Privatisation: 'Pakistan can learn from UK experience'

KARACHI (June 07 2005): Pakistan can benefit from the British experience of privatisation of British Telecommunications in 1980, which was followed by deregulation of water and utilities' companies and railways. This was stated by Professor Roderick Martin of Southampton University at a seminar on "Whose Company Is it Anyway" organised by the Management Association of Pakistan (MAP) in collaboration with Pakistan State Oil (PSO) on Monday.

Talking on advantages of privatisation, he said it led to elimination of influence in appointments, provide greater flexibility in raising capital and a free hand in running affairs of the company.

Privatised companies tend to focus more on investors' interest and stop caring for fulfilling public sector obligations.

The British professor said the privatisation brought a significant change in relations between investors and managers and laid special focus on shareholders value and return of investment.

The deregulation also restricts autonomy of senior managers and makes them obedient to market discipline. He said there was no chance of investors' interference in company affairs because wise shareholders believed that managers knew more about the business.

To a question, Professor Martin said in the event of privatisation of large public sector organisations, like the PTCL, the unionised manual workers were not removed from their job but on the contrary their remuneration is increased.

He said lack of uniform accounting standards in large industrial countries such as USA, the UK, France, Germany, and Japan adversely affected global flow of investment.

The German investors prefer to invest in the USA because of uniform standards of financial statements, which are different in countries like Japan and China.

About investors' perspective, he said different types of investors had different concerns but their real concerns were mergers and acquisitions, composition of board of directors, especially appointment of chairman and non-executive directors and senior executives' remuneration.

Professor Martin said the manager of a company had the ability to manage investors' expectations as well as board of directors and they had greater knowledge of the company. The seminar was chaired by Abdul Qadir, Honorary Secretary of MAP.

Copyright Business Recorder, 2005