Wednesday, February 26, 2014

Asad Umar's poor economics - a friend's blog

Here is one post from Shahid Mehmood's blog:

I was recently forwarded Asad Umar’s two part article on the subject of privatization (which appeared in the NEWS) of public sector enterprises (PSE’s). It is a continuation of the debate that has been generated in lieu of the government’s decision to privatize a specific percentage of these bleeders. Aside from a few positive suggestions over the methodology and how the intended sale should be carried out, the article was a reflection of the author’s poor understanding of factors that affect the economy and its working, especially in the context of Pakistan. In short, Asad Umar showed a poor grasp of basic economics.

Let’s start with his question that why are profit making enterprises like OGDCL being sold? But before raising this question, he should have asked himself why are they making profits in the first place? The simple answer is that these are government supported monopolies that face little competition. Couple this with the fact of high demand for its products which ensures that these entities will earn profit despite having the common bureaucratic setup. Anybody who has had the chance of going to offices of these ‘profit earning’ organizations would surely have witnessed the same level of corruption, inefficiency and mismanagement that is the hallmark of state run institutions in Pakistan. This is the same bureaucratic setup and functioning that Asad Umar derided in the first part of his article.  

Read more: 

Sale of PSEs, and Asad Umar's economics 

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