This argument has several flaws.

The level of profits earned by a public enterprize could be sub-optimal in the first instance and can be further increased after privatization. These profits could be eroded once the market structure changes from a monopoly to competition. Profits could also evaporate if a less transparent management and political set-up assumes power.

In a static sense, profits are not the appropriate indicator but it is the sustained capacity of the enterprise to generate maximum profits, make productive and efficient investments to grow over time and provide quality goods or customer satisfactory services that are relevant.

There are many cogent reasons that question the assumption of sustained profitability of PTCL under the changed environment of telecom sector deregulation that is sweeping Pakistan since 2004.

PTCL enjoys high profits because it earns monopoly rents as a single provider of fixed telephony in the country. Comparison with other telecos in developing countries shows that it is not due to the efficiency of PTCL that it is showing good financial results and paying dividends.

Tele density under PTCL monopoly is quite low - only three percent compared to seven per cent in India. Another more efficient operator in the private sector would have generated twice the current level of PTCL profits through better cost controls and higher penetration rates.

Had it not been for the private cellular companies with their seven million customers calling to and from its network, the revenues and profits of PTCL would have been much lower.

Since the market structure has been deregulated, the PTCL monopoly broken and new private sector operators given licences to compete, it would be extremely difficult for PTCL to show such performance in the future despite its dominant market power.

The corporate income tax, sales tax and other taxes collected from the new licensees would exceed the total taxes paid by the PTCL at present as the aggregate profits of the industry would rise due to higher tele density and higher penetration rates.

With the induction of new licencees, the tele density of Pakistan is estimated to double in the next two years to eight million subscribers. Public Sector monopoly could reach only four million in 57 years.

Cellular phones have already jumped almost threefold to seven million subscribers during the last one year due to competition among the four players and have contributed to increased tax collection. Government would still receive all the taxes from PTCL and 65 percent of all the dividends that hopefully will be higher under private management.

State enterprises have an inherent disadvantage that their procedures, clearances, and lengthy approval processes do not permit the managers to make timely decisions to respond to the business opportunities.

U-Fone lost 18 months' valuable time facing various inquiries into its procurement while its competitors were successful in enhancing their market share at its cost. Such a scenario is most likely to recur once a government owned PTCL is pitted against several private competitors.

The skill mix of the staff employed by the PTCL and its numbers are inappropriate to meet the new challenges of providing high standards of customer service, introduction of value added services and new product development.

This legacy of PTCL inherited from the culture of the Post and Telegraph Department cannot be washed away and this culture will always keep it at a competitive disadvantage.

It will always be difficult to get rid of the redundant labour in a public sector company due to the political repercussions while the private sector firms face no such constraint.

The PTCL Board has been recently reconstituted and private sector individuals of eminence have been inducted. This has improved the quality of the oversight and monitoring.

However, as they have no direct personal stakes it can not be expected that these part-time members engaged in their own professional pursuits will be able to devote as much time or energies to the Board's affairs as the private strategic investors will.

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Thus the PTCL's governance structure under government ownership would always remain second best despite the high quality and integrity of its Directors. If a more callous Minister is unfortunately saddled to chair the Board, it is not hard to imagine as to how the contracts will be awarded, how appointments will be made and how transfers and postings will take place.

As a government entity, PTCL is considered a rich cash cow to meet the fiscal needs rather than a business enterprise that requires funds for its own maintenance and operations and more important for its investment needs.

The compulsions of extracting as much profits and cash for meeting fiscal deficit will always dominate the imperatives to expand the network, infrastructure and services through retained earnings.

Even assuming a perceptive that government does allow PTCL the funds to make investments, it is not obvious if these will be efficient and cost effective. The World Bank has recently blacklisted 200 firms for padding contracts and bribing officials in public sector procurement awards in a number of developing countries.

One of the difficulties faced by the public sector businesses is that they cannot pay market based remuneration's to their executives or highly technical manpower. If the PTCL is not allowed to pay more than MP1 scale to its Chief Executive i.e. Rs200,000 per month which is a fraction of what senior executives in the rival private firms get, should we expect that the PTCL to attract, retain or motivate high performing manpower.

The field gets tilted against a public sector company as it has skill gaps and redundancies and is unable to provide value added services of the same quality as provided by the private sector rivals.

The process of hiring and firing of employees in a public sector company such as PTCL is highly convoluted, complex and cumbersome. Those found guilty of infractions or negligence of duties or even corruption can only be dispensed with after a protracted process of disciplinary proceedings that sometimes take several years to complete.

In the meanwhile, the employee continues to stay put in service and receives all the emoluments and perks. In a rare case, a departmental inquiry comes up with a guilty verdict, the employee can appeal to the Federal Services Tribunal and if he is unsuccessful, then all the way to the Supreme Court. Why will any right minded boss choose to go through such an ordeal?

How can a public sector company be expected to show same results as its private sector competitors whose compensation structure is driven by performance and by power of hiring and firing without any restraint.

Everywhere, Government has a distinct role of a neutral umpire, policy maker, provider of infrastructure, and regulator. When it runs its own business companies in fields in which the private sector is also engaged, the playing field no longer remains level.

If this may not be true under one particular set of rulers, the apprehension that such an eventuality may happen at some time in the future keeps prospective investors away from that field of business. The growth of a dynamic private sector in the economy is thus stifled.

The temptation by the elected political leaders or other rulers to interfere in the affairs of the public sector companies is not only high but natural. They are constantly accosted by their constituents for jobs, contracts, postings and transfers and it is not possible for them to keep on saying no to everyone all the time. In some cases, they have to yield to pressures. It is therefore, necessary to sever the connection between the government and the business.

The alarm of employment losses after privatization is also largely misplaced and rhetorical. Telecom sector has generated, after deregulation, hundreds of thousands of new jobs through public call offices, calling cards and pre-paid card companies, Internet Service providers, mobile phone companies, broad band services, and other value added services under the private sector.

The losses of redundant jobs in PTCL, if any, will be more than offset by new productive jobs in the Local Loop, Wireless Loop and LDI companies being set up in the private sector and new infrastructure facilities.

Industry estimates that 100,000 new jobs will be added during next 3-5 years. The substitution of unskilled jobs in the PTCL by the skilled jobs in the telecom industry as a whole will raise the productivity of the sector as well as that of the user companies and institutions. Those among the unskilled who can be retained or re deployed could be retained minimizing the overall loss within the PTCL itself.