Pakistan: Government privatisation efforts threaten further unrest over next 12 months

15 Feb 2016

Pakistan: Government privatisation efforts threate...


  •   A seven-day strike by Pakistan International Airlines (PIA) workers that ended on 9 February reveals the extent of popular opposition to the government’s privatisation programme and the potential for related unrest. 
  •   The government’s unwillingness to acquiesce to demands by unions and opposition parties means there will remain the potential for further strikes and protests as the government looks to complete the privatisation of some 31 state-owned enterprises.
  •   Although the programme will further increase political and public opposition to the government, an opposition campaign to impeach the prime minister is unlikely to be successful due to the ruling PLM-N’s majority in parliament. 

Airline strike signal future disruption 

The PIA strike and protests underscore the potential for unrest and disruption as the government presses ahead with its controversial privatisation programme. The strike, which ran from 2-9 February, resulted in losses of more than USD 30 mn to exporters and importers who rely on PIA for their logistical operations, and USD 47 mn to the airline itself, according to a PIA statement. The perishable goods sector has been particularly affected, which depends on PIA to carry around 30 percent of Pakistan’s daily food exports. In addition to the cancellation of thousands of flights, there were also significant incidents of protests reported around airports nationwide, including clashes between police and PIA employees at Karachi airport that resulted in two deaths.

The government’s refusal to acquiesce to the demands of PIA workers indicates the potential for further unrest as the government sells off some 31 state-owned businesses as part of the privatisation programme. Under the conditions of a USD 6.64 bn loan agreed with the IMF in September 2013, Pakistan is required to privatise or reform many of its inefficient state-owned enterprises. The success of other regulatory reforms led to the disbursement of a USD 497 mn tranche of the loan on 4 February. The IMF has not announced when it will release the remaining USD 1.1 bn of the loan, and the government is now planning to complete the sell-offs to secure the final tranches.

Energy, rail and steel industries at risk

The power sector is at particular risk of disruption in the coming months. The government is looking to privatise numerous state-owned electricity companies, including the Electric Supply Companies of Islamabad, Lahore, Hyderabad, Peshawar, Quetta and Faisalabad, and six regional power generation companies. Workers for several of these companies have already held strikes and protests in recent months, and future industrial action could lead to power and gas outages, or possible damage to electricity infrastructure should the protests turn violent, as has been the case in the past. Any outages risk provoking wider unrest among affected communities in urban areas, where there is strong precedent for violence in response to prolonged disruptions to power supply. On 1 February, nationwide protests were held due to shortages of about 40 percent of total daily demand.

Other sectors likely to be affected by anti-privatisation strikes include the oil and gas, railway and steel industries, which are proposed targets of the IMF programme as of a December 2015 government memorandum. Financial advisors have been hired to oversee the mid-2016 privatisation or restructuring of Pak-Arab Refinery Limited and Mari Petroleum Limited, one of the country’s largest oil companies, which could exacerbate Pakistan’s ongoing fuel shortage in the medium term. Pakistan Steel Mills is in line for privatisation by June 2016, and is highly likely to see mass strikes and protests, following earlier industrial action in recent months. Workers for state-owned Pakistan Railways also joined the PIA protests on 4 February, and are highly likely to disrupt the country’s railway network if the government decides to complete the privatisation of the firm. There has not yet been an announced schedule for Pakistan Railways’ privatisation.

Politicisation of protests undermines PLM-N

The scale and repercussions of the PIA protests have placed significant pressure on Prime Minister Nawaz Sharif’s administration, which has struggled since 2013 to implement key policy goals such as economic stability and growth, energy security and the eradication of militant groups from the country. Strong public and parliamentary opposition led by Pakistan Tehreek-i-Insaf (PTI), the Sindh-based Muttahida Qaumi Movement (MQM), and other parties, has incited numerous attempts to impeach the prime minister over alleged electoral fraud. The controversy surrounding the impeachment efforts have already led to several mass protests involving tens of thousands of people since mid-2014, centering on Islamabad and other key cities.

As yet any impeachment motion is unlikely to be successful while the ruling PLM-N party maintains its majority in parliament, but growing harmony among the opposition risks undermining the government’s legislative agenda. A number of opposition parties, including MQM, PPP and the Awami Workers Party, have expressed solidarity in opposition to the privatisation efforts and will continue to use the issue as a means of mobilising support. As such further mass demonstrations and strikes are likely to continue in response to the privatisation programme, particularly in PTI strongholds in Lahore and Karachi, as well as the capital Islamabad.  




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