Union Strike One

dude you are talking smack. how can a company that is paying 37% of its pre tax profit as taxes be subsidized by the govt? also with respect to how efficiently these entities are run, i will post research reports by local brokerages so that people can evaluate for themselves, the state of these company.

Re: # 23

Pakistani army is not of the size or in a setting where it would make business sense, like the army of British East India Company, or US Army in Iraq.
It is more of a compulsion whether you like it or not. Countries have always needed armies and Armies have alway had a major stake in national power. We can discount democratic West but they have reached there after ages of trial and error.
We do not a subway yet.
Yes, privatization is the only way there is. Maybe three years, five years after priv., service and cost improves. Nonetheless state`s monopoly over this facility will end.

Re: # 23
LOL - yes, it doesn`t all have to be serious!

Re: # 20
I like the detailed analogy you`ve given pertaining to PIA.

On numerous occasions having decided to give in to the patriot within me and travel by PIA, I`ve witnessed and personally experienced, (a) shameful acts of bribery and the like on part of the PIA staff, and (b) their sheer ineptness to grasp the concept of customer service. I’m sure PIA is serving its employees, but is it serving the nation? In a true market economy, the corruption-infested rank and file of the PIA wouldn`t be tolerated by the shareholders for a single day as it would invariably lead to reduced profits.

We can hate Privatisation to our hearts’ content, but the market forces are the only cure for corruption in `most` such cases in developing countries.

faisal man, you continue to evade the fact that these fauji entities are subsidized by the people`s taxes and this allows them to continue to operate despite being weak in business skills.

I suppose you don`t have a business background. That is why you do not support the creative destruction of capitalism. A process through which none of these fauji entities could have survived.

rozaiba man you are lying again much in the same manner when you said that pak army linked entities pay no taxes. in neither of the sectors you mention is a fauji linked entity protected from competition. in banking, askari bank is a minor player compared to nbp, ubl and habib. engro is the biggest fertilizer company in pak. i cant remember the name of the largest pakistani cement manufacturing company but i am farly sure that its not fauji cement. i will double check and post the name here.

I believe in privatization. It`s the only way out.

That is why I feel the Pakistan Army should also be privatized. It is the most OVER-STAFFED and INEFFICIENT entity.

It makes no business sense.

Re: # 18

Bah! Banking, cement, airlines, real estate, fertilizer - you name it, the faujiz are in it! The Fauji industry is protected from private competition from other local companies. The losses are sustained by the state. Once after much mismanagement and trial and error - a process that should have eliminated the company and allowed real Pakistani entrepreneurs to set up shop, is over, and more and more funds are stuffed through and the company is established on a large scale through `protective competition` the company is put up on the Karachi Stock Exchange. Obviously the company will have financial statements after that.

latest on ptcl privatisation. my money is on an arab entity. arab telcos are sitting on heaps of cash and have limited investment avenues available at home. in addition they have very limited internation presence and thus might be more desparate to acquire ptcl:

http://sg.biz.yahoo.com/050615/15/3sz5q.html

Wednesday June 15, 4:50 PM
SingTel, Etisalat Favorites For Pakistan PTCL Stake


By Imran Maqbool
Of DOW JONES NEWSWIRES

KARACHI (Dow Jones)--Singapore Telecommunications Ltd. (T48.SG), or SingTel, and the UAE-based Emirates Telecommunications Corp. (ETISALAT.AD) are the top contenders to buy a 26% stake in Pakistan Telecommunication Co., or PTCL, analysts said.

All eyes are on a planned bidding Saturday to partly privatize Pakistan`s largest phone-service provider. A total of nine international telecom firms have been shortlisted by the country`s Privatization Commission.

The other seven companies in the run are Telekom Malaysia (4863.KU), China Mobile Communication Corp. (CHL), Kuwait`s Mobile Telecommunication Co. (TELE.KW), Saudi Oger Ltd. (SO.YY), Turkcell (TKC), Saudi Telecommunications Co. (7010.SA) and Egypt`s Almal-led consortium.

PTCL`s sale is the biggest ever privatization in Pakistan and a test case of the government`s resolve to sell off state firms despite opposition by political parties and labor unions. If the sale goes smoothly, analysts said other firms like Pakistan State Oil, the country`s largest oil marketing company and Pakistan Petroleum Ltd., the second biggest exploration firm in Pakisran, will follow soon.

Seven out of 10 analysts surveyed by Dow Jones Newswires said SingTel would be the likely winner, while three said it would be Etisalat. The winner will also get management control of PTCL.

...In Pakistan alone, the telecom market`s total revenue stood at US$1.33 billion in the last fiscal year and is expected to grow by about 66% to US$2.2 billion in the fiscal year 2009.


...``I think, Arab investors` risk assessment of Pakistan will be lower than those of other foreign investors because of our (Pakistan`s) historical ties with them,`` said Asif Qureshi, head of research at Invisor Securities.


...A consortium led by JPMorgan and Goldman Sachs is advising the government on the transaction.

...``The government`s credibility is at stake here,`` said Tanvir Abid, head of research at Live Securities.

If the sale goes well it will provide a strong impetus to the government`s drive to privatize state-run firms, analysts said.

``After the successful completion of this transaction, it will be easier for the government to move forward with its privatization program,`` said Arif of KASB Group. ``It will give positive signals to international investors and the government will capitalize on it.``

Rezwan #varoius: I don’t know much about the internals of PTCL. Could you highlight what it’s employee to profit and employee to connections/clients serviced etc. ratio is with respect to other telecom companies in the world……….

Before supporting or opposing privatization of anything, one has to first understand the internals of the organization. Unions can be positive or negative. If they are acting to protect the workers against Capitalistic exploitation, then they are a positive. This is what has kept Capitalism on track, and this is why Communism has failed. Because efficient Capitalism never turned into an exploitation of the masses, since the masses were able to form strong unions and demand their rights. This is why all of us expats migrated to Capitalist countries, and not to the USSR. Including the ones, who spend their whole day supporting labor unions, without trying to figure out whether they are pushing a legitimate or illegitimate stance.

However, labor unions can be huge negatives also. They can bring down companies, and can bring down whole economies. Specifically in poor third world countries, with massive publicly owned companies, where the political parties and govts. fill the companies with employees, just to provide jobs to voters in their constituencies. It is equivalent to putting people on excellent welfare plans, at the expense of companies. And in the process destroying the work of people in companies, who are actually working hard.

Unconditionally supporting labor unions, even if they are over-staffed, sounds quite noble. Unless you consider the fact that people are being paid to do nothing, in such situations. That same money could be better used to help the poor. Pay off international loans. Put into infrastructure, etc. Or raise the salaries of the employees in the companies that are working hard. This is why Pakistan has publicly owned companies, which have a monopoly on markets, yet make either little profit or in many cases go in a loss!! Having a monopoly on a population of 150 million people and still going in a loss, or not make gigantic profits, is pretty hard to do.

I do know something about a company called PIA. Which is one of the largest publicly owned White elephants in the international aviation industry. PIA has some of the strongest unions in Pakistan, starting from its Pilot’s union, whose salaries are (were) phenomally high, in comparison to what they should be in a third-world country like Pakistan. I have friends who barely got their FA degress, yet enjoy a high lifestyle as PIA pilots………..

To do a comparison, consider the following:

PIA barely has 50 airplanes. Out of these, around 40 are capable of international flights. PIA has averaged around 20 thousand employees, over the years. And it averages 6 to 10 million passengers, per year. Delta airlines has around 550 airplanes (nearly all of which are capable of int’l flights), and carries around 85 million passengers/year. Yet it has only 70 thousand employees.

Do the math. An airline with 13 times the Boeings and Airbuses and ten times the passenger load (Delta) has only three and a half time the employees of PIA. PIA generally runs in a loss. I wonder why? Could it be, because it is heavily over-staffed. The govt. has to give it money to stay in business. Money that could be used to build schools, roads etc. Or to venture fund young IT entreprenuers. This is despite the fact that PIA has, over the years, had a virtual monopoly on domestic travel and a complete monopoly on int’l travel for a population of 100 million + people, with a gigantic expat population.

And despite such a high number of employees, PIA has pathetic customer service.........One would think all these extra employees could at least be put on the task of cleaning the airplanes or answering the phones...........

Had PIA been competing in a competitive market like USA, the Deltas of the world would have put it out of business, years ago. In fact, Canada 3000, an airline of closer size to PIA, went under right after 9/11, because it was operating as a private airline. The same would have happened to PIA, in Canada, but years before Canada 3000.

Would it make sense to privatize PIA and right-size it? Or keep in public, and right-size it? Of course, it would. Should one be on the PIA;s labor unions’ side in such a situation. I wouldn’t be. Because a huge chunk of its employees are getting paychecks, excellent perks etc., for doing nothing………..and being paid by the people of Pakistan……….In addition, they are keeping other entrepreneurs in Pakistan from building large profitable airlines………To some extent Air Canada, supported by the govt. in Canada, is doing the same…………

I don’t know the efficiency of PTCL. I hope you do, since you wrote the article. But my guess is it would not be able to compete against private companies. I have heard it is a white elephant also, and is only profitable because it has had a monopoly over 150 million people’s phone connections, also. A much more lucrative monopoly than PIA has.

Pakistan’s telecom sector is in a boom. Any qualified person is not going to be out of a job. However, it is not the job of the govt. to pay people, just for the sake of paying them………..and keeping them employed at govt. exchequer for doing nothing……….I think Pakistan Steel Mills may be in the same category. I have heard MQM has filled it with its party members……Much like PPP and PML support strong labor unions in PIA……………

re #18

correction:

i meant fauji fertilizer`s tax expense amounted to 37% of its PRE TAX INCOME rather than pre tax expense.

also btw, fauji foundation has submitted lots of bids in the current round of privatisation. those bids have however not been accepted because other parties have submitted higher bids.

rozaiba is perpetrating more lies. fauji fertilizers is one of the core holdings of fauji foundation. in 2004, fauji fertilizer`s tax expense amounted to 37% of its pre-tax expense, a rate higher than that paid by most american companies. fauji fertilizer`s 2004 financials are available at the following link:

http://www.ffc.com.pk/contents/annualrep.htm

in addition, neither does any pak army linked entitity hold a stake in top pak companies ranked by revenue. most people here in fact probably cant name top five companies in that list.

Re: # 7
Would love to know if you are against Privatisation in general, or Privatisation in this particular case due to whatever concerns you may have?

Although, there are points scattered through out this heart-felt article that I feel sympathetic towards, I think the debate between Privatisation and Nationalisation is an old one and if I may say so, a settled one - firmly in the favour of the P word!

I totally disagree with you Rizwan that the purpose of a state-run organisation is to serve people that it employs! The purpose of a state-run organisation is surely to serve the people of the country. And the two we all know are NOT the same! Providing livelihood for people is the job of the government, not PTCL. The job of the PTCL is to provide the state-of-the-art telecoms services across the nation.

And once it has been privatised (which is bound to happen sooner or later), its additional responsibility will be to provide an increased value to its shareholders, which it will have to achieve by becoming more attractive to the consumer. Sounds like it’s a win-win for the country. If some people (fellow countrymen and women) owning shares in the company make a bit of money along the way, good for them!

Having said all of that, I do think the IPO will have to be carefully managed. I`m not totally against the idea of breaking a company down, before privatising it. This way, it can be ensured that the organisation does not enjoy the sector monopoly that it once had under the government. The thought of a single private entity solely controlling a lucrative public sector is quite frightening in itself.

I like Zakkk`s way of putting it: regulate yes, run no! Good one!

Also not sure if the politics of trade unions is exactly a step in the right direction! But will have to see the details of what exactly happened in this case to make up my mind.

Re: # 14

Haroon, because the Pakistan Army has nothing better to do and has failed in its professional duties, it may as well fight the trade unions. I think we should document this episode and send it to the Defense colleges where young cadets are told inspirational tales of how the Pakistani Army Jawans successfully fought the trade unions. They could also be taught how the Pakistan Army became the largest land owner and largest corporate entity in the country while it was buffered with subsidies from the State and didn`t have to pay any taxes on profits.

The course book should be titled: ``How to take over a country - your own country!``

Young cadets will most certainly leave the classes with prideful eyes and look forward to a bright future looting the country.

Rozaiba, PTCL is a national asset right now and it`s security can not be comprimised upon until the privitization takes place. The Federal Government has taken a decision to privitize it and it is the government and not the union`s who steer the direction of the Pakistan state.