Earlier this month, the Government of Pakistan unveiled plans to privatize 10 state-owned enterprises (SOEs) within the current fiscal year as a means to stem losses to the national exchequer.
This is a necessary—and long-pending—step for a country seeking economic stability. One of the SOEs facing the axe is the Pakistan Steel Mills in Karachi, inaugurated by then-prime minister Zulfikar Ali Bhutto in 1973. At the time, despite Pakistan lacking the capacity to operate it as a SOE, the Steel Mill was hailed as the beginning of a workers’ utopia in Pakistan. Developed with the techno-financial assistance of the Soviet Union, it was constructed by a consortium of Pakistani companies. After decades of declining profits, thanks to corruption, mismanagement and unchecked hiring—by some estimates the mill required just 1,300 workers but had 30,000 employees—the incumbent government decided to shutter it entirely after finding no interested buyers.
The imbroglio surrounding the Steel Mills started in earnest in 2006, when then-prime minister Shaukat Aziz sought to privatize it. The Supreme Court scrapped those plans, with successive governments failing to reverse its fortunes, leading to its closure in 2015 over non-payment of utility bills. This shutdown inflicted further losses of $18 billion in foreign exchange in terms of exports. Yet, even during its closure, the Mills earned an after-tax profit of over Rs. 7 billion in 2022. This proved insufficient to save it, as Pakistan’s soaring debts made it unsustainable to continue funding the Mills, which had taken out loans to continue paying salaries and keep the lights on. These were never repaid.
The government had hoped to capitalize on the significant real estate holdings, including thousands of acres of mines, of the Steel Mills as a means to attract buyers, but the outdated infrastructure, requiring significant investment, proved too hard a sell. Unfortunately, Pakistan is unlikely to see another project on the scale of the Steel Mills in the near future, as the country struggles to overcome an ongoing, punishing economic crisis. The government’s decision to finally shutter it consigns the country’s first big project to oblivion; and leaves tens of thousands without any gainful employment.