PRIVATIZATION OF STATE-OWNED ENTERPRISES
Aug 23 - 29, 2010
The concept of privatisation is not new in Pakistan. The privatisation process was started in the 50s with the setting up of Pakistan Industrial Development Corporation (PIDC) in 1952. PIDC set up about 50 industrial units all over the country and after running them successfully these units were transferred from the public to the private sector.
The privatisation of State Owned Enterprises (SOEs) became an important instrument of economic policy of the Ziaul Haq government in late 80s. However, the privatisation process in Pakistan began in earnest after the creation of Privatisation Commission on January 22, 1991, although the commission's mandate initially restricted to industrial transactions. By 1993, it had expanded to also include power, oil and gas, transport (aviation, railways, ports and shipping), telecommunications, banking, and insurance sectors.
During January 1991 to June 2009, the commission completed 167 transactions for Rs476.421 billion. The government is continuing with the policy of privatisation of the state-owned entities with the help of stock exchanges.
During the year 2009, the commission has realised an amount of Rs237.058 million because of balance proceeds of Wah Cement Company, HBL's IPO generated Rs2.515 million. The government of Pakistan has completed or approved 167 transactions at gross sale price of Rs476.421 billion so far.
In the 2009-10 budget, the government had shown privatisation proceeds of Rs19.351 billion, but nothing was materialised throughout the year. This was only due to poor economic situation of the country.
SALE PROCEEDS 1991 TO JUN 2010
NO. AMOUNT (RS IN MILLION) Banking 7 41,023 Capital Market Transaction 22 133,124 Energy 14 51,756 Telecom 4 187,360 Automobile 7 1,102 Cement 17 16,177 Chemical 16 1,643 Engineering 7 182 Fertilisers 7 40,281 Ghee Mills 24 842 Rice 8 236 Roti Plants 15 91 Textile 4 370 Newspapers 5 270 Tourism 4 1,805 Others 6 159 Total 167 476,421
Sources in privatization commission told Pakistan and Gulf Economist (Page), the privatisation process slowed down during the past two to three years due to global economic recession as well as economic meltdown in Pakistan. However, PC has been making concerted efforts for the last one year to expedite the privatization program by interacting with the market players to get their views on innovative privatisation structure. Because of these efforts the PC received informal feedback from international markets regarding proposal of monetising GoP's equity holding in oil and gas development company limited (OGDCL) to the extent of approximately 5-7 per cent via an equity-linked instrument.
According to the sources, privatization commission has received indicative proposals from JP Morgan, Barclays, RBS, Citi Bank, Nomura Bank, Credit Suisse, Deutsche Bank, Standard Chartered, HSBC, KASB and Bank of America/Merrill Lynch.
According to federal minister for privatization, Waqar Ahmed Khan, there was a huge potential of investments in textiles, food processing and other agro-based industrial projects in the country and the initiative of setting up economic zones would reshape the entire philosophy of attracting foreign investments from brotherly countries like Saudi Arabia and Bahrain in various sectors.
DETAILS OF PRIVATISATION PROCEEDS (1991 TO JUNE 2010) RS (IN MILLION)
SR. NO UNIT NAME SALE PRICE DATE OF TRANSFER BUYER NAME BANKING AND FINANCE BANK 1 Allied Bank Limited (51%) 971.6 Feb-91 EMG 2 Muslim Commercial Bank (75%) 2,420.0 Apr-91 National Group 3 Bankers Equity (51%) 618.7 Jun-96 LTV Group 4 Habib Credit & Exchange (70 %) (52,500,000) 1,633.9 Jul-97 Sh. Nahyan bin Mubarik Al-Nahyan 5 United Bank Ltd. (51%) (1,549,465,680) 12,350.0 Oct-02 Consortium of Bestway & Abu Dhabi Group 6 Bank Alfalah (30%)(22,500,000) 620.0 Dec-02 Abu Dhabi Group 7 Habib Bank (51%) 22,409.0 Dec-03 Aga Khan Fund for Economic Development . Total 41,023.2 . . CAPITAL MARKET TRANSACTION 8 Muslim Commercial Bank (6.8%) 563.2 Jan-01 MCB Employees-PF & Pension Fund 9 Muslim Commercial Bank (4.4%) 364.0 Nov-01 MCB Employees-PF & Pension Fund 10 NBP 10% shares IPO 373.0 (37.3 million shares) Feb-02 General Public Thru Stock Exchange 11 Muslim Commercial Bank† (CDC)(24,024,560 shares) 664.0 Oct-02 Sale†Thru CDC 12 Pakistan Oil Fields Limited shares (CDC) (28,546,810 shares) 5,138.0 Oct-02 Sale†Thru CDC 13 Attock Refinery Ltd. shares (CDC) (10,206,000 shares) 1039.0 Jan-03 Sale†Thru CDC 14 ICP Lot - A 175.0 Sep-02 ABAMCO 15 ICP Lot - B 303.0 Oct-02 PICIC 16 ICP - SEMF 787.0 Apr-03 PICIC 17 National Bank of Pakistan 10% SPO (37,303,932 shares) 782.0 Nov-02 Sale†Thru CDC 18 DG Khan Cement shares (CDC) (3,601,126 shares) 63.0 Dec-02 General Public thru Stock Exchange 19 NBP 3.52% 3rd offer (13,131,000 shares) 604.0 Nov-03 General Public thru Stock Exchange 20 OGDCL 5%- IPO (215,046,420 shares) 6,851.0 Nov-03 General Public thru Stock Exchange 21 SSGC 10% - SPO (67,117,000 shares) 1,734.0 Feb-04 General Public thru Stock Exchange 22 PIA 5.8% shares SPO 1,215.1 Jul-04 General Public thru Stock Exchange 23 PPL 15% IPO (102,875,000 shares) 5,632.6 Jul-04 General Public thru Stock Exchange 24 KAPCO 20% IPO (160,798,500 shares) 4,814.8 Apr-05 General Public thru Stock Exchange 25 UBL 4.2% IPO (21,867,000 shares) 1,087.2 Aug-05 General Public thru Stock Exchange 26 OGDCL 9.5% GDR (408,588,000 Shares) 46,963.0 Dec-06 GDR offering to international & domestic institutions 27 OGDCL 0.5% SPO (21,505,000 shares) 2,359.6 Apr-07 General Public thru Stock Exchange 28 UBL 25% GDR (202,343,752 shares) 39,450.7 Jun-07 GDR offering to international & domestic institutions 29 HBL 7.5% thru IPO (51,750,000 shares) 12,161.0 Oct-07 General Public thru Stock Exchange . Total 133,124.2 . . . Total Banking & Finance: 174,147.4 .. .. ENERGY SECTOR 30 Mari Gas (20%) 102.4 Apr-94 Mari Gas Company Ltd. 31 Kot Addu Power Company (26%) 7,105.0 Jun-96 National Power 32 Kot Addu Power Company (10%) 3,046.0 Nov-96 National Power 33 Kot Addu (Escrow A/c) 900.7 Apr-02 National Power 34 SSGC LPG business 369.0 Aug-00 Caltex Oil Pak.(Pvt) Ltd. 35 SNGPL LPG business 142.0 Oct-01 Shell Gas LPG Pakistan 36 Badin II (Revised) 503.2 Jun-02 BP Pakistan & Occidental Pakistan 37 Adhi 618.9 May-02 Pakistan Oil Field 38 Dhurnal 161.0 May-02 Western Acquisition 39 Ratana 24.6 May-02 Western Acquisition 40 Badin I 6,433.0 Jun-02 BP Pakistan & Occidental Pakistan 41 Turkwal 75.6 Jun-02 Attock Oil Company 42 NRL (51% GOP shares) 16,415 May-05 Consortium of Attock Refinery Ltd 43 KESC (73% GOP shares) 15,859.7 Nov-05 Hassan Associates . Total 51,756.1 . . TELECOMMUNICATIONS 44 PTCL (2%) 3,032.5 Aug-94 General Public thru Stock Exchange 45 PTCL (10%) 27,499.0 Sep-94 Through DR form 46 26% (1.326 billion) B class of shares of PTCL 156,328.4 Jul-05 Etislat-UAE 47 Carrier Telephone Industries 500.0 Oct-05 Siemens-Pakistan Engineering Co. Ltd. . Total 187,359.9 . . INDUSTRIAL UNITS AUTOMOBILE 48 Al-Ghazi Tractors Ltd. 105.6 Nov-91 Al-Futain Industries (Pvt) Ltd. UAE 49 National Motors Ltd. 150.4 Jan-92 Biboojee Services 50 Millat Tractors Ltd. 306.0 Jan-92 EMG 51 Baluchistan Wheels Ltd. 276.4 May-92 Abdul Qadir & Saleem I.Kapoorwala 52 Pak Suzuki Co. Ltd. 172.0 Sep-92 Suzuki Motors Co. Japan 53 Naya Daur Motors Ltd. 22.3 Jan-93 Farid Tawakkal & Saleem I.Kapoorwala 54 Bolan Castings 69.2 Jun-93 EMG . Total 1,101.9 . . CEMENT 55 Maple Leaf Cement 485.7 Jan-92 Nishat Mills Ltd. 56 Pak Cement 188.9 Jan-92 Mian Jehingir Ellahi & Ass 57 White Cement 137.5 Jan-92 Mian Jehingir Ellahi & Associates 58 DG Khan Cement 1,960.8 May-92 Tariq Sehgal & Associates 59 Dandot Cement 636.7 May-92 EMG 60 Garibwal Cement 836.3 Sep-92 Haji Saifullah & Group 61 Zeal Pak Cement 239.9 Oct-92 Sardar M. Ashraf D. Baluch 62 Kohat Cement 527.9 Oct-92 Palace Enterprises 63 Dandot Works - National Cement 110.0 Jan-95 EMG 64 General Refractories Limited 18.9 Feb-96 Shah Rukh Engineering 65 Wah Cement 2,415.8 Feb-96 EMG 66 Associated Cement Rohri 255.0 Nov-03 National Transport Karachi 67 Thatta Cement 793.0 Jan-04 Al-Abbas Group 68 10% additional shares-Dandot Cement 8.3 Oct-04 EMG 69 10% additional shares-Kohat Cement 40.7 Oct-04 EMG 70 Mustehkam Cement† Limited 3,204,.9 Nov-05 Bestway Cement Limited 71 Javedan Cement Company Limited 4,315.9 Aug-06 Haji Ghani Usman & Group . Total 16,176.9 . . CHEMICAL 72 National Fibres Ltd 756.6 Feb-92 Schon Group 73 Kurram Chemicals 33.8 Feb-92 Upjohn Company USA 74 Pak PVC Ltd 63.6 Jun-92 Riaz Shaffi Reysheem 75 Sind Alkalis Ltd 152.3 Oct-92 EMG 76 Antibiotics (Pvt) Ltd 24.0 Oct-92 Tesco (Pvt) Ltd. 77 Swat Elutriation 16.7 Dec-94 Sahib Sultan Enterprises 78 Nowshera PVC Co. Limited 20.9 Feb-95 Al Syed Enterprises 79 Swat Ceramics (Pvt) Limited 38.6 May-95 Imperial Group 80 Ittehad Chemicals 399.5 Jul-95 Chemi Group 81 Pak Hye Oils 53.6 Jul-95 Tariq Siddique Associates 82 Ravi Engineering Limited 5.4 Jan-96 Petrosin Products Pte 83 Nowshera Chemicals 21.2 Apr-96 Mehboob Ali Manjee 84 National Petrocarbon 21.9 Jul-96 Happy Trading 85 National Petrocarbon (addíl† 10% shares) 2.3 Mar-02 Happy Trading 86 Khuram Chemicals (additional 10%) 6.0 Oct-03 Pfyzer Pakistan 87 10% additional shares - Ittehad Chemicals 26.1 Oct-04 EMG . . 1,642.5 . . ENGINEERING 88 Karachi Pipe Mills 18.9 Jan-92 Jamal Pipe Industries 89 Pioneer Steel 4.4 Feb-92 M. Usman 90 Metropolitan Steel Mills Limited 66.7 May-92 Sardar M. Ashraf D. Baluch 91 Pakistan Switchgear 8.9 Jun-92 EMG 92 Quality Steel 13.2 Apr-93 Marketing Enterprises 93 Textile Machinery Co 27.9 Oct-95 Mehran Industries 94 Indus Steel Pipe 42.5 Jul-97 Hussien Industries . . 182.5 . . FERTILISER 95 Pak China Fertilizers Company Limited 435.4 May-92 Schon Group 96 Pak Saudi Fertilizers Ltd. 7,335.9 May & Sep-02 Fauji Fertilizers 97 Pak Saudi Fertilizers Ltd. (10%) 815.0 Sep-02 Fauji Fertilizers 98 Pak Arab Fertilizers (Pvt) Ltd. (94.8%) 14,125.6 May-05 Export Reliance- Consortium 99 Pak American Fertilizers (100%) 15,949.0 Jul-06 Azgard 9 100 Lyallpur Chemical & Fertilizers 280.2 Dec-06 Al Hamd Chemcial (Pvt) Limited 101 Hazara Phosphate Fertilizers Limited 1,340.00.2 Nov-08 Pak American Fertilizers . Total 40,281.1 . . RICE 102 Sheikhupura 28.0 May-92 Contrast Pvt Ld. 103 Faizabad 21.2 May-92 Packages Ltd. 104 Siranwali 16.2 Jul-92 Enkay Enterprises 105 Hafizabad 20.0 Sep-92 Pak Pearl Rice Mills 106 Eminabad 24.1 Nov-92 Pak Arab Food Industries 107 Dhaunkel 79.2 Jun-93 Dhonda Pakistan Pvt Ltd. 108 Mabarikpur 14.4 Nov-93 Maktex (Pvt) Ltd. 109 Shikarpur 32.5 Mar-96 Afzaal Ahmad . . 235.6 . . TEXTILE 110 Quaidabad Woollen Mills 85.5 Jan-93 Jehingir Awan Associates 111 Cotton Ginning Factory 1.2 Jun-95 Hamid Mirza 112 Bolan Textile Mills 128.0 Oct-05 Sadaf Enterprises 113 Lasbella Textile Mills 156.0 Nov-06 Raees Ahmed . . 370.7 . .
According to a spokesman of privatization commission, the PC is mandated to divest title, interests, rights, ownership and control in the SOEs by means of various modes of privatisation. Section 25 of the PC Ordinance stipulates that the commission shall carry out privatisation in accordance with the prescribed procedure, through any of the following modes:-
(a) sale of assets and business;
(b) sale of shares through public auction or tender;
(c) public offering of shares through a stock exchange;
(d) management or employee buyouts by management or employees of a SOE
(e) lease, management or concession contracts; or
(f) anyother method as may be prescribed.
One of the models employed in the privatisation of large SOEs is the divestment of a minority strategic stake along with transfer of management control. For example sale of 26 per cent shares with management control was used in the privatisation of Kot Addu Power Company, PTCL, MCB and Allied Bank. This strategy is based on the rationale that given the large size, a single offer for total divestment for some transactions would limit the interest of potential investors and consequently affect the level of competition. It also helps to sell the remaining equity in a phased manner to maximise the eventual sale proceeds once the private sector has had a chance to bring about substantial value addition to the SOE.
According to him, the main objective of privatization of 26 per cent equity stake with management rights through a Public-Private Partnership (PPP) model is to put national resources and assets to optimal use and in particular to unleash the productive potential inherent in SOEs.
Government would continue to ensure that divestment does not result in alienation of national assets and reduction in quality of production and service to the detriment of its people. It would also ensure that divestment does not result in private monopolies and cartels. In order to strengthen the privatisation process in the country, it is necessary for the government to improve governance and ensure transparency in all official matters.