1 IS PRIVATIZATION IN PAKISTAN PURPOSEFUL?

The philosophy of privatization stems from the role of state in economic life. The thinking of the international financial institutions and free market economists is that, as in USA, the state should confine itself to regulation only and the operation and ownership of industrial enterprises and utilities should be left to the private sector. However, there is an opposite view expressed by a distinguished economic historian, Gershenkron, in his seminal article “Economic Backwardness in Historical Perspective1”. Gerschenkron’s argument is that in those states which start late in the race of development, the public sector has to play a vital role in accelerating the pace of economic growth. As is in developing countries, the private sector is shy, inexperienced and not equipped to embark on rapid industrialization. Pakistan alongwith other developing countries followed the activist role for the state in industrialization and the rate of industrial growth in Pakistan has been very high. The second main thrust for privatization is the belief that private sector units are more efficient than public sector units. This is not true across the board. In a study2 which made a comparison between public industrial enterprises and private firms producing similar goods, the conclusion was that changing the ownership of industry from public to private is neither a necessary nor a sufficient condition for more efficient operation of specific industrial enterprises. However