Abdul Ghafoor - Public Infrastructure Performance in Developing Countries: The Case of Electric Power and Telecommunications Industries in Pakistan

First published 2000 by Ashgate Publishing

Reissued 2018 by Routledge

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Copyright Abdul Ghafoor 2000

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A Library of Congress record exists under LC control number: 99075456

ISBN 13: 978-1-138-70048-2 (hbk)

ISBN 13: 978-1-315-20471-0 (ebk)

During recent decades, despite a tremendous increase in privatisation in almost every sector, public sector activities in general and public infrastructure in particular continue to dominate a large share of the economy in many developing countries. It is argued that public spending on infrastructure construction and maintenance can be a valuable policy tool to provide economic stimulus during recessions, and labour-based approaches to infrastructure development can be an important instrument for employment-intensive economic growth. However, recent literature has made serious allegations against the public provision of infrastructure, like serious and widespread misallocation of resources, and failures to respond to user demand. Moreover, it is highly criticised by property rights, principal agent and public choice theorists. They argued that state owned enterprises (SOEs) are inherently inefficient. Since the literature does not provide statistically satisfactory evidence, it can be concluded that public ownership is not inherently less efficient than private. However, there are other problems such as fiscal drain due to underpricing, subsidising and overstaffing, inefficient spending and inadequate maintenance, which are common in the public provision of infrastructure. These problems not only reduce the efficiency of infrastructure but also widen the gap between revenue and investment in infrastructure, which in turn adds a burden on the treasury and ultimate on the taxpayers. The question is how can we diagnose these problems?

Performance evaluation helps in identifying the source and causes of such inefficiencies. Therefore, the first task in these pages is to present a detailed empirical analysis on the performance of publicly owned infrastructure in a developing country. I had selected electric power and telecommunication sectors of Pakistan as a case study to explain the inefficiencies related to these two sectors and performed a diagnostic analysis to identify the causes of these inefficiencies. Since, it is also argued that neither physical nor financial, nor productivity indicators alone are able to explain the duality of public infrastructure purposes and the complexity of their multi-dimensional goals, a set of relevant physical, financial and productivity indicators have been identified through a detailed discussion on each indicator. Economies of scale are also an important factor, which can be neglected in a discussion of financial and economic efficiencies. Therefore, a discussion on economies of scale in the electric power sector is also included in these pages. Although data constraints prevent me from performing a detailed analysis of economies of scale at the distribution level, some graphic and regression analysis have been used to identify the existence and to measure the extent of economies of scale at generation level. Moreover, some methodological issues related to calculate the total aggregate output in the case of telecommunications has also been discussed.

Performance evaluation not only helps to identify the source of inefficiencies but also leads to search for possible solution for them. Within this context, the second task is to discuss the impact of these inefficiencies (such as multiple objectives, overstaffing, underpricing, poor design, suboptimal expansion, and lack of autonomy) on an enterprise itself as well as on national economy. This discussion leads to chose an alternative policy option to increase efficiency in these sectors. It is argued that the choice may not be public or private but it may be to devise a mixed public-private structure, which could work better with all economic, political and institutional constraints of a country.

Since this book contains a comprehensive review of literature and explains the basic concepts of state-owned enterprises related to electric power and telecommunication sectors, it could provide an overview to the beginners in this field. This book has grown out of my doctoral research work; it can help doctoral student to plan their research work more systematically. This book also discusses the planning and policy issues of electric power and telecommunications sectors. Therefore, it is equally useful for the policy makers and planners. This work will also be a reference for ones who likes to perform a comparative analysis on the performance of public and private enterprises in electric power and telecommunications in Pakistan at a later stage.

This book has grown out of my doctoral research work at the Development and Project Planning Centre. I am grateful to Prof. John Weiss and Dr. Michael Yaffey, whose continuous interest and support during my study and later while preparing this manuscript helped me through the hardship of this work. I am also grateful to Dr. Will Banham, Mr. David Potts, Dr. Hossein Jalilian and Dr. Mark Hiley for their assistance, encouragement and inspiration. In particular, I am indebted to Jean Hill, who gave tremendous help in typing and generally assisting with the manuscript. On a personal level I must stress my gratitude to my wife Nusrat, who always provides me with the necessary distractions at the right time and to Sidrah and Warda, my daughters, whose innocent love pleased me all the time, despite my ignorance. I have dedicated the book to my parents who died earlier this year and are never out of my thoughts.