Privatising Public Enterprises
Evaluation Essential

By Khilendra Basnyat

THE concept of public enterprises (PEs) emerged many years ago when it was realised that PEs were essential to meet the increasing needs of the people. Since the private sector had not developed at that time, government management and ownership of enterprises was indispensable.

In fact, PEs have their special importance In delivering goods and services to the people of a country. Such enterprises have been playing a significant role in developing countries where the per capita income is very low.

In the past few decades, in our country, the level of private sector’s participation to produce goods and to provide services was negligible. What is more, the inability of the private sector to meet the goal of industrial growth adequately led to the emergence of PEs in our country.

In Nepal, most of the PEs were established in the 1960s and early seventies.

Between 1956 and 1985 the number of PEs increased from just one before 1956 to fifty-five in 1985. Of these, twenty-eight were manufacturing businesses set up between 1964 and 1985. One of the oldest public sector industrial enterprises is Raghupati Jute Mill Limited which was established in 1946.

In recent times, our policy-makers have realised that the PEs, which were meant to help the people of our country, are becoming an economic burden due to political interferences. Such an unfavourable trend persists in several state-owned PEs even now although they have not been able to render as much services to the people as expected.

Over the years, adequate investments have been made in PEs. However, it is disappointing to note that most of them are languishing due to lack of efficient management, overstaffing and the lack of appropriate plan in order to make their services competitive. To make matters worse, these PEs have been turned into recruiting centres for the workers of different political parties that came to power at different times.

Frequent changes in leadership of these enterprises contributed to add confusion, thereby adversely affecting their output. With their earnings decreasing every year, the government is facing a dilemma whether to continue their operation or to close them down as soon as possible.

In reality, PEs, if their management is efficient as well as effective, can play a vital role for the overall development of our country. However, unfortunately, they have not been able to play such a role. Consequently, some PEs have already collapsed and most of the remaining ones are not in a good shape.

The PEs, established a few decades ago to work for the welfare of the people and make the country self-reliant in certain sectors, have not been able to live up to the expectation. Actually, efficient and effective management of PEs is the need of time, but the situation is quite disappointing.

The conditions of the government owned enterprises are worsening day by day because of political interference, weak management and rampant corruption. In order to correct these shortcomings, it is essential to appoint people in the management who are qualified as well as experienced. By doing so, the existing PEs can not only serve the people at large in the manner they should but also become profitable ventures for their sustainability.

One of the hallmarks of this tend was the initiation of the privatisation of state owned enterprises although this change in the outlook of economic policy has much to say against the liberal economic policy.

After the restoration of the multi-party democracy in Nepal in 1990, privatisation has been given importance as a part of economic liberalisation.

In fact, privatisation is inevitable in order to expedite economic growth in our country. Actually, one cannot always expect government’s involvement in running factories, business houses and financial institutions. There are several important areas such as education and health where the government should place high priority for the overall development of the nation.

No doubt, the role of public enterprises as an engine of development has gained credibility in many countries. However, recognition of this will take time in our country.

In order to speed up privatisation in our country, the government set up a privatisation policy unit under the Ministry of Finance and formulated privatisation policy a few years ago. Likewise, the privatisation act was enforced in 2050 B.S. to reinvigorate the privatisation process. Consequently, sixteen PEs have so far been privatised.

Although the present Ninth Plan has a target of privatising thirty PEs, the process is very slow. This fiscal year’s budget has provided the opportunity to privatise those PEs that do not need government’s involvement and that may attract private sector’s investment.

Despite the fact that the government has a policy of privatising the state owned enterprises, it has been establishing various kinds of funds such as poverty alleviation fund town development fund and now an electricity development fund. Actually, such government funds are not needed if the existing finance companies of our country are given the chance to finance various development activities in the entire Kingdom.

Regarding the privatisation of PEs, there are some contradictions in the government’s plans and programmes. In order to amend them, such contradictions should be avoided at the earliest convenience.

Although in other countries PEs have been contributing to their economies, they have not been able to do so in our country. It is because most of our PEs have run into the quagmire of debt.

No doubt, the privatisation of our PEs will help reduce the economic burden of the government to some extent. However, it is essential to evaluate the performance of these enterprises before they are privatised. Otherwise the privatisation of PEs will affect our economy in the long run.

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