SUMMARY

In recent past, there has been a debate on regularization or de-regularization of government

owned enterprises, some people are of that mind that it should be run by state and others argue
that government should have few regularity authorities and many of the firms must be left on
their own. Advocates of regulation argues by giving the example of Europe where since the
financial crisis of Europe they have decided to legislate the power of regulator to protect the
consumer rights, and financial stability of the firms. Financial market is unique in its
characteristics, in shareholders bank equity the balance sheet shows only 8pc to 10pc and the
banks have to take 90pc-92pc from other financial institutions through borrowing and deposits,
which shows the upside and downside risk of the market, and bank management. The upside
gains are mainly accrued by the shareholders and managers while the downside losses are bailed
by government in the form of taxes. In this situation, the state have to make sure that the
shareholders, and non taxpayers, tolerate the impact of extreme risk-taking. Therefore, in this
given market structure the regulators role is not justifiable but desirable.
This same logic becomes illogical in other food producing sectors where a farmer doesnt get
benefit for his extra efforts or productivity. The state regulates the wheat prices subsidize the
fertilizers and then buys the wheat from those who grease their palms, in this situation why one
should opt for maximum productivity. If the sector is de regularized then the productivity may
jump up to 30 million ton because the gap of average producer and aggressive producer is merely
50pc to 70 pc. In milk market, the de-regulation allows farmers to increase their cash as the
prices are determined by market due to supply and demand, in sugar sector state interferes and
some time it buys sugar from local market and sells it in international market in loss. In
manufacturing sector the state allows the private owners to run and do business but here the state
agents may disrupt the owner by misguiding or misleading the owner in order to ensure their
own money.
Because of these bad government policies Pakistan ranks low among the world in index of World
Bank. The sector needs to get rid of in efficient and outdated laws; recently India has taken
initiative in this regard. It is difficult to achieve the balance between innovation and regulations.
But the in Pakistan the tragedy is that where we need strong regulation we dont put efforts in
those sectors and where markets are free and efficient enough to grow state puts barriers and
controls the markets. Relaxing the severe product and labor market policies and phasing out
random state interventions and dogmatic orders mainly those creating entry obstructions for
newcomers would increase innovation and efficiency. Implementation of regulations for the
sectors like health, safety, environment, and financial markets would protect the consumers.