Nationalization in Pakistan

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The total GDP per capita stood between 8.4% (in the 1970s) and 8.3% (in 1993-96), periods of nationalization.

The Nationalization process in Pakistan[1] (or historically simply regarded as the "Nationalization in Pakistan") was a policy measure programme in the economic history of Pakistan, first introduced, promulgated and implemented by people-elected Prime Minister Zulfikar Ali Bhutto and the Pakistan Peoples Party in order to lay the foundation of socialist economics reforms to improve the growth of national economy of Pakistan.[2] Since the 1950s, the country had a speedy industrialization and became an industrial paradise in Asia.[3] But, as time progressed, the labour trade unions and labor-working class had strained relations with the industrial business oligarch classes, completely neglected the work conditions and failed to provide healthy environment to the workers class in the industries.[4]

The nationalization programme began on January 2, 1972, in a vision to promote economic democracy, liberalization, and a mainstream initial goal to put Pakistan in the line of state of progressivism.[3] Ended effectively in 1977, the nationalization programme was again put forward by Prime Minister Benazir Bhutto in 1996,[5] and as of current Prime minister Yousaf Raza Gillani in 2012 who activated the programme in order to bring three major megacorporations (Steel Mills, Railways and International Airlines) under the government ownership in an attempt to improve its structure and to alleviate its profitable process.[6]

Despite its success in its formative years, such policy measure programmes met with an extreme[clarification needed] level of spontaneous demonstration and international and national opposition that left disastrous effects on Pakistan's national economy[7] until it was replaced with the privatization programme set forward by Prime Minister Nawaz Sharif in 1990 until the programme's final execution in 2008 by Shaukat Aziz.[8]

Nationalization phase (1971-1977)[edit]

Zulfikar Ali Bhutto (1928–1979) became President of Pakistan (1971–74) on December 21, 1971 after a disastrous end of 1971 war with India.[3] The nationalization programme was implemented for the first time in the history of Pakistan and it was promulgated through three different stages. On January 1, 1972, on a televised speech to the nation, Bhutto and the peoples party's government promulgated the three-staged programme, under "Nationalization and Economic Reforms Order (NERO)", which nationalized all major metal industries, including iron and steel, heavy engineering, heavy electricals, petrochemicals, cement and public utilities except textiles industry and lands.[3] The first stage of the nationalization programme integrated approximately 31 major industrial megacorporations, industrial units and enterprises, under direct management control of the government under 10 different categories of basic industries. The programme intended to assert public ownership over the industrial megacorporations, and to satisfied the labour unions in order to keep the industrialization peace in the country.[3]

I had made a pledge to the people of Pakistan to implement industrial reforms.... I am now beginning to redeem the pledge....!

—Zulfikar Ali Bhutto, 1971, Cited source[9]

Namely, the first stage of the nationalization programme integrated the selective industries approved by the peoples party's government and the nationalization programme provided the iron and steel, basic metal industries, heavy engineering industries, heavy electrical industries, assembly and manufacture of motor vehicles, tractor public utilities, including the electricity generation, transmission and distribution, gas and oil refineries, under the management of public sector.[3] After Bhutto becoming Prime Minister in 1974, the life insurance, vegetable oil industry, banks, shipping companies, oil companies and wheat, rice and cotton processing units were also nationalized forcefully.[3]

After the success of the first stage, the nationalization programme stepped into the second stage when it was launched on 1 January 1974, intending to nationalized the banking and financial industry and sector in Pakistan. Passed by the parliament, over 13 major banks, over a dozen insurance companies, two petroleum companies and 10 shipping companies were forcefully nationalized. The second programme was presided by Finance Minister dr. Mubashir Hassan who strongly maintained that: "wealth of the nation must be used for the benefit of the nation and can not be allowed to be concentrated in the banks of a few individuals.".[9]

Banks ...which till (Monday) were the private property of a group are now public property.... All our big industries in the private sector were set up largely on the basis of financial accommodation provided by the banks and the financial institutions..... Because of the previous governments obsessions with GNP growth, (...)... industrial power was concentrated in the hands of few robbers barons

—Dr. Mubashir Hassan, source[9]

On 1 April 1973, Bhutto held a meeting with members of Lahore Chamber of Commerce and Industry and maintained:

Activity of public sector prevents the concentration of economic power in few hands and protects the small and medium entrepreneurs from the clutches of giant enterprises and vested interests

—Zulfikar Ali Bhutto, source[9]

The third programme soon launched in July 1, 1976, when approximately 2,000 cotton, ginning and rice husking units came under the nationalization programme.[9] This programme met with administrative nightmare and widespread public resentment. The third programme eliminated the role of middle men, and it was rumored that the producer as well as consumers of cotton, rice and wheat had been at the mercy of middle men trading in the milling of these commodities, with the result that producers were deprived of due share and consumer got poor quality and adulterated commodities at much higher prices.[3] By 1977, the peoples party's government had had built a strong and sizeable public sector with priority on cement, steel and fertilizers.[9]

Nationalization phase (1988–present)[edit]

In November 1988, Benazir Bhutto and the Pakistan Peoples Party came to power for a second time.[5] During the election campaign in 1988, Benazir Bhutto promised to the industrial sector to end nationalization programme and to carry out the industrialization by means other than state intervention.[5]

But controversially, Benazir Bhutto did not authorize the directives to carry out the denationalization programme or liberalization of the national economy. No nationalized units were privatized, only few economic regulations were reviewed.[5] Although limited-scale privatization continued under Benazir Bhutto's second government, the UBL Pakistan and railway consortium was completely nationalized by Benazir Bhutto before being dismissed in 1996. During the second government, the Peoples Party intensified the government control on Pakistan Railways and Pakistan Steel Mills; all shares were kept under government management ownership. In 1998, Prime minister Nawaz Sharif imposed economic emergency after performing nuclear deterrence in a direct response to India. All state-owned corporations and private sector industries' assets were frozen by Nawaz Sharif after ordering to freeze the private assets under government control in order to prevent the financial collapse.

From 1999 to 2010, the nationalization programme was swiftly ended and effectively came to its end until 2011. The nationalization programme was again promulgated by current Prime Minister Yousaf Raza Gillani on December 15, 2011, in order secure and rescue the former state-owned enterprises. The nationalization programme was put forward to enhance the government ownership of Pakistan Steel Mills,[10] Pakistan Railways as well as Pakistan International Airlines.[6] The current nationalization programme remains intact to restructured and made profitable while remaining within government ownership.[6]

Opposition and adversaries[edit]

The GDP growth rate stood between 3.88% until being dropped to 2.84% after the completion of nationalization programme.

The nationalization policies had disastrous effects on economy and had damage the confidence of investors in the country. The nationalization programme financially devastated 22 oligarch families, while one investor quoting: "industrialists not just lost industrial units to Bhutto's nationalization policy, they lost the urge to invest in Pakistan.". Major affectee included Nawaz Sharif who lost the major steel mill, the Ittefaq Group of Industries, and Chaudhry Shujaat Hussain's Gujrat Enterprises.[11] All 25 shipping companies were merged with Pakistan National Shipping Corporation by Bhutto's nationalization programme; those who protested were imprisoned by the government.[11]

At an international level, the United States fully opposed the nationalization programme and marked it as "ill-considered" decision of the government. Former prime minister Nawaz Sharif, an affectee of nationalization process, gave vehement criticism and cited nationalization programme as "lamentable state of Pakistan".[12] While on the other hand, the unnamed and anonymous United States embassy officer later further noted that:

During Bhutto's five years in Pakistan's helm, Bhutto had retained an emotional hold on the poor masses who had votoed him overwhelmingly in 1970s general elections. At the same time, however, [B]hutto had many enemies. The [socialist economics] and nationalization of major private industries during his first two years on office had badly upsets the Business circles... An ill-considered decision to take over the wheat-milling, rice-husking, sugar mills, and cotton-gaining, industries in July of 1976 had angered the small business owners and traders. Both leftists— socilists and communists, intellectuals, students, and trade unionists— felt betrayed by Bhutto's shift to centre-right wing conservative economics policies and by his growing collaboration with powerful feudal lords, Pakistan's traditional power brokers. After 1976, Bhutto's aggressive authoritarian personal style and often high-handed way of dealing with political rivals, dissidents, and opponents had also alienated many....

U.S. Embassy, Pakistan, U.S. commenting of Bhutto's fate

Responsive reasoning[edit]

The Pakistan Peoples Party's intellectuals on other hand, vigorously defended the nationalization programme.[13] The Peoples Party maintained that the "nationalization" programme was indeed a "success" but the way it was implemented led to its failure.[13] The Peoples' Party's members and cabinet officers, such as Dr. Mubashir Hassan, maintained that the Nationalization programme was party policy and the founding programme of the PPP in 1967, under "socialism is our economy" clause.[12] Others supporting the arguments that the program was mandated by the people of Pakistan when they voted for PPP in 1970 general elections, and peoples party is proud of the successful implementation of the nationalization policy, and the fact that nationalization measures were protected for 10 years by the 1973 Constitution.[12]

Started in 1970, the nationalization programmes wwere precise articulation of that "self-consciousness" and "self-recognition" expression. The nationalization programme completely abolished the monopoly and politicization of economy under few hands that was kept in close drawing-room politics.[14] The nationalization program gave a though of "self-awarenes" to labors, traders, and workers unions and to be more aware about the worker's rights and work healthy safe environment, as Suleman Akhtar maintained.[14]

Government reports[edit]

See also[edit]

References[edit]

  1. ^ Riazuddin, Riaz. "Pakistan: Financial Sector Assessment (1990-2000)". Economic Research Department of State Bank of Pakistan. State Bank of Pakistan. Retrieved 2 June 2012. 
  2. ^ Story of Pakistan. "Zulfikar Ali Bhutto becomes President". Jun 1, 2003. Story of Pakistan. Retrieved 31 May 2012. 
  3. ^ a b c d e f g h Raza, Syed Rasul; Sani Panwar (2008). "5: Nationalization" (webbook). Zulfikar Ali Bhutto: The architect of Pakistan. Los Angelos, Karachi (Pakistan): Syed Rasul Raza. pp. 29–32. Retrieved 31 May 2012. 
  4. ^ Bhurgri, Abdul Ghafoor; Sani H. Panhwar. "§Nationalization and Land Reforms" (web books). Zulfikar Ali Bhutto: The Falcon of Pakistan. Abdul Ghafoor Bhurgri and Pakistan Peoples Party. pp. 284–289. 
  5. ^ a b c d Farazmand, Ali (1996). Public Enterprise management. United States: Greewood publishing Group, Inc. pp. 182–250. ISBN 0-131-28025-8 Check |isbn= value (help). 
  6. ^ a b c Iftikhar Firdous (December 15, 2011). "Railways, Steel Mills taken off the chopping block". The Tribune Express, Iftikhar Firdous. Retrieved 31 May 2012. "In a major blow to the economic liberals in government, the federal cabinet decided against the privatisation of eight of the largest state-owned companies, including Pakistan Steel Mills" 
  7. ^ Group News (30 October 2010). "‘Nationalization of educational institutions was blunder’". Dawn News Group. Retrieved 31 May 2012. 
  8. ^ Malcolm Borthwick (Thursday, 1 June 2006, 23:42 GMT 00:42 UK). "Pakistan steels itself for sell-offs". BBC Pakistan, Malcolm Borthwick. Retrieved 30 May 2012. "Pakistan has had the most broad-based structural reform of any country in Asia. Last year, we were the second fastest growing economy in the world after China. We grew at 8.4%" 
  9. ^ a b c d e f Press. "Pakistan's Economic Saga". Pakistan's Economic Saga. Retrieved 31 May 2012. 
  10. ^ Syed Fazl-e-Haider (May 3, 2012). "The state-owned Pakistan Steel Mills (". Asia Times. Retrieved 31 May 2012. 
  11. ^ a b Release. "Impact of Nationalization on Pakistan's Economic development". Impact of Nationalization on Pakistan's Economic development. Retrieved 31 May 2012. 
  12. ^ a b c Our Correspondent. "Nawaz has derailed politically: Mubashar". Parliament Media Lounge. The News International, Parliament Lounge. Retrieved September 14, 2011. 
  13. ^ a b Nishapuri, Abdul (01/XI-2010). "Was nationalisation policy measure programme a mistake?". Abdul Nishapuri, Directorate Press for Public Relations of Pakistan Peoples Party. Directorate for the Press and Public Relations of Pakistan Peoples Party. p. 1. Retrieved 1 June 2012. "Under Nationalization programme, Zulfiqar Ali Bhutto gave hope and honour to Pakistan's poor and downtrodden people." 
  14. ^ a b Akhtar, Suleman (02/ XI-2010). "Bhutto’s nationalization policy: A response to PM Gilani’s statement". The Directorate for Press and Public Relations of the Pakistan Peoples Party. The Directorate for Press and Public Relations of the Pakistan Peoples Party (Akhtar). p. 1. Retrieved 1 June 2012.