Selling the Cash Cows
By Farid Masood • Jun 14th, 2008 • Category: Politics, Worth A Second Look • 14 CommentsCertainly not any organization sells its Cash Cows, but dogs. Stars are tried to be converted into Cash Cows. Privatization Commission of Pakistan is up to selling every asset owned the government in business sector whether profitable or not. Theme behind this policy is that its not function of the government to run business. If we go some decades back, every big business was meant to be run by the government because numbers of masses don’t posses huge capitals.
As the small business progressed in to medium and large businesses and multi-national companies and foreign investment due to opening up of economic condition of countries started to invest in medium and large business. As precedent by investment in banks, cell phone companies, textile, cement, fertilizers, medicine etc.
Privatization started since 1990s, Ghee Corporation of Pakistan sold out, State Cement Companies of Pakistan sold out etc etc. This was a good approach in the case of Ghee Corporation but may not be in the case of State Cement Companies. Many a companies privatized by two governments in different time period headed by Mr Nawaz Sharif and also government of Shaheed Benazir Bhutto.
As an overall image of privatization it reflected as a non-clear policy in terms of establishing the exact business value, addition of market prospects and off-course the corruption involved in selling of profitable businesses.
Indeed government should be much spare to put in its efforts for the betterment of the nation, really a welfare state, but on the other hand its should have options of income except taxes and duties. And those business units, which are still under government control they should properly be looked after to avoid a Star unit don’t become a Dog, or a Cash Cow don’t become between the Stars & Dogs of Dog like Pakistan International Airline.
In the case of Pakistan International Airline (PIA) its was a profitable unit a decade ago like State Life Insurance Corporation of Pakistan. At that time three units Pakistan State Oil (PSO), State Life Insurance Corporation and PIA were top of the list business units earning profits in billions of rupees per month. PIA was supported be the government as and when required by raising fares and charges of services. An airline transporting more than hundred thousand pilgrims per year and business and economy classes by its planes can become a Dog like it is in these days receiving a loss of 1.5 Billion rupees per month?
Pakistan Steel Mills is a Cash Cow now for last 3 or 4 years. Why to sell such business units? Shall we opt for selling PIA in near future? Or State Life Corporation?
Selling banks are another issue, but in most of the banks are operating with government supervision with public-private partnership. This is how we can increase the profitability of Stars and we can make a losing unit as a profitable business.
Until our government is able to create in infrastructure of a massive business all around Pakistan in every field of engineering / services whether it’s the field of mining (which is only 5% explored), production units / service sectors with the help of public private partnership the profitable businesses under government control should not be sold out in the name of Privatization. And with the public-private partnership business processes should be improved and opening of business sector should be perform with certain reforms. Selling of everything is not a solution, public involvement is need of the hour. Government should encourage local businessmen as well international groups to participate in making new infrastructure as well as improving the existing one like PIA, Railway etc.
If we take one example that is Pakistan Railway, section may be privatized to generate revenues with the help of public-private partnership. This shall also help in improving the infrastructure and standards.
Side by side we should also invest in other un-explored fields of business so that the modes of government incomes should increase.
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Farid, i must say a very good post.
Drastic changes are required in all such institutions. Selling of everything is definitely not a good solution and improvement of infrastructure should be done with the help of local and international businessmen!
Farid Sahib, does the concept of “public-private partenrship” clear to you? It appears you are confusing it a bit. The banks that are privatised are not run under government supervision at all, they are private properties managed and run by the owners and managers. Government of Pakistan has no role to play as far as enhancement of their profitability is concerned. Of course, they are under legal obligation to comply with the rules and regulations of The Statement Bank of Pakistan, Security and Exchange Commission of Pakistan, and Pakistan Banking Council.
Forgive me for interfering with your efforts in “excellent communication of knowledge”.
Mr. fareed, you have discussed 3 levels of BCG growth share Matrix but left untouched fourth one i.e. ? (Question Mark). In my opinion, PIA not falls in Dog category. It comes in ? because market growth rate is high but PIA’s market rate is falling day by day. It can be revived by best business strategies and management.
Only those companies falls in Dog categories where market growth rate and market share both are at lower side. But Aviation don’t have problem with Growth rate.
Anyway it was nice and good article. Keep in touch.
Dog companies are like Instaphone (already closed), CDMA/AMPS companies, Fixed line companies, conventional ISP companies and other related kind of obsoleting businesses.
Now Zardari Saeen has come and everything will be alright. Dont worry.
Saleem Khan
Thanks for your comments, actually the article was not about the BCG and “? Marks were not discussed. PIA was a profitable institution and it stood with State Life and PSO, What happened to it as the tarrif is being regularly increased, it also accomodates thousands of Hajis per year. The problem is some where inside the organization and people are paying the price of it.
Secondly, selling of every organization through so-called privatization is not the solution. Once you sell all of them then government will increase the taxes and duties to increase earnings.
Aftab S. Alam
Some banks are still operating on this concept though the government share is less than 50%.
Farid Masood, you suggest that some banks are still operating on this concept (Public-Private Cooperation). I would be grateful and obliged if you could, kindly, name a couple of them. I suspect there is some misunderstanding, however, we can verify this fact for our information.
Great day!
Aftab S. Alam
One of them is Askari Bank, comes under AWT owned by GHQ
Thanks. Is that the only one?
An excellent and informative article relating to business and selling off state owned companies, to make money. This is a short-term gain and has been the way governments in UK have raised funds back as far as the early eighties. But now have sold off our assets it is creating higher taxes and other related costs, namely oil, gas and water.
My suggestion is the creation of a co-operative to protect your small businesses and to provide your people with a way to re-invest their profits back into development of the co-operative and thus add more members, increasing profitability. It is the small businessmen l would promote and thus provide a way for them to grow, using an umbrella to protect their assets.
You have a brilliant suggestion. Unfortunately, this concept was tried in Pakistan (province of Punjab) and resulted in the grand screw up of the common people, you guessed it, by the “great politicians” namely Ch. Shujat and the Nawaz Sharif. Once burnt so badly, people’s trust can’t be pooled again they tend to have long memories of personal losses.
very good and informative post. Be Pakistani.
Is there anyone having some idea that who is the “Cash cow” and who is playing a role of “Star” among Pakistani banks now-a-days with at least one reason.
Thanks
Great info thanks.