Media Type

Article

Publication Date

10-29-2010

Description

I would like to place the topic assigned to me in the larger context of separation of functions of policy making, ownership of the assets and regulatory oversight. Until the beginning of this decade all these varied functions in Pakistan were bundled together and carried out by each Ministry. In early 2000s the Cabinet decided to unbundle these functions to avoid conflict of interest, protect consumers and provide a level playing field for both the public and private sectors. The concern was: How can a private firm compete with a public sector firm in the same field when the owner of the latter firm enjoys substantial relative advantages. For example, the Ministry can alter the policies to favor its own firm, it can arrange tax concession specific for that firm, it can finance the losses of the firm from the public exchequer, provide subsidies for under-pricing the products the firm sells and it can create many hurdles to stifle the growth of the competing private firms. The Cabinet therefore set up an independent regulatory agency not answerable to the Ministry to carry out regulatory functions, it established autonomous Boards of Directors consisting mainly of independent non-executive Directors to govern the public sector firms and made the Ministry responsible for policy making only. This pilot experiment was carried out in the case of the Ministry of Petroleum and Natural Resources (MPNR). Oil and Gas Regulatory Authority (OGRA) was set up to regulate the oil and gas sector. State owned companies such as OGDC, PSO, PPL, SNGPL, Sui Southern were given their own Boards of Directors which carried out the governance of these entities and the MPNR was left to focus on policy making. This experiment, in my view, proved successful and should have been extended to other Ministries also. Some half-hearted attempts were made but fierce resistance by the Ministries and the bureaucrats who were clearly losing power and authority due to this separation have not so far allowed the whole water front to be covered.

Notes

Remarks made at the Private Sector Development Task Force meeting held at Islamabad on Oct 29, 2010.

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