Privatisation: A principal principle?

Published : 15 Sept 2014, 01:15 PM
Updated : 15 Sept 2014, 01:15 PM

Suffering unabating influenza and incessant coughs made me realise that, no matter how good the treatment – the medicine and the physician – some diseases remain incurable, at least for a while. Then, depending on the resilience and condition of the body, the illness slowly gives way to recovery. One then needs care and nursing to recover.

The good thing about treating a common sickness like flu is that its symptoms and remedies are well known (albeit, new viruses constantly emerge), and physicians show confidence in applying the required treatment. While the disease is endemic, ongoing research engages with this (and many other) afflictions.

As with illness of the body, economists, economic theorists, think-tanks and policymakers seek development solutions, trying to promote rapid and sustainable development for ailing economies. And nothing is more in accord than this group when they advocate a supposed panacea – 'privatisation'.

Whether one has been to a business school or merely follows commentaries in economic journals, this would be one of the words most accentuated.

As a policy response, nothing makes more sense. The philosophy is easily understood: to do away with the inefficiencies of an economic system, particularly those incurred by the state. And after the spectacular fall of the USSR (that had embraced the converse philosophy, however ineffectively), and the rise of globalisation, what fool would not agree with this?

While developed donors (and their mouthpieces – the World Bank, IMF) have sternly stressed the precondition – they have commonly termed this 'structural reform' – for achieving prosperity, countries themselves found reasons against its implementation.

Observations specific to our country can be made from the last few decades. While my delirious memory (owing to my illness) flashed back many, I have picked just a few for illustration.

First a miniscule glimpse of the acute and perennial plight of inter-city commuters. In the late eighties, the dictator among his 'few good policies', introduced designated seating arrangements for non-first class rail passengers on selected routes. One could buy a ticket and expect to have a seat for their whole journey, avoiding the ordeal and anxiety of having to pay a coolie (or a broker) to snatch a seat as empty trains approached the platform. The transaction was in good faith – no bond money was exchanged, no assurance of the product (seat) was provided.

Among the amenities were reasonably comfortable coaches with orderlies offering refreshments; passengers were entertained with patriotic songs. On the particular route (Dhaka-Chittagong), it  took you to your destination in roughly six hours.

When I took the same train in recent years (after two decades) I was startled to find the same service: those orderlies and their services, and those exact songs in precisely the same order. The trip, however, now takes about 2-4 hours longer due to inadequacies in the system, and securing tickets, as ever, is quite a task.

Allowing private telecoms to operate in the mobile/internet market has been a success story. One remembers the painful process of getting access to a landline phone a decade or so ago. It was nearly impossible for a middle-income family to gather the 'priority money' or 'find a channel' required for having the phone, and very difficult to meet ongoing maintenance costs, while service was anything but reliable. Now, with ubiquitous mobile phones through many providers, customers are in a much better situation.

An en masse entry of private providers in the education sector, particularly in higher education, has been remarkable. Prestigious primary and secondary schools had always catered for specific client groups, but state-owned universities largely met higher educational need. Similar to the increased number of private hospitals, their creation is driven by supply and demand. Just as desperate students seek quality higher education (at home or abroad), thousands are treated in local (and overseas) private hospitals.

Yet, in both cases, I wonder about the satisfaction of the clients with the products and services being received.

There is general acceptance that private enterprise is more efficient than the state (or state-owned entities), and that the state should limit its role to supervision (overseeing regulation). In any economy – developing or developed – it would be difficult (and naturally inefficient) for a government to produce all the goods and services needed.

In fact, governments, even in the more efficient developed world, are finding it extremely hard to generate enough income (tax) to perform governance roles and to provide basic services; hence the ongoing global dissatisfaction with governments, their balancing acts and inconsistent records in keeping election promises.

But in bestowing responsibilities to build and manage hospitals, schools, roads to private companies – the core 'for argument' is to reduce the public debt – we need to be mindful that unlike 'government', companies thrive on making profits; their goal is to be profitable for shareholders in immediate years, not to invest and reap longer-term rewards. Though they can be made accountable, more often than not they manage to wiggle out, specially the big ones, whatever the rigor of the regulations or the rigidity of the administration.

Thus even in efficient economies governments are pressed to keep a strong hold on natural resources, infrastructures, health, education and environment, as lack of universal free access makes citizens more unequal. But this does not mean there shouldn't be private delivery of such services – e.g. toll roads, private schools or private hospitals.

Bangladesh has been taking the privatisation pill for a long time. It has a Privatisation Commission and a Board overseeing the drive. You can check progress through its website. Meanwhile, well-wishers such as the World Bank are still worried about weak enabling and regulatory environments, improper implementation, lack of transparency and credible privatisation programmes — although they agree that progress has been made.

I do not disagree. Generations of skilled and educated Bangladeshis have been attracted by the private sector. Fostering and facilitating the private sector is specially important for our economy, as it is one of the biggest employers of our many millions.

Further, not only private involvement in delivery of services (e.g. I understand that the processes for machine readable passports are handled partially by a foreign private enterprise; Chittagong Airport for a very brief period, I think it was in 2006 and 2007, was managed by a foreign private authority) can be efficient, consistent with a global trend we would see more public-private ventures in many sectors.

But as in many other unending debates, achieving balance is the key. After all, a lot is at stake, specially, in important sectors such as telecommunications, transportations, electricity, gas, ports or forests – where among other issues, foreign involvement is inevitable.

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Irfan Chowdhury writes from Canberra, Australia.