Guide to Stakeholder Engagement in the Privatisation Process

The main objective of the government is social welfare, but professional entrepreneurs in a competitive market economy operate business entities more efficiently than government-nominated management or bureaucracy. In developing countries like Pakistan, state-owned enterprises (SOEs) often underperform due to unnecessary interference by unqualified government functionaries and vested interests of politicians, leading to higher costs of doing business and lower productivity. The Government of Pakistan has undertaken an ambitious program of economic reforms, including the privatisation of SOEs from various sectors. The Privatisation program aims to reduce the fiscal burden of loss-making SOEs on the government budget, enhance the private sector's role in the economy, and create a liberal economic environment that fosters domestic and international investment and promotes competition. The program uses an integrated approach that goes beyond the transfer of public assets to the private sector by identifying the linkages and role of regulation, good governance, and market competition that will result in the provision of quality goods and services to the public. The Privatisation Commission (PC) has been entrusted with the task of implementing the privatisation policy of the Federal Government. The PC is a legal body established under the Privatisation Commission Ordinance, 2000. However, not all necessary laws have been enacted to fully empower the PC to perform its mandate of leading the privatisation agenda in Pakistan. The recent establishment of the Ministry of Privatisation has moved privatisation to the cabinet level, which should facilitate the implementation of the PC's mandate. Effective stakeholder engagement is crucial for the success of the privatisation program. The PC should not view stakeholder engagement as an end in itself or a way to manage crisis, but rather as an essential and mutually beneficial strategic function that results in better-informed and more effective reforms, policies, restructuring frameworks, and smooth transactions. For stakeholders, the benefits of engagement include the opportunity to participate in the decision-making process through which they have their issues heard and addressed. For the Privatisation Commission, the benefits of stakeholder engagement include improved communication between the PC and all individuals or groups who have a vested interest in the privatization/restructuring of the individual SOE and collectively. Access to critical information relevant to the sectoral or organizational frameworks that has an impact on the business operations, restructuring, or sale is also a benefit. The ability to consider the implications of policy initiatives or proposals to inform strategy development is another advantage of stakeholder engagement. Together, these benefits are intended to lead to better organisational outcomes and knowledge, strengthened and trusted relationships, and a more positive view of the Commission. Involving stakeholders in decision-aiding processes as early as possible generally improves the mutual understanding of the situation. Although it may increase the duration of the process, involving stakeholders generally facilitates better cooperation between all participants, leading to more acceptable and sustainable decisions in the privatization process and preventing the PC from reaching a deadlock in a transaction at a later stage.