CREATING THE ENABLING ENVIRONMENT
An exclusive interview with Altaf M. Saleem, Federal Minister for Privatization
By SHABBIR H. KAZMI
May 13 - 19, 2002
It is not important how quickly we can sell state-owned enterprises. The aim should be soliciting attractive bids and ensuring decent return to strategic investors. We are trying to create enabling macroeconomic environment. In the absence of such an environment, investors seek and often demand sovereign guarantees. We have committed this mistake in the past and also experienced the fall out. Now the efforts are to let the investors evaluate the working environment, estimate the potential returns and risks. Only once the investors are confident and feel they have the expertise, can make a strategic decision to enter or not to venture in Pakistan.
It may be said that we are too slow but we, at the Privatization Commission, strongly believe that the strategy has started yielding results. This is evident from some of our successes. We planned to off-load five per cent shares of National Bank of Pakistan, through stock exchanges, but were able to sell ten per cent shares only because of the keen interest of investors and market appetite. We received an attractive deal in case of Pak Saudi Fertilizer. We also succeeded in convincing the bidders of Badin-I oilfield to improve their offer. We managed to conclude these transactions in the post September 11, 2001 era.
Some of our critics say that two of the above transactions were concluded with local investors — not a big deal. I have my own rationalization. The level of confidence in an economy is gauged by the interest of local investors. If the local investors are shy, no foreign investor would come forward. Besides, in case of a large transaction, foreign investors are keen in joining hands with credible local partners.
To further dilate my point I would say that portfolio investment by foreign fund managers also substantiate my point. Historically, these fund managers have invested in the shares of those companies which enjoy sound fundamentals, management is prudent and also share the profit earned with the shareholders. Therefore, involvement of a credible local partner is very crucial for the successful operation even when the larger stake is held by a foreign investor.
We pronounced our privatization plan in early last year and also disclosed our strategy. Once the strategy was there, we started the marketing. We made the details, about the companies being offered for sale, initiated financial restructuring and even appointed financial advisors. Then came the September 11, 2001 incident and the subsequent events. How could we expect the foreign investors to respond to our calls, when they were grossly involved in overcoming the key issues being faced by them.
Luckily, Pakistan economy has emerged stronger. The biggest gain achieved, was reprofiling of our external debt, inflow of fresh funds at concessional rates and renewed interest and confidence of foreign investors in the economy of the country. The investors' confidence was also displayed at the recently held conference of International Chamber of Commerce in Karachi. They also pronounced their specific areas of interest, oil and gas being the most prominent.
At present the process of privatization of Pakistan Telecommunication Company (PTCL) and Pakistan State Oil Company (PSO) is at an advanced stage. Investors are also show their keen interest. We should be ready to go for the bidding of these units in August and/or September this year. We have also achieved financial restructuring of Karachi Electric Supply Corporation (KESC) and appointed Financial Advisor for the sale of Sui Twins. The necessary regulatory framework, establishment of Gas Regulatory Authority and deregulation of POL trade, has been ensured. I am sure that we have been able to overcome most of the concerns expressed by the strategic investors.
The most important message that we have been able to convey to strategic investors is the firm commitment of the GoP towards the process of privatization in the country. While the GoP has been able to gradually curtail subsidy on gas and electricity, it has also improved guaranteed of return for gas marketing companies. It is also on record that both the companies (Sui Twins) are actively involved in revamping and expanding their transmission and distribution networks. It was possible only because the production of gas has increased in Pakistan.
To conclude, let me say, it is not an easy task. While we have been making our best efforts, the renewed confidence of investors in the resilience of economy of Pakistan, provides us the courage. As the process gains momentum and adverse impact of synchronized recession is subsided, we will be able to achieve our target.