From Shamim Ahmed
May 08 - 21, 2000
The privatization process which has almost been stalled for over 18
months may have a jumpstart from next month under a new policy and with changed
priorities. The new policy plan prepared by the commission is in the final stages of its
approval and may be launched through an ordinance any time during the current month.
The Privatization Commission has, in the meanwhile invited expression
of interest both from local and foreign investors for privatization of gas companies OGDG
in addition to off-loading the government shares in the oil companies. Remaining
government shares of Muslim Commercial may also be offered for sale to general public
through stock exchanges in the month of June.
The new Chairman of the Privatization Commission (PC) Mr. Saleem Altaf
a leading businessman in an exclusive interview to page said that the pace of
privatization has been slow because the required preparatory work had not been done. A lot
of regulatory work was required to be done before selling off public enterprises to
private parties specially in the services sector to safeguard the interest of the consumer
and ensuring the working of the privatized organization within the broad framework of
national interest. The pre-requisites have to be accomplished before privatization. In
some cases it has been done and in some other is being done now.
The other important reason for the slow down of the privatization
process, the new chairman said, is the general recession both in domestic and
international markets. Investors are difficult to find who can offer a reasonable price.
Extremely cautious in his answers to the question posed by this
correspondent Mr. Saleem Altaf said that so far 103 units have been privatized for about
Rs. 85 billion out of which Rs. 2.6 billion was still stuck-up. Because of unsatisfactory
preparatory work and faulty regulatory framework, there are about 300 cases pending in the
courts filed by or against the commission. A significant portion of privatization proceeds
has been spent on golden handshake of staff and clearing other liabilities of privatized
units. A major chunck had been utilised by the previous government for meeting budgetary
gap and a minor share (not more than 25 per cent) has been utilised for retirement of
debts. Under the new policy the government would be legally bound to use 90 per cent of
privatization proceeds for debt retirement and only 10 per cent will be used on
programmes for poverty alleviation.
The revised list of units to be privatized include 40 units in
industrial sector 7/8 in oil and gas sector, PTCL in communication sector, UBL, Habib Bank
etc. The Chairman said that the commission hopes to complete this task in 24 to 30 months
with an estimated total proceeds of about 4 billion dollars. Oil and gas sector is on the
top as per changed priorities. NDFC and ADB, Railways, WAPDA, PIA are not included in the
first phase of privatization programme of the present government as the same are
undergoing a restructuring process in order to make them viable and attractive for buyers.
When asked why the commission has changed its priorities by bringing
oil and gas sector which has been earning huge profit on top of the privatization
programme instead of those which are running in losses and are a burden on national
economy, the Chairman could not offer any convincing explanation except that there was not
declared policy in this regard and even previous government wanted to privatize oil and
gas sector. It was brought to the notice of the Chairman that the Petroleum Ministry
headed by a powerful Minister, Nisar Mohammad Khan, in the ousted Nawaz Sharif government
was strongly opposed to the privatzation of oil and gas which was earning about Rs. 70
billion revenue to the government and because of this strong opposition oil and gas sector
could not be put on sale despite best efforts of the than PC Chairman and blessings of the
then Prime Minister. How is it that the Ministry of Petroleum has resiled from their
earlier stand and agreed to privatization of oil and gas on priority basis, the PC
Chairman remarked that the clarification may be sought from the Ministry of Petroleum.
Although the PC Chairman would not comment on the logic behind this
change in this policy, other official confided that the Privatization priorities have been
changed because the government is keen to earn as many dollars as possible within
the shortest possible time to pay off its short-term foreign loans at the earliest.
For this purpose such units have to be offered for sale which could attract foreign
investment. It would serve double purpose. Firstly the government through sale proceeds in
foreign exchange can repay short-term foreign currency loans carrying high rate of
interest secondly the government would regain the confidence the foreign investors and
consequently it may lead to more direct foreign investment in the country.
The privatization of state-run companies in fuel, gas, telecom and
financial sectors are likely to fetch over 4/5 billion helping the government to retire
its short-term expensive foreign loans due by next year. So first phase of the new
privatization programme has already started by inviting expression of interests to bid for
liquefied petroleum gas (LPG) units of Pakistan State Oil (PSO), Pakistan Petroleum
Limited (PPL), Sui Southern Gas Pipeline Limited. (SSGPL) and Sui Northern Gas Pipeline
Limited (SNGPL). IBL & PTCL may follow suit, to raise about 4 billion dollars before
March 2001 when payment of reseheduled loans falls due.