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Privatization programme may encounter serious snags

Nov 20 - 26, 2000

All tall claims and rhetoric apart, the fact remains that the pace of privatization of public sector enterprises has been. extremely slow and there seems hardly any chance of Privatization Commission (PC) touching its target of raising 4 billion dollars during the next 2 years as claimed by PC Chairman while announcing the new "result oriented and realistic" policy about 4 months back.

After its approval at a joint meeting of the federal cabinet and the National Security Council in the second week of August last, the Chairman Privatization Commission Mr. Altaf Saleem unfolded before press his 2 years policy covering the then remaining slightly over 2 years of the tenure allowed by the Supreme Court to the present government. He told the newsmen that the commission had prepared a list of 49 units which it intended to privatize during the next 2 years to fetch over 4 billion US dollars. He said the commission had taken 6/7 months to formulate the new plan announced a day earlier. "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. No one can guarantee the future but we are hopeful that our plan will succeed in achieving the target," PC Chairman added.

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.

According to PC Chairman the privatization process was to take off in the 3rd week of August with the sale of Liquefied Petroleum Gas (LPG) business. He said that the financial and utilities organizations which were 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 to be privatized before December 2000 included Kohinoor Oil Mills Ltd., Morafco Industries Ltd. A.C. Rohri Cement, Javedan Cement, Lyallpur Chemicals, Hazara Phosphate, Pak Steel Fabricating, Sind Engineering Ltd., Suzuki Motorcycles Pak Ltd., Ravi Rayon Ltd., Larkana Sugar Mills, Shahdadkot Textile Mills, Talpur Textile Mills, Dir Forest, PECO (Badami Bagh), TDC Vehicle Engineering.

Transactions envisaged to be undertaken during medium term privatization plan (ending June 30,2000).

Telecommunications; PTCL, TIP, CTI.

Financial and banking sectors; Habib Bank Ltd. United Bank Ltd., First Women Bank, NIT & ICP. Oil and Gas Development Co. Ltd, PGCL, working interest in nine oil/gas fields (other than those included in the short term), Pakistan Petroleum Ltd. Pakistan State Oil, Sui Northern Gas Pipelines Ltd. Sui Southern Gas company (SSGC).

Power and Electricity; Karachi Electric Supply Corporation, National Power Construction Co. Insurance; State Life Insurance Corporation, Pakistan Insurance Corporation.

Industrial sector; Pak-American Fertilizer Ltd., Pak-Arab Fertilizer Ltd. A&B Industrial Gases, Maqbool Oil Mills, E&M Oil Mills, Sargroh Vegetable Ghee Mill, Thatta Cement, Mustehkam Cement, Spinning Machinery, Republic Motors Ltd. Pak Motor Car Company, PECO (Kot Lakhpat) Harnai Woollen Mills, Bolan and Lasbella Textile Mills.

Faletti's Hotel, Lahore, National Construction Company.

As against all these claims the 3 LPG, business units of Sui Northern, Sui Southern and Pakistan State Oil were put on sale. The sealed bids were opened in the presence of the representative of the bidder which amounted to Rs.630 million. Out of these 2 were not approved by the Privatization Board and only one deal with 369 million could be finalized.

It is apprehended that as in case of the past governments, the present government programme of privatization may encounter serious snags. The Privatization process started in Pakistan in 1990 and so fair it has yielded only about Rs.60 billion or dollar 1.7 billion at the then prevailing conversion rate. How it is possible to raise 4 billion dollars during the next less then two years is anybody's guess. Addressing the participants of 76th advance course at the National Institute of Public Administration (NIP), the Chairman of the PC disclosed that Rs.30.53 billion were raised through the PTC vouchers, Rs.10.21 billion from Kot Addu Power Company (Kapco), Rs.4.01 billion by putting banks under the hammer and Rs,13.27 billion from the sale of 96 other small units. Quoting a study on the units privatized during 1991-97, Saleem said that half of these units had good economic benefits, one fourth experienced negative effects while the remaining continued to maintain their pre-privatization conditions.

However, PC Chairman is confident that he will be able to achieve the target set by the present government.