Labour Trouble

By Amir Zia
The News
May 24, 2011

The prevailing lawlessness, the government’s mixed signals and the state’s incapacity to provide protection to legitimate and lawful businesses are sending negative signals to both foreign and local investors, who were already wary of Pakistan.

Are the commercial organisations free to reform, restructure and reinvent themselves in Pakistan? Are they allowed go for cost-saving measures and improve efficiency? Do they have a right to hire the best possible human resource, get rid of non-performers, cut losses and make profits?

These are some basic policy questions on which the ruling coalition needs clarity of thought, which appears to be missing at present. Even a cursory look reveals how this policy confusion is damaging the country. Overstaffing, nepotism, corruption and mismanagement — long being the hallmark of most public sector entities — remain the biggest source of financial hemorrhaging for the national exchequer. The top eight public sector organisations alone incur annual losses of more than 250 billion rupees, an amount higher than Pakistan’s development budget.

The government has failed to reform and restructure these institutions, simply because it remains hostage to various interest groups and flawed perceptions about popular politics. Some senior Pakistan Peoples’ Party (PPP) leaders, caught in the time-bubble of the ’60s and ’70s, see privatisation as a betrayal to their party’s founding ideology. But they fail to recognise the fact that this ideology died long ago when Benazir Bhutto, in line with the changing times, abandoned the mantra of nationalisation and dropped her father Zulfikar Ali Bhutto’s socialist rhetoric in favour of pragmatic economic policies, incorporating privatisation and market-oriented reforms. However, even during her times, there remained a contradiction between the actual policy and the party’s public rhetoric that was often followed by controversial actions such as providing jobs to loyalists in already overstaffed public sector institutions.

This contradiction of policy and action seeps through even while managing affairs of the private-run companies. The labour trouble at the Karachi Electric Supply Company (KESC) is a case in point, where the government has been barring its management from going for the planned restructuring for months now.

On paper, the government wants to attract foreign investment, which has taken a blow because of terrorism and the country’s political instability. It runs a full-fledged privatisation ministry. There is a government-run Board of Investment, which seeks to bring and facilitate foreign and local investors. Finance Minister Dr Abdul Hafeez Shaikh was the moving spirit behind the country’s most successful privatisation programme under the former military-led government of Pervez Musharraf.

Yet, this government fails to protect those investors, such as KESC, which had already invested more than 600 million dollars over the last two years and brought some improvement in the city’s rickety old power generation and distribution systems.

Back in January, the ruling coalition forced the KESC management to withdraw its decision to sack more than 4,000 non-core employees, who were being given a voluntary separation scheme. The scheme ensured that each employee receives more than 1.4 million rupees on an average on leaving the organisation. A decent package, but political party-backed trade unions blocked the scheme.

The KESC, even then, made it clear that it was being forced to accommodate these employees under duress as it had already outsourced the non-core functions, including bill distribution, security and transport. The government, however, slept over the issue. In fact, some politicians openly supported their respective trade unions, encouraging workers to go for an all-out confrontation with the management.

The result: the trade union decided to jack up stakes when the management decided to bar non-core employees from overtime and withdrew their job specific allowances. The decision made sense because jobs of the non-core employees had already been outsourced at a fraction of the cost incurred on these regular employees, many of whom claimed up to eight hours overtime a day, but barely worked for more than two to three hours.

According to a senior KESC official, the cost of outsource functions remains 250,000 rupees less than the total amount spent just on non-core employees’ overtime and job specific allowances. Once the KESC implements its restructuring plan and reduces the number of employees to around 13,000 from the current 17,000, it will make net savings on account of their salaries and allowances. From a financial point of view, the decision makes perfect sense.

Already, there have been such precedents in Pakistan, including at the privatised banks, and the state-run natural gas supply companies, which outsourced security and bill distribution functions. The KESC management says that by getting rid of non-core functions, it would be able to concentrate on core operations and hire new technical staff where required.

The reform agenda, however, remains unacceptable to the political party-backed trade unions, which have huge vested interest in keeping things as they are. This means keeping an army of ghost workers, paying them overtime for work, which they never do and allowing corruption. In the case of KESC, this implies meter tampering and stealing electricity through illegal connections. While the technical staff supported the management’s move, the non-core employees resorted to disrupting the power supply in an organised manner. They forcefully closed down offices, set a number of sub-stations on fire and cutoff power supply cables. The troublemakers also attacked co-workers trying to restore supplies and even threatened their families.

This has been happening for more than two weeks now. Even on Monday morning, the trade union workers and their political supporters attacked KESC offices, vehicles and staff. No wonder, the city’s power supply situation now stands in a mess and the megapolis bubbles with spontaneous protests against the prolonged power outages that have hit every segment of the society, especially people belonging to the middle and lower income groups, many of whom do not have the luxury to light their homes and run businesses on generators. The power supply remains suspended in many commercial, industrial and residential areas not just for a few hours, but even for five to six days at a stretch. No wonder, patience is running thin in many localities and violent mobs are out on the streets.

Many PPP stalwarts, rather than helping institutions to establish the rule of law, are seen inciting workers for cheap publicity. The prevailing lawlessness, the government’s mixed signals and the state’s incapacity to provide protection to legitimate and lawful businesses are sending negative signals to both foreign and local investors, who were already wary of Pakistan. The PPP and the unions are not doing a service to the nation by indulging in this mindless politics and protests, which ensure only a “lose-lose” situation for all.