PRIVATISATION PROCESS CRITICISED FOR NON-TRANSPARENCY
May 3 - 16, 2010
Privatisation process in Pakistan has always been under severe criticism both from political and industrial circles due to alleged corruption and non-transparency in it. On the other hand, the official circles always said the government intended to increase the profitability of both entities and to safeguard the interests of the consumers and the investors by increasing their capability by addressing the issues being faced by the companies.
According to a spokesman of Privatisation Commission, the cabinet has approved to privatize 58 state-run enterprises and the process will be completed in nine months. The companies are Morafco Industries Ltd., the Pakistan Tourism Development Corporation, Faisalabad Electric Supply Company Limited, National Power Construction Corporation (Pvt) Limited, Pakistan Machine Tool Factory (Pvt) Ltd., Peshawar Electric Supply Company Limited, Pakistan Mineral Development Corporation, SME Bank Ltd., Hyderabad Electric Supply Company Ltd., and Quetta Electric Supply Company Ltd.
The privatisation process of mega units is underway on fast track basis to make them attractive prior to their privatisation.
He said the Privatisation Commission has already asked the management of Sui Northern Gas Pipeline Limited (SNGPL) and Sui Southern Gas Company (SSGC) to conduct revalue exercise of their companies to assess up gradation requirements of both the companies and to take measures for value addition in these companies prior to take forward these transactions to the market for privatisation.
According to him, SNGPL has around Rs31 billion projects in hand with Rs20 billion company's share and Rs11 billion allocated by the government of Pakistan (GoP). An amount of Rs6.8 billion provided by the GoP has been spent while remaining Rs4.2 billion is available with the company for various projects. SNGPL has to spend approximately Rs18.1 billion from own sources.
The company has completed projects worth Rs8.7 billion while remaining projects worth Rs22.3 billion are outstanding.
Giving details of privatisation proceeds, the spokesman said the government of Pakistan had completed or approved 167 transactions at gross sale price of Rs476.421 billion. About 67 per cent of the proceeds received were transferred to the federal government. 26 per cent was returned to legal entities whose shares were sold, 5 per cent was used for restructuring expenses associated largely with golden handshakes and rehabilitation, and 2 per cent was used for PC's privatisation-related expenditures. Almost all the transactions were settled in local currency. About 66.3 per cent of the proceeds have been received in foreign exchange from transactions pertaining to 2nd tranche of PTCL vouchers, Kot Addu Power Plant (KAPCO), six oil & gas concessions, Habib Credit & Exchange Bank, United Bank Limited, Habib Bank Limited, KESC, and OGDCL GDR.
During the period from October 1999 to November 2008, the Privatisation Commission has privatised 66 entities for Rs417.5 billion. Some of the major transactions, including capital market transactions completed are:
- 51 per cent shares of GOP in UBL for Rs12.350 billion.
- 51 per cent of GOP shares in HBL for Rs22.409 billion
- Divestment of 30 per cent shares of Bank Al-Falah for Rs620 million.
- GOP shares in POL, ARL and DG Khan Cement for Rs6.240 billion.
- GOP shares in MCB lots for Rs1.591 billion
- Management Rights of ICP Lot A, B and SEMF for Rs1.265 billion
- 23.2 per cent NBP shares to general public for Rs1.759 billion.
- 10 per cent shares of SSGC thru SPO for Rs1.734 billion to general public.
- 5.8 per cent shares of PIA thru SPO for Rs1.215 billion to general public.
- 15 per cent shares of PPL thru IPO for Rs5.633 billion to general public.
- 20 per cent shares of KAPCO thru IPO for Rs4.815 billion to general public.
- 5 per cent OGDCL shares thru IPO for Rs6.851 billion to general public.
- 9.5 per cent OGDCL shares thru GDR & local institutions for Rs46.963 billion
- 2.5 per cent OGDCL shares SPO for Rs2.360 billion to general public.
- 4.2 per cent UBL shares thru IPO for Rs1.087 billion to general public.
- 25 per cent UBL shares thru GDR & local institutions for Rs39.450 billion
- 7.5 per cent HBL shares through IPO for Rs12.161 billion to general public.
- 26 per cent B class shares of PTCL for Rs 156.328 billion
- Sale of Carrier Telephone Industries for Rs500 million
- 73 per cent GOP share holding in KESC for Rs15.859 billion
- GOP Working Interest in six concessions for Rs 7.816 billion
- SSGC/SNGP LPG business for Rs0.511 billion
- 51 per cent shares of National Refinery Ltd for Rs16.415 billion
- 100 per cent shares of Pak Saudi Fertilizers Ltd., for Rs8.150 billion
- 94.8 per cent GOP shares in Pak Arab Fertilizers Rs14.125 billion
- 100 per cent GOP shares in Pak American Fertilisers Rs15.949 billion
- Sale of Lyallpur Chemical & Fertilisers for Rs0.282 billion
- Sale of Hazara Phosphate Fertilizers for Rs1.340 billion
- Sale of Mustehkam Cement Limited for Rs3.205 billion
- Sale of AC Rohri Cement for Rs0.255 billion.
- Sale of Thatta Cement for Rs0.793 billion.
- Sale of Javedan Cement Limited for Rs4.316 billion.
- Sale of the Falleti's Hotel, Lahore for Rs1.211 billion.
- Sale of Lasbella Textile Mills for Rs0.156 billion.
- Bolan Textile Mills for Rs0.128 billion.
- Sale of Al Haroon building for Rs0.100 billion
- Sale of International Advertising (Pvt) Limited for Rs5.117 million
According to federal minister for privatisation Senator Waqar Ahmed Khan, about 500,000 workers of 80 State Owned Entities (SoEs) are being empowered under Benazir Employees Stock Option Scheme (BESOS) with free of cost 12 per cent GoP shares unit certificates, disbursing dividends, ensuring their representation on their respective Board of Directors, making them owners and associating them to have their say in the decision making process for the progress of their companies.
Senator Waqar said that we were not privatising any entity but for value addition of the entities in Privatisation Program private sector was being associated through Public Private Partnership (PPP) with clear instructions that not even a single employee could be retrenched and to create new job opportunities through expansion in these entities and to increase the production.
On the other hand, Pakistan Labour Party President Farooq Tariq is of the view that a record 700 billions of rupees ($10.76 billions) of corruption took place during the privatisation of financial institutions. When Habib Bank Limited (HBL)'s 51 per cent shares were sold out to Aga Khan Fund For Economic Development in December 2004 for only 22 billions of rupees, its total assets were more than 570 billions of rupees ($8.76 billions). While another large bank, United Bank Limited (UBL) was sold out only for 13 billion of rupees. HBL had 1437 branches and another 40 branches in 26 countries with ownership of the buildings that the branches are functioning.
According to him, privatisation process gave nothing except causing unemployment in the country. There has been a massive price hike of the product produced by the privatised companies while the economy is in consistence decline. As a result, the trends of monopolisations have increased and the multinational companies have further monopolised the economy.