The Politics of Privatization: Who Really Benefits from Pakistan’s Asset Transfers?

Introduction: Privatization Beyond Economics

Privatization has been presented for decades in Pakistan as the only road to efficiency, fiscal prudence, and modernity. The story, persuasively marketed by foreign lenders and local elites, goes like this: the state is bloated, wasteful, and unable to handle resources. Thus, its assets need to be transferred to the private sector, ideally foreign investors, who are assumed to provide greater productivity, quality services, and much-needed finance.

But beneath this technocratic presentation there is a series of deep political and economic questions: who really wins from privatization, who pays, and what conception of sovereignty and development is being sacrificed? Recent examples, from the proposed outsourcing of Islamabad International Airport operations to the UAE, to the renegotiation of Reko Diq’s $7 billion copper-gold mine agreement, track the asymmetric power dynamics inherent within privatization. These are not neutral transactions; they are decisions that redistribute wealth, control, and opportunity in ways that overwhelmingly favour elites at the expense of the public.

Decisions about which assets are sold, who buys them, and under what terms are not neutral acts of market correction but choices shaped by vested interests, regulatory power, and geopolitical alignments. To ask “who benefits” from privatization is to interrogate the political economy of asset transfers: the distribution of risks, rents, and rewards across state elites, private conglomerates, and ordinary citizens.

The Rationale and the Reality

Privatization in Pakistan cannot be explained without the structural adjustment programs (SAPs) of the late 1980s and early 1990s. Successive governments were pushed into privatizing dozens of SOEs, banks, textile mills, and small industries, in the name of reform under the IMF and World Bank pressure.

This period of consolidation of oligarchic capitalism became the perfect time to sell assets at under market value to politically connected families. This privatization of United Bank Limited (UBL) and Muslim Commercial Bank (MCB), for instance, passed massive financial institutions to influential business dynasties, such moves of course have entrenched crony capitalism and continue to fuse political and economic power to this very day.

Workers paid the price in terms of lost jobs, stagnant wages, and shattered unions. The state, however, was left burdened with obligations: debt, pension liabilities, and bailout guarantees. Rather than breaking up inefficiency, privatization produced a two-tier system: private elites siphoning off profits while the public remained subsidizing risks.

Contemporary Deals—From Banks & Airlines to Energy Companies 

The most contentious privatizations have centred on strategic assets: banks, energy companies, and infrastructure.

Primarily no asset better illustrates the contradictions of privatization than Pakistan International Airlines (PIA). Once the pride of South Asia, helping establish airlines like Emirates, PIA has become a case study in state mismanagement, political interference, and the repeated failure of privatization.

Multiple governments have tried to privatize PIA, under pressure from the IMF and domestic business lobbies. Each time, the process faltered due to union resistance, legal hurdles, and political backlash. Yet the state continues to funnel billions into bailouts, keeping the airline afloat.

Why does privatization stall? Because PIA represents more than a company. It is a political constituency with unions, pensioners, and workers forming a powerful resistance bloc. Attempts to privatize are viewed not as reform but as elite dispossession of national patrimony. The stalemate reveals privatization’s political nature: efficiency is less important than the distributional consequences of asset transfer.

Secondly, K-Electric, Karachi’s power utility, is often cited as a success story of privatization. Handed to the private sector in 2005 and later acquired by Abraaj Group, the company introduced modern billing systems, reduced line losses, and improved customer service in some areas.

But scratch beneath the surface, and the story is far more complicated. Despite privatization, state subsidies and sovereign guarantees remain central to K-Electric’s operations. Consumers continue to face high tariffs, frequent outages, and disputed billing. The utility’s monopoly position shields it from genuine competition, while profits flow to shareholders abroad.

K-Electric thus highlights a common feature of privatization in Pakistan: profits are privatized, but risks remain socialized. The state still steps in during crises, whether through subsidies or political cover, while ordinary consumers bear rising costs.

Lastly, the privatization of Pakistan’s banking sector in the 1990s is often hailed as a model of reform. Efficiency did improve bad loans declined, customer service modernized, and profitability rose.

Yet the deeper story is one of elite consolidation. Major banks were captured by business families with close political ties. Instead of democratizing finance, privatization entrenched financial oligarchies. Lending patterns favoured large corporate clients while small farmers and SMEs remained marginalized.

The sector’s transformation also illustrates how privatization shifts the focus from public development goals to private profitability metrics. Banking reform delivered stability, but it also reinforced an exclusionary growth model where access to finance is skewed in favour of the already privileged.

Winners and Losers in the Transfer of Assets

Privatization inevitably produces winners and losers. The winners are often politically connected buyers who acquire undervalued assets with state guarantees of profitability, sometimes through opaque bidding processes. Multinational firms benefit by accessing new markets with limited competition, often shielded by government incentives. The losers, however, are diffuse: workers who lose jobs, consumers facing higher costs, and taxpayers who may still underwrite risks through hidden subsidies or guarantees. The asymmetry lies in visibility as its benefits to elites are concentrated and tangible, while the costs to the public are fragmented and normalized.

Alternatives — Rethinking Public Ownership

The persistent challenge lies in weak institutional frameworks. Transparency in bidding, accountability in contract enforcement, and fairness in regulation remain fragile in Pakistan’s privatization history. In the absence of strong governance, privatization is less efficient and more an exercise in redistributing public assets to private hands. This undermines public confidence, breeds populist reaction, and has the potential to delegitimize otherwise desirable reforms. To serve the public interest, privatization requires more than deals, it requires governance institutions geared towards inclusivity and distributive justice.

Criticism of privatization is not a defence of inefficiency. There is a need to reform. But alternatives should value democratization, not displacement.

• Public–Public Partnerships: Collaboration with successful public entities (e.g., regional utilities) rather than private monopolies.

• Cooperatives: Worker- or community-owned models that align management with social needs.
• Transparent Frameworks: If privatization occurs, it must involve open bidding, labor protections, and reinvestment in social infrastructure.
• Sovereign Funds: Strategic assets should feed into national wealth funds, reinvested for long-term development instead of debt service.

Conclusion: Toward an Inclusive Model

Privatization is not inherently detrimental; many countries have leveraged it to foster competition and innovation. But in Pakistan, the essential issue is political capture: who governs privatization, under what protections, and with what redistributive consequences. In order to prevent repetition of cycles of elite enrichment out of public funds, reforms need to build in transparency, defend labour rights, and ensure strategic assets serve national development purposes. Otherwise, privatization will still be less about efficiency and more about the politics of wealth transfer; wherein the true beneficiaries are not the public but the privileged few who already hold economic power.