Govt Invokes Nationalisation Order: Bureaucracy’s Bid to Control PECO

Introduction

The government is attempting to take over the management of Pakistan Engineering Company (PECO) by invoking the controversial Nationalisation and Economic Reforms Order of 1972, a move that has sparked concerns among stakeholders. This order, which was introduced by former Prime Minister Zulfikar Ali Bhutto, had a detrimental impact on Pakistan’s private sector and is now being used to justify bureaucratic control over a publicly listed company.

The Nationalisation Order and Its Impact

The Nationalisation and Economic Reforms Order was originally intended to bring industries under government control. However, this policy led to the stagnation of the private sector, which took two decades to recover. Former Prime Minister Nawaz Sharif later liberalized the economy, reversing some of the damages caused by this order.

Attempts to Control PECO

Prominent businessman Arif Habib, who owns a 25% stake in PECO, has raised concerns about the government’s attempt to exercise authority over the company’s management. PECO is legally bound to operate under the Companies Act 2017, not the outdated Nationalisation Order.

Habib has reached out to Prime Minister Shehbaz Sharif and Special Investment Facilitation Council (SIFC) National Coordinator Lt General Sarfraz Ahmad to intervene and stop bureaucratic interference.

Legal and Administrative Challenges

The State-Owned Enterprises (SOEs) Act 2023 grants the board of directors the authority to appoint managing directors for state-owned enterprises. However, the government is bypassing this law by enforcing the Nationalisation Order.

A joint secretary of the federal government wrote a letter to PECO’s board stating, “I explicitly conveyed to the board of directors that the company’s affairs have to be governed by the Economic Reforms Order 1972.”

This statement contradicts the privatisation policies promoted by the World Bank and the International Monetary Fund (IMF), which Pakistan committed to when enacting the SOEs Act.

Privatisation Efforts and Bureaucratic Hurdles

PECO has been on the privatisation list since the 1990s, yet the process has not been completed due to bureaucratic roadblocks.

• In August 2023, the cabinet reaffirmed its decision to privatise PECO.
• Privatisation Commission Secretary Usman Bajwa noted that unresolved issues related to the 2003 sale of 23% shares by National Investment Trust (NIT) are a major hurdle.
• A three-member secretaries committee was set up in July 2023 to investigate the share sale issue, but no resolution has been reached.

Share Sale Controversy

In 2003, NIT sold 23% of PECO shares, which the government later deemed illegal. In 2004, Arif Habib purchased these shares and now holds a 25% stake in the company.

Despite two National Accountability Bureau (NAB) investigations clearing the transaction, the government continues to stall privatisation efforts, citing unresolved ownership disputes.

PECO’s Decline Due to Mismanagement

Once a thriving company with 25,000 employees, PECO has deteriorated due to decades of poor management.

• Government-appointed managing directors lack expertise in PECO’s operations.
• An MD once sold electric towers below production cost due to ignorance of market pricing.
• Under former MD Mairaj Anis Ariff, PECO incurred losses exceeding Rs1.2 billion.

Need for Privatisation or Revival

Arif Habib and stakeholders argue that PECO needs either privatisation or a revival strategy to survive. The government must decide whether to:

1. Sell PECO to private investors.
2. Revamp and restructure the company.

Proposed solutions include:

• Selling PECO’s Lahore property to recover government loans.
• Establishing a garment city on the PECO land.
• Investing in high-voltage transformer manufacturing, where PECO holds a monopoly.

Government’s Role and Future Prospects

The Standing Committee on Privatisation, led by MNA Farooq Sattar, has urged the government to resolve PECO’s privatisation issues within 40 days.

Sattar emphasized that PECO cannot be left in limbo, and the Ministry of Industries must clarify its stance before NAB. The Privatisation Commission must take decisive action to finalize PECO’s future.

Conclusion

PECO’s situation highlights the persistent bureaucratic hurdles in Pakistan’s economic landscape. The revival or privatisation of PECO will set a precedent for future economic reforms. Stakeholders urge the government to adopt a clear, business-friendly approach to attract investors and restore PECO to its former glory.

Frequently Asked Questions (FAQs)

1. Why is the government invoking the Nationalisation Order for PECO?

The government is using the 1972 Nationalisation and Economic Reforms Order to justify bureaucratic control over PECO, despite its status as a publicly listed company.

2. What are the main hurdles in PECO’s privatisation?

The primary issue is the 2003 sale of 23% shares by NIT, which the government disputes despite two NAB inquiries clearing the transaction.

3. What impact did nationalisation have on Pakistan’s economy?

Nationalisation led to economic stagnation and the decline of private industries. It took two decades for economic liberalization to reverse its effects.

4. What are the possible solutions for PECO’s financial troubles?

• Selling its Lahore property to recover government loans.
• Privatising the company.
• Revamping PECO’s operations to focus on its high-voltage transformer monopoly.

5. What role does the Special Investment Facilitation Council (SIFC) play in this matter?

The SIFC is a hybrid civil-military body created to remove bureaucratic hurdles in business operations. It has been involved in resolving PECO’s ongoing issues.