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Snail’s pace of privatizing process

  1. Sharp decline in edible oil prices
  2. Snail's pace of privatization process
  3. Federal tax revenues
  4. Rescheduling of PICIC loans
  5. Islamic stock market indices

Lack of coordination between various ministries has been the biggest hurdle in smooth process of privatization

From Shamim Ahmed Rizvi, Islamabad
Sep 06, 1999

Despite all the tall claims made by the Privatization Commission from time to time, the fact remains that the performance of the commission during the last 30 months has been painfully slow. The biggest obstacle has been the lack of coordination between various ministries and difference in the perceptions of the commission and the concerned ministries over the privatization of various units.

According to the Privatization Commission, those units should be privatized first which are performing well and showing profits while restructuring of those state owned units should proceed their privatization which were in bad shape and causing losses.

The Chairman of Privatization Commission Kh. Muhammad Asif is of view that through this method alone we could get the good price of units offered for sale. This view which is also supported by the IMF is not shared by the ministries concerned. Kh. Asif, a close aide of the Prime Minister, strongly feels that the national interest would be served by selling 30 to 40 per cent of government investment in the oil & gas sector and thereby paying off most expensive debt of about $10 billion. He was able to convince the Prime Minister for the usefulness of his plan of action and was extremely happy when, on his suggestion, Prime Minister agreed to become Chairman of the Privatization Board, a few months back. This, he thought, would discourage the bureaucrats and also some ministers who were opposing privatization of PTCL & Oil Sectors.

According to sources in the Privatization Commission, IMF has also suggested that Government should first start the restructuring, modernization of badly performing units, make them profitable and then arrange their privatization against a good return. There is strong section in the government, besides the concerned ministries, who are opposed to this approach. Some of them rightly question the wisdom of this approach which means that the government should first invest billion of rupees on sick units, introduce modern technologies, improve the management and make them profitable before selling them to private sector. They are of the opinion that profit making organizations should not be privatized. They are also opposing the privatization of UBL and HBL now when after sinking over Rs. 19 billion of state money these two banks have been turned into profit making units. For the same reason they are opposing the privatization of PTCL, OGDC and other units which are earning billion of rupees annually.

Insiders say that Khawaja Asif was given the task by the Prime Minister about two months ago to urgently plan the disinvestment of 30 per cent government shareholding in the oil and gas sector. This was intended to get ride of the most expensive foreign loan amounting to $ 10 billion which had been acquired on high mark-up. If this $10 billion loan is paid off, it is said, the government would be free of seeking compulsory loans to pay off its old loans. Since the oil and gas sector has great potential for offering $ 8 to 10 billion, the government decided to privatize it.

Asif then managed to get all the relevant details about the oil and gas sector despite the bureaucratic opposition. In his report to the Prime Minister he said that all international players in the oil and gas sector were already present in the country and were very much interested in purchasing the government shareholding. These major players were the foreign oil companies which had expressed their willingness to take part in the bidding process as soon as all the formalities were completed.

While Khawaja Asif believes that the solution to all the current serious economic issues lies in the disinvestment of the government's shareholding in oil and gas sectors, the minister for petroleum reportedly insists that the privatization commission which could not sell small lodges and hotels, has no capacity and wisdom to disinvest the mighty oil and gas sector. He is also said to have held the belief that the privatization, done so far, is confined only to ghee and cement sectors which shows the performance of the commission during the last two-and-a-half years. He reportedly claims that whatever industry has been privatized, its owner ultimately made "cartels" and thus created problems for the people. In this regard the ghee and cement manufacturers are often mentioned who formed cartels after having purchased their units from the government.

During the Peoples Party government, former president Farooq Leghari had opposed the privatization of the oil and gas sector. He used all his influence to stop the privatization of Oil and Gas Development Corporation (OGDC), although former minister for petroleum Anwar Saifullah Khan was all for its disinvestment.

All efforts of the Privatization Commission to disinvest government shareholding in this sector are said to have been scuttled by them reportedly with the support of the minister for petroleum and natural resources.

Khawaja Muhammad Asif has not been able to privatize even 10 per cent of the profitable and viable state-owned industrial units during the second PML government. He has also been complaining that four of the transactions which are almost ready and include Pakistan Telecommunication Company Limited (PTCL), Karachi Electricity Supply Corporation (KESC), Habib Bank Limited and United Bank Limited are being opposed by the relevant ministries. He had felt relieved when Sartaj Aziz was given a new assignment as he had been allegedly opposing the privatization of many state enterprises. But today he is equally unhappy and circles close to him claim that he has already conveyed his feelings to the prime minister.

Many people fear that there will be kickback and commissions in the privatization of the oil and gas sector. They argue that since it is the only profitable sector and could attract foreign investment, people sitting in the ministries and those in politics will scramble for having their share in the cake.

Now the question is whether the prime minister and his team are serious about a meaningful privatization specially that of the oil and gas sector to secure the much needed $ 10 billion to get rid of country's most expensive debt. Apparently one does not see any seriousness on the part of the government for accelerating the privatization process.