The government’s role, as far as business is concerned, is making sure that consumers are protected from businesses, that they know what their rights are, and that they are getting those rights. Sometimes, however, governments are the ones setting up companies and businesses.
The idea of a government owned company is a simple one: they are a legal entity that undertakes commercial activities on behalf of an owner government. Their legal status varies from being a part of government to stock companies with a state as a regular stockholder.
The idea is that these state owned enterprises will have a higher standard of corporate governance, which is supposed to result in financial stability and sustain global growth. Essentially, the government creates a body to do their job, except without the bureaucratic red tape that inevitably seeps into projects the government takes on directly.
One such body is the Punjab Model Bazaars Management Company (PMBMC), which is one of the 56 companies founded by the previous Sharif administration in Punjab. The idea of Punjab Model Bazaar originated from the Sasta Ramadan Bazaars.
Essentially, the project would set-up model bazaars equipped with facilities ranging from basic ones like boundary walls to CCTV cameras, washrooms, designated parking areas, and self service check-ou counters. The baazars are supposed to be set-up all across the province in different cities.
However, the coming into power of the Buzdar government has seen the PMBMC fall out of favour and into the spotlight. Will the company survive and thrive, or is this the end of the road?
The role of the model bazaars
Officials in the PMBMC claim that the model bazaars have been a rip roaring success among the general public, and have provided easy access to everyday commodities in a respectable and clean environment throughout the year. For the average citizen that visits the Sunday bazaar at the end of the week, it has saved them a lot of jostling, haggling, and tiresome days.
Most people do not visit large convenience stores because the D.C. rate counter is short on supplies most of the time and there is a class stigma. At Sunday bazaars, it is difficult to ensure that the vendors are selling at the right price, and the crowds can get stuffy and the products on display subpar. Under the supervision of the PMBMC, the model bazaars were devoid of all these problems.
The company ensured that daily use items were provided at competitive rates in a neat and clean atmosphere along with allied facilities and services. The bazaars had prayer rooms, food courts, rides for children and clean washrooms as well. The idea was that people would go to these bazaars, and eventually, private bazaars would also have to step up their game and provide better facilities and rates to keep up with the competition.
The bazaars also offered an opportunity to people hopeful of finding work. It provided complete, official, clean, dignified and secure opportunities to lower and middle class business owners to get involved as vendors or sellers at the bazaars. And as the company’s Chief Internal Auditor, Farhan Dilawar, told Profit, the model bazaars solved a major problem.
“Whenever a person from the middle or lower middle class has to start a business, the first issue they have is the availability of land and a suitable place for the shop,” he explained. “With this in mind, we thought that the government land which is in a suitable place and is not being used should be used so that business can be provided to the middle and lower middle class people.”
The way the bazaars decide on a location is they first conduct a survey of government land not being used in cities to check for its feasibility for a model bazaar. For example, if a place is already close to a vegetable or fruit market, there would be no point in building a market there. Similarly, a place where there is no easy walk-in access, there is also no point in setting up a bazaar. Once a suitable location is found, the company writes a letter to the Industries Department of Punjab, requesting them to ask the concerned Commissioner or Deputy Commissioner to get them an NOC (No Objecting Certificate) for that place.
Once the NOC arrives, the company is allowed to use that site even though they have no rights to the land. “That’s why we create a setup in the model bazaars that can be easily removed later without any harm to anyone. Our method is that we advertise in the newspaper for allotment of stalls in the bazaar and anyone can join the lottery process by paying a small fee of Rs 3,000 in the bank,” says Dilawar.
“The allotment of stalls is then made available to interested persons through lottery and the entire process is monitored by CCTV cameras to maintain transparency. We have now started charging rent of any stall for one or two months as security to join the lottery. This amount is also deposited in the bank, and is between Rs 3,000-5,000.”
However, there has not been a big change in the supply chain system ever since the model bazaars have been set up. This is mainly because before the company started operating, it was given an opportunity to prove itself by the Punjab government by running the pre-existing Friday and Sunday bazaars of the government, before they set up their all week bazaars. “There were a lot of vendors in these Friday and Sunday bazaars who were allotted stalls by the district administration. So in the beginning, these same people kept setting up stalls in model bazaars and running them,” says Dilawar.
“We still do not interfere in the supply chain system. Our stallholders buy items from the place of their choice and sell them in these markets and we only check the quality. Yes, when there is a shortage of anything in the market, such as sugar or flour, there are stalls set up in the model bazaars, especially for these items to overcome the shortage.”
What went wrong
When the PTI came into power in Punjab, there were mutterings about whether or not it would continue the pet projects of the previous PML-N government. One of the first signs for the PMBMC that its future was not good was when the National Accountability Bureau (NAB) got involved.
Initially, when the project was launched, different vendors hoping to set their businesses up in the bazaars were asked to submit applications, and they were later allotted stalls in these markets by balloting. The bazaars seemed to be operating successfully in most cities where they were established, with no real complaints becoming evident. However, NAB began investigating the company behind these bazaars, the PMBMC, as soon as its patron government was out of power.
The matters that were being investigated were less about corruption and more about inefficiencies, which the accountability watchdog continues to confuse with corruption. A major bone of contention became the Rs 600,000 salary that the CEO of PMBMC, Nasir Rafique, was getting every month, even though government established companies are supposed to treat their employees like private employees not paid on the government scale.
Even as far as May this year, however, the PMBMC continued to operate and with quite some aplomb. At least 10 bazaars were operating in Lahore and 22 in other cities. But matters came to a head in June, when rumors began circulating that the decision to disband the PMBMC had been taken following complaints of alleged irregularities.
However, since the bazaars had become a successful project met with public approval, it was decided that the PMBMC would now be replaced by the Sahulat Bazar Authority, that would be set up at the provincial level – and would not be a company. According to one source, a preliminary draft of the Punjab Sahulat Bazar Authority Act has been prepared and sent to the Law Department for approval and under the Sahulat Bazar Authority all model bazaars will be converted into Sahulat Bazaars.
According to well placed sources in the Industries’ Department, the main reason behind this change is the corruption within the supply chain system that the company was unable and possibly unwilling to change. “The specific traders of the fruit and vegetable markets have secret alliances with a few bazaar stall holders and some officials. Ordinary players are not allowed to enter the supply chain system and goods are bought and sold only from people of their choice,” says one source in the department.
Others have claimed that onions, potatoes, garlic and ginger are all supplied by specific vendors in all of the bazaars. Since the number of these stalls is also high and the footfall is also high here, these vendors are minting good money. “Reputable company officials should also monitor the supply chain system themselves, but are instead acting as a third party that books the goods themselves and supplies them to the stalls,” said the source.
“Some time ago we thought that the stall holders doing business in our model bazaars have an additional profit of up to RS 50,000 as they do not have to pay electricity bills and commercial rent,” says Dilawar, defending the company’s patronage of the old supply chain. “So we figured, why not lower the prices of items sold at these stalls even below the DC notified rates? We talked to them about this and now the goods are available in our markets at rates 10 to 20 percent lower than DC rates as it was strategic management, it created an economic circle that benefits both sellers and buyers and it is also a good model for controlling inflation.”
How the bazaars could improve
One of the issues that some critics of the model bazaars raised was that there are very few branded or packaged items available, even those produced locally. However, the PMBMC says that their entire company and the concept of the model bazaars was started to give an opportunity to middle class people to do business so that they can earn good money. While consumers might want to buy these brands even at model bazaars, introducing them at the bazaars would be bad for these small scale business owners, especially since the brands are already making profits outside of these bazaars.
“The government suggested that big brands should also be given the opportunity to do business in these bazaars, and that we could take commercial rent from them, but since we are a non-profit organization aiming to help small businesses, the idea was not feasible to us,” says Dilawar. “Many multinational companies and brands are in touch with us who want to work here. However, we plan to build commercial lanes in the new model bazaars that will emerge in the future and there should be an opportunity for these brands to do business.”
On the other hand, sources in the Industries Department believed that the present government should establish as many model bazaars as possible to eliminate the monopoly of profiteers in the markets. “The advantage of establishing maximum model bazaars is that there will be a trend towards these bazaars and there will be a gap in demand and supply in the open market due to customer flow so the other big stores and retailers will have to lower their rates,” said the source.
“PMBMC borrows from the government to set up new bazaars, and since it is a non-profit organization, repayment of loans is not possible. Obviously, where will the company repay the loan unless it makes a profit? The government should, if it wants to expand the model bazaar project to the Punjab level, convert it from company mode to authority mode so that at least the loan taken from the government can be repaid.”
This of course means the end of the PMBMC, and while the loans will be repaid, it may also reintroduce the old inefficiencies that make government created companies necessary in the first place. However, according to sources, the company currently owes RS 550 million and after coming into authority mode, the company’s projects will not only be included in ADP schemes but will also be able to deliver better.
For now, the government is simply trying to set up as many model bazaars as possible before it makes any decision on replacing the company with an authority. Speaking about the expansion of Model Bazaar Project, Dilawar said that Chief Minister Punjab Sardar Usman Buzdar has directed that model bazaars be set up in all tehsils of Punjab in the next three years.
“The chief minister wants to expand operations of the model bazaars throughout Punjab. It was desired that at first phase DHQ (District Headquarter) level might be explored for the said purpose and later on construction of new model bazaars may further be expanded to Tehsil level.”
The plan was presented before the Board of Directors for approval and BOD approved the same. At present, there are bazaars present in 19 out of 36 districts of Punjab. While the company has sent letters to the concerned DCs to set up model bazaars in the remaining 17 districts, there has been little action beyond formal replies to these 17 letters site engineers inspecting the proposed locations for the bazaars.