Kinnaird College for women, Lahore

Name: Aimen Anjum

Major: Media Studies

Pakistan Studies

Section U

Topic: Privatization vs Nationalization in Pakistan

Instructor: Aminah Gillani

Date: 21st April 2022

After Jinnah’s death in 1947, a lot of political parties came into power with their policies to
govern Pakistan efficiently. But the ones that outshined the most were the Privatization under
the reign of General Ayub Khan and the Nationalization under the government of Zulfikar Ali
Bhutto. The transfer of ownership, property, or business from the government to the private
sector is termed privatization. The government ceases to be the owner of the entity or
business. The process in which a publicly-traded company is taken over by a few people.
Whereas the term Nationalization refers to placing privately owned institutions like industries,
hospitals, banks, etc under complete government control.
On October 1958, General Ayub Khan took over the PM-ship. Domestically, Ayub embraced
private-sector industrialization and free-market principles, making the country one of Asia's
fastest-growing economies. Strong emphasis on capitalism and foreign direct investment (FDI)
in the industry is often regarded as a "Great Decade" in the history of the country (both
economic and political history). The "Great Decade" was celebrated, which highlighted the
development plans executed during the years of Ayub's rule, the private consortium
companies, industries and credited with creating an environment where the private sector was
encouraged to establish medium and small-scale industries in Pakistan. This opened up avenues
for new job opportunities and thus the economic graph of the country started rising. He
oversaw the development and completion of mega projects such as hydroelectric dams, power
stations, and barrages all over the country. During 1960–66, the annual GDP growth was
recorded at 6.8%. Loans from more industrialized western countries like the USA, Germany, and
the UK helped set up an oil refinery in Karachi and a Mineral Development Cooperation was set
up for the exploration of mineral deposits. Production did rise rapidly giving benefits to a large
number of people living near the poverty line however due to these privatization schemes
Pakistan was largely dependent on foreign aid. Ayub introduced new curricula and textbooks
for universities and schools. Many public-sector universities and schools were built during his
era. He also introduced agricultural reforms preventing anyone from occupying more than 500
acres of irrigated and 1000 acres of unirrigated land. An oil refinery was established in Karachi.
These reforms led to 15% GNP growth in the country which was three times greater than that
of India. Despite the increase in the GNP growth, the profit and revenue were gained by the
famous 22 families of the time that controlled 66% of the industries and land of the country and
80% of the banking and insurance companies of Pakistan. Extensive education reforms were
supposedly carried out and 'scientific development efforts' were also supposedly made during
his years. These policies could not be sustained after 1965 when the economy collapsed and led
to economic declines which he was unable to control.
On December 1971, Zulfikar Ali Bhutto became President and Chief Martial Law Administrator.
Bhutto’s first step towards his introduction of radical changes in the economic sector was the
nationalization of the key industries. There are always multiple reasons involving the
nationalization program. Particularly a populist regime like the PPP is confronted with
multifarious economic problems which demand an immediate solution.
Ayub’s regime had created acute distributional inequalities. The financial resources, heavy
industrial units, and other means of production had been concentrated in a few hands. The
laborers and white-collar workers had been ruthlessly excluded from sharing the economic
benefits accrued by the industrialization program during Ayub’s regime. The urban workers and
middle-class people were the backbones of PPP’s strength. Consequently, great pressure came
from the urban workers and middle classes who have been deprived of economic betterment,
to introduce radical changes in the economic sphere. The nationalization program of Bhutto
had many such considerations.
The first phase of nationalization began in January 1927 when the government took over thirty-
one industrial units which fell under 10 categories of basic industries. A board of industrial
management was set up under the chairmanship of the federal minister to manage the
nationalized industries. The taken-over industries included iron, steel, basic metals, heavy
engineering, heavy electrical, motor vehicles, electricity, gas, and oil refineries. The step was
taken to put an end to the sheer exploitation done by a handful of industrialists who earned
huge profits by investing a meager amount. They amassed the wealth simply due to the
government’s non-intervention and Ayub’s policy of excessive inequalities. However, still, many
of the privately-owned industrial units in the consumer goods sector were unaffected by
nationalism. The credit policy in 1972 also diffused the fears of the private sector as it
confirmed that the nationalization program was not meant to curb the private sector.
The nationalization had both positive and negative impacts on the economy of Pakistan.
Pakistan’s education system was not yet producing sufficiently educated workers to take
managerial positions in the industries. The federal ministry had a huge job to do. Coordinating
nationalization across the country. The system often got bogged down in bureaucratic muddle.
The reforms were put into effect without a proper plan and prior preparations. The process was
very slow and at times stopped because of the lack of expertise.
But by the end of the 1960s, Pakistan witnessed a spike in the inflation rate which was more
than 10%. Bhutto’s nationalization policy however was successful in bringing down the inflation
by up to 6%. The reforms were introduced at a time when the world was facing a global
recession. Many privately owned industries were closing but the nationalized industries in the
country continued to operate which eventually led to the economic growth in Pakistan to
improve.
All in all, In my opinion, Zulfikar Ali Bhutto’s nationalization policy was a win despite the
challenges it faced. Privatization of industries done by Ayub Khan did certainly increase the
economic reproduction by the increase in efficiency in the agricultural, industrial, and social
industry but the major drawback of the privatization scheme was the creation of Monopolies. A
large amount of wealth was accumulated in fewer hands and the poor middle-class people
were to be ignored. In order to end the economic disparity, Bhutto decided to nationalize the
industry. Its main aim was to enhance the living standard and working conditions of the
employees and gain support from the urban people who formed a major part of his political
support. Despite the slow and low productivity, Bhutto managed to improve the economic
situation in Pakistan even in times of global recession because the needs of the people and the
whole country were met not just a few wealthy people.