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Revival programme for sick industrial units

  1. Budget 2000-2001
  2. Revival of sick units
  3. It is not a routine budget
  4. Comman man and the budget
  5. Towards lead free society
  6. The declining prices of Palm oil

CIRC will take over the nonperforming assets of NCBs and DFIs which would ultimately lead to the revival of sick industries

From SHAMIM AHMED RIZV
Islamabad
Jun 26 - Jul 02, 2000

The Finance Minister, Mr. Shaukat Aziz, in his post budget press conference on June 18 in Islamabad, declared that 114 sick industries will be revived within the next 3 months starting from July 1 at a cost of over Rs 7 billion.

These units have been identified by the committee for the revival of sick units in the country out of total about 4000 sick units most of which relate to the textile sector. The Federal Cabinet, in its meeting last month approved the draft of the ordinance which seeks to set up the Corporate and Industrial Restructuring Corporation (CIRC) to promote the revitalization of the nation's economy by reviving sick industrial units in the country. The ordinance is likely to be promulgated within this week. The corporation has already been set up under the Chairmanship of Mr. Tariq Hamid, a leading industrialist.

The Cabinet meeting which was presided over by the Chief Executive Gen Pervez Musharraf, was told that the proposed CIRC will take over the nonperforming assets of Nationalized Commercial Banks (NCBs) and the Development Financial Institutions (DFIs) which would ultimately lead to the revival of sick industries. The draft has been vetted by the law ministry. The government would soon be seeking 400 million US dollars foreign assistance to revive 900 major sick industrial units through the CIRC.

The cabinet was given a detailed briefing over the issue and told that by creating the CIRC, the government could rehabilitate at least 900 sick units out of total of about 4000 units. The proposed CIRC, sources said would undertake Balancing, Modernization and Replacement (BMR) of genuine sick industrial units for which it planned to contact the authorities of the Overseas Development Assistance (ODA) of Canada, Japan and couple of other countries for financial assistance.

The corporation will start working by first week of July 2000. Also the World Bank and the Asian Development Bank (ADB) were being contacted to offer loans for reviving the sick industrial units. Then the government-to-government contact would also be made to acquire soft term loans.

Various studies conducted in the past by the State Bank and Ministry of Industries have concluded that about 900 industries could easily be revived through balancing, Modernization and Replacement (BMR) process while over 500 had no chance of revival where capital over Rs 100 billion was stuck. The banker committee which looked into these cases have recommended their outright auction. Ministry of Industries has identified over 150 major sick industrial units and advised the government to arrange revival of these units on priority basis to augment industrial activity in the country.

Official sources confided with this correspondent that all these reports will be checked and reexamined by the experts of the proposed corporation which will decide modalities of revival or outright auction of the such identified units. To arrange necessary funds for the corporation a decision has been taken to seek Foreign Development Assistance and bilateral funding for reviving 900 units, out of total of 4000 sick units, some of which were offered some funds by the previous government but without any result.

"We plan to maintain government to government contact to have considerable assistance for reviving our 900 major sick industrial units", said a high official of the Ministry of Finance. He said that some of the industrialized countries including Italy was being approached to also offer their industrial machinery and expertise for reviving these units.

The sources said that initial contact with the government of Italy was encouraging as it has decided to look into the request of providing machinery to address the issue. The government, believed that Pakistan could not increase its exports unless it has surplus production and that this job could not be done without reviving at least 900 major sick units. "Without boosting the industrial sector, nothing could be achieved to put the economy back on the track", said another official. He said that the State Bank of Pakistan has also been asked to give a fresh report over the issue by providing details as to what happened during the previous government for reviving sick units. "How much money has been offered for various units for their revival has also been asked from the central bank", he added.

The Ministry of Industries and Production has advised the government to revive 150 major sick industrial units on priority basis to augment industrial activity in the country. Sources in the Ministry of industries and Production told this correspondent that in a recent meetings on economic matters the ministry has pointed out that without reviving these viable sick units the overall improvement in local industry would be difficult.

Out of 1000 major sick industrial units, we have identified 150 projects which can be revived in a short period through the newly proposed 'micro credit banks, senior official of the ministry said.

The Banker Committee headed by the former Chief of Habib Bank Mr. Shaukat Tarin set up by the ousted PML government had recommended that over 500 units be sold through public auction through which the government could recover about one third of its stuck up loan of about Rs100 billion outstanding against these units as a large number of the units are reduced to mere scrap and only value they offered is in terms of real estate which has certainly appreciated in the meanwhile. Bankers are setting their eyes on the overseas Pakistanis for taking over a large number of these units and injecting the much needed liquidity and hard cash in the national economy. Bankers are proposing the government to allow the overseas Pakistanis to buy the revivable sick industrial units at the original principal loan amount. They want complete write off of the accumulated mark-up on the loan and total exemption from payment of government liabilities by way of taxes and utilities.