The Chairman Privatization Commission (PC) Mr. Altaf Saleem
unfolded on Thursday the two year privatization policy covering the remaining
slightly over two years of the tenure allowed by the Supreme Court to the
present government. The policy approved at a joint meeting of the National
Security Council and the federal cabinet a day earlier. The commission has
prepared a list of 49 units which it intends to privatize during the next 2
years estimated to fetch over 4 billion US dollars.
According the new policy which has been enforced through an
ordinance, 90 per cent of the privatization proceeds will be spent on debt
retirement and the remaining 10 per cent on poverty alleviation programme.
"The privatization process will kick-off on August 24
with the sale of liquefied petroleum gas (LPG) business", Chairman of
Privatization Commission, told a press conference adding that the government
would not fix a benchmark price as the buyers would themselves determine the
price of a unit in open competition. The new privatization law would give legal
cover to transactions, protect the rights of buyers and consumers.
He unfolded present government's two-year privatization
policy covering short-term and medium-term transactions. He also gave the names
of 49 state-owned entities included in the two-year privatization plan. All 49
entities will not be completely sold. In certain cases we will sell only 25 per
cent shares, in others 50 to 100 per cent, he explained to a questioner who
believed earnings of four billion dollars were not a sufficient amount for all
the 49 units. He said about a dozen units were expected to earn 75 per cent of
the total proceeds while the remaining would fetch 25 per cent.
He said at least one entity would be put on sale every
alternate month for price maximization. The plan is to start from small
entities, to medium size and then to bigger ones to develop credibility.
"During the process we will also judge the appetite of the market as well,
" he said.
The Chairman told newsmen that the process would be completed
in two years and a regulatory framework, to be announced shortly, would govern
this process. The sale/disinvestment of utilities organizations would be covered
by a regulator for price control, shares would be handed over to bidders with
the debt burden, and benchmarks would be set for evaluation of the organizations
and their shares, he said.
The financial and utilities organizations which are to be
unloaded wholly or in part by December 2000 are: Allied Bank (disinvestment of
49 per cent shares); NBP, HBL, MCB and Sui Southern Gas Company (public offer);
nine oil/gas fields (working interest); LPG and meter manufacturing units
of the SSGC, SNGPL and PSO, POL, ARL (minority share-holding); PSO shares in PRL;
and Pak-Saudi Fertilizers.
Industrial units are Pak Steel Fabricating, Suzuki Motorcycle
Pak Ltd., Sindh Engineering, Kohinoor Oil Mills, Morafco Industries, A.C. Rohri
Cement, Javedan Cement, Lyallpur Chemicals, Hazara Phosphate, Ravi Rayon,
Larkana Sugar Mills, Shahdadkot Textile Mills, Talpur Textile Mills, Dir Forest
Complex, PECO (Badami Bagh), and TDC Vehicle Engineering.
Besides, transactions envisaged to be undertaken during the
medium-term privatization plan (ending on June 30, 2002) include
telecommunication, financial/ banking, oil/gas, power/ electricity, insurance,
The PC, Chairman claimed "our privatization plan is
realistic and our calculations reasonable. There is every possibility that we
would succeed in raising 4.50 billion dollars (against target of 4 billion
dollars) by selling the public sector units". Saleem was pointed out that
in view of the declining foreign investment over the last few years and
reluctance of the local businessmen to invest in privatization plan which
envisages to raise 4 billion dollars from the sale of 49 public sector units in
a two-year phased programme appeared ambitious and unrealistic.
He said the commission had taken 6/7months to formulate the
new plan announced on Thursday. "During this period, we have tried to frame
and put in place a regulatory environment, restore investors' confidence and
reform the economy to attract foreign investors. So one can guarantee the future
but we are hopeful that our plan will succeed in achieving the target. But even
if we succeed in raising 3 billion dollars, it will not be a small thing. We
also hope that foreign investors will again come to Pakistan," he said.
The PC Chairman said the government also planned to sell at
least 10 per cent shares of several public sector banks and utilities through
stock exchanges to small investors. "We want to involve small investors in
the privatization process apart from strategic buyers".
He did not agree with the critics of the Privatization
programme, saying most public sector units had become unmanageable. He said the
government had sold the Muslim Commercial Bank (MCB) in the early 1990 to
private investors. "Since its privatization the bank has not retrenched a
single employee and successfully expanded its network. On the other hand, the
government had retrenched 10,000 employees from the two other banks — Habib
Bank Ltd and United Bank Ltd — and injected an equity of Rs29 billion to
stabilize them during the same period
Similarly, the government has so far injected Rs.29 billion
in the Karachi Electric Supply Corporation (KESC) which still require an
injection of Rs. 60 billion if it has to continue power supply to the people of
Karachi. In these conditions, you can judge for yourself whether the government
should keep these units or sell them," he said.
Mr. Altaf Saleem did not agree with the perception that pace
of privatization had been extremely slow in Pakistan. He said that data on
privatization over the past 6-7 years in the region indicated that Pakistan did
not fare badly. Privatization worth 1.7 billion dollars was achieved by Pakistan
in the period in comparison to 1.6 billion dollars by Thailand and 900 million
dollars by Malaysia.
The minimum regional achievement was 1.5 billion, reflecting
the performance of Pakistan on the positive side. He said that out of Rs.59.6
billion dollars worth of sale so far conducted, only Rs 2.5 billion was
outstanding due to litigation. "That is not a discouraging
performance," he remarked.
The following projects and organizations fall under the
medium-term privatization plan; PTCL, Telephone Industries of Pakistan, CTI, HBL,
UBL, First Women Bank, NIT, ICP, OGDC, Pakistan Gas Corporation, working
interest in nine oil/gas fields (other than those included in the short term)
Pakistan Petroleum, PSO, SNGPL, SSGC, KESC and the National Power Construction
The insurance companies to be disinvested under the long-term
plan are; State Life Insurance and Pakistan Insurance Corporation. the
industrial units listed under this plan are Pak-American Fertilizers, Pak-Arab
Fertilizers, A&B Industrial Gases, Maqbool Oil Mills, E&M Oil Mills,
Sargroh Vegetable Ghee Mills, Thatta Cement, Mustahkam Cement, Spinning
Machinery, Republic Motors, Pak Motor Car Company, PECO (Kot Lakhpat), Harnai
Woollen Mills, and Bolan and Lasbella Textile Mills. The list also includes
Flattis Hotel, Lahore, and National Construction Company.