allocation and utilization of resources and thus the decisions as what goods and services to produce, how much to produce, distribute and trade can be done well only by the private sector and not by the bureaucrats. this division and redefinition is also essential to reduce corruption and generate sustained and equitable growth in the country. market - based competition, privatization of public banks and a strong regulator have successfully reformed the banking sector in pakistan during the last several years and this model should be replicated elsewhere in the economy. it is not ideology but pragmatism and learning from the past mistakes that should drive our economic policies and strategies. growth takes place only when productivity from the existing resources keeps on rising. the global experience shows that by and large, productivity actually declines or remains stagnant when the businesses are managed and operated by the government thus slowing down or hurting the pace of growth. i will now turn to the economic rationale of privatization that is not fully understood by many. in particular, there is a popular view that it is okay to sell the loss making enterprises but retain the profit making entities such as ptcl and pso in the public sector. it is true that the budgetary stress and commercial bank borrowing factors are not valid in such cases but there is a larger economic case for the divestiture of even such profit making enterprises. the main logic behind this divestiture is that it will promote efficient allocation of scarce resources, optimal utilization of

##oluments and perks. in a rare case, a departmental inquiry comes up with a guilty verdict, the employee can appeal to the federal services tribunal and if he is unsuccessful, then all the way to the supreme court. why will any right minded boss choose to go through such an ordeal? the alarm of employment losses after privatization is also unjustified for another reason. telecom sector has already generated, after deregulation, hundreds of thousands of new jobs through public call offices, calling cards and pre - paid card companies, internet service providers, mobile phone companies, broad band services, and other value added services under the private sector. as the penetration ratios in pakistan are still quite low, there is going to be a large expansion in the telecom sector. the losses of redundant jobs in ptcl, if any, will be more than offset by new productive jobs in the local loop, wireless loop and ldi companies being set up in the private sector. industry estimates that 100, 000 new jobs will be added during next 3 – 5 years. the substitution of unskilled jobs in the ptcl by the skilled jobs in the telecom industry as a whole will raise the productivity of the sector as well as that of the user companies and institutions. those among the unskilled who can be retrained or redeployed could be retained minimizing the overall loss of jobs within the ptcl itself. if the ptcl itself is able to expand its services and operations, the manpower that is surplus to its present requirements can be productively employed. thus the fears of 8 workers losing protection under a privatized entity appear to be misplaced. after all, the ptcl is the only telecom company that has been in the business for the last 58 years. the oversight, monitoring and guidance capabilities of public enterprises are ridden with the aggravated problems of principal – agent relationship. as the board members, however able and honest they may be, have no direct personal stakes in the well - functioning of a public enterprise, they cannot be expected to devote as much time or energy to the board ’ s affairs as the private strategic investors would. thus, the ptcl ’ s governance structure would always remain second best to its private sector competitors and put it at a comparative disadvantage. if a more callous minister is unfortunately appointed to chair the board, the appointments, award of contracts and transfers and postings will do further damage to the performance of the ptcl. the temptation by the elected