Impact of Privatisation on Employment and Output in Pakistan

Abstract

The paper aims to assess the impact of privatisation on employment and output in Pakistan. It uses edible oil and cement sectors as a case study in a pre- and post-privatisation comparative framework. Assessing the impact of privatisation in Pakistan is important at this juncture for two reasons. Firstly, the country is facing a severe economic crisis and privatisation forms an integral part of an array of reform measures recommended by multi-lateral donors as well as policy-makers within and without the country. Burki [(2000), p. 152] observes, “The economy and state of Pakistan are in crisis…. Pakistan has not faced a crisis of this magnitude in its entire 50-year history”. He refers to the five different crises that have combined to create this situation. These are: the global financial crisis, Pakistan’s short-term liquidity problem, economy’s structural weaknesses, severe social backwardness, and, finally, the crisis of governance. Burki (2000) suggests several solutions to the problems, and privatisation is one of the ways to restructure the economy and improve the quality of governance.

Earnings Management And Privatisations: Evidence From Pakistan Evidence From Pakistan

“…Hemming and Mansoor (1987) and Mansoor (1988bMansoor ( , 1988a also argue that ideally, the change of ownership should have no effect on fiscal deficit due to the fair market price of SOEs. Khan (2003) has also concluded that managers had incentives for upwards earnings management to increase the probability of privatisation. This is because after the initial shock of privatisation was over, they benefitted both in terms of better wages and increased employment opportunities.…”

“…The fact is that in Pakistan, international financial aid was conditioned on the privatisation and restructuring of SOEs. Mirza (1995) gives a number of examples that highlight the role of international donors in privatisation in Pakistan. According to Khan (2003), since privatisation was an imported phenomenon in Pakistan, it had no clearly spelled out objectives initially. The government reports on privatisation do not list even a single objective until 1992 [Qureshi (1992)].…”

A Systematic Approach to the Motivations for Earnings Management: A Literature Review

“…Authors examined the incidence of earnings management around the time of the privatisation. Khan (2003) and Martin and Parker (1997) demonstrated that managers can benefit in the period of post privatisation period. It is because, the initial shock of privatisation is over, and they can benefit in terms of better wages or of the increase employment opportunities.…”

Employment Preferences and Length of Job Queues in Pakistan

“…The immediate impact of privatisation and the consequences of private sector unemployment due to downsizing are unavoidable. This is responsible for increasing fears of job loss, particularly in the private sector (see Khan [2003] for a more detailed discussion on the impact of privatisation on employment). There is a modest amount of literature available supporting the statement that in the short run, privatisation grounds unemployment and fall in wages (Gupta et al 1999).…”