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Revival of sick units

So far no real attempts have been made to sell off these sick units despite interest shown by many foreign investors to buy out the units

Dec 25 - 31, 2000

Lack of marketing by the government and exaggerated prices demanded by the creditors, mainly banks and DFIs, is not only discouraging revival of some 4,000 small and medium industrial units officially identified as sick but is also resulting in the increase of many other units which are heading towards a similar fate.

According to Matloob Ul Jamil Sahir, a Karachi-based commercial consultant, lack of proper marketing is prolonging the revival of some 4,000 identified sick units in various sectors and of all sizes. This is not only shying away local but also foreign investment which could help the revival of these units which are collectively blocking a massive amount of Rs 35 billion. This indeed is a great financial loss to the national economy.

Matloob said that so far no real attempts have been made to sell off these sick units despite interest shown by many foreign investors to buy out the units which could be the first step towards their revival for the benfit of the economy. Instead of providing an investor-friendly package of information about individual units the policy makers have chosen to impart only a much crude form of information to the potential investors which is just not enough to make an informed decision. There is just no specific and precise data such as the information about the available machinery and corporate set-up available to attract a potential investor. Matloob said that information pertaining to sick units should be made available as a public document to help make a better informed choice by a potential investor. Unless that's done, the sell-off and revival of sick units would not be materialised.

Matloob also stressed on using the latest telecommunication technology such as the Internet to provide the specific information and data about the sick units to better attract investors who thus far have remained indifferent to the sell-off of the sick units.

He also stressed on the need to upgrade the detailed information about the sick units nationwide which has not been upgraded during last decade in general and last five years in particular. It is imperative to identify the status of an individual sick unit particularly due to presence of many persons claiming the ownership of a particular sick unit due to corporate laws which take years for the dissolution of a company and thus its ownership, he added.

The bureaucratic red-tape also deprives the potential investors of proper guidance while the biggest problem with the sick units is the delayed disbursement of loans to the banks and the DFIs which failed to achieve one of their major aim- the industrial development.

In addition, the creditors that is the banks and the DFIs are demanding highly exaggerated prices to shy away the investors to help revive the sick units. The practice is creating a conflict of interest as banks and DFIs, the creditors, are unwilling to sell the units at an economically viable price being more interested to recover their loans plus the mark-up irrespective of how they arrived at a particular selling price.

So is there anything that could be done? Yes, says Matloob — the Sick Units Revival Committee (SURC) should take over all the units officially identified as sick and re-evaluate and update their status to fix a price which is techno-commercially viable for the quick sell-off of thousands of sick units which are blocking billions in unproductive units at a great cost to the national economy.

He also stressed the need for upgrading of the information on numerous other small and medium size units which are heading towards a similar fate nationwide due to rising cost of electricity and all around increase in utility prices. Most of all, he stressed that in the information technology of today the policy makers should realise that availability of crude information lacking specific and precise information through traditional means particularly the creditors, who have to protect their own interest irrespective of how exaggerated the asking price may be, would keep on dragging the sell-off of the sick units. The procrastinating would only worsen off an already bad situation at the cost of an already suffering national economy.

It is time to use the Internet to attract the investors, be they local or foreign, to take-over the sick units to help revive them not only so that the banks and DFIs could recover their loans but also to revive the industrial activities — the primary objective of the DFIs in the first place.