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MAP Seminar

Need to change Pakistan's image through act
  1. SBP Report on Pakistan's economy
  2. Shortfall in sugar production?
  3. Construction of Kohat tunnel
  4. HUBCO-WAPDA drawing close to settlement
  5. MAP seminar on industrial development
  6. Economics of production and costs
  7. E-Commerce and IT (PAGE Report)

Privatization worthwhile only if it is beneficial for all the stake holders

By SHABBIR H. KAZMI
 Feb 21 - 27, 2000

Three corporate leaders have called for a long-term consistent economic policy, expeditious privatization, maintenance of law and order and an effective curb on smuggling, prerequisite for industrial development and investment promotion in the country. In their presentations, at a seminar on Industrial Development, Investment Promotion and Privatization organized by the Management Association of Pakistan (MAP), Altaf Saleem Chairman, Privatization Commission, Syed Babar Ali, Yusuf Shirazi, Federal Secretary of Industries and Production, Abu Shamim Arif expressed their point of view on the topic.

Abu Shamim Arif said that various expert groups were busy in framing recommendations on various industrial sectors. This exercise is expected to be finalized in next few weeks and then the government would be able to come out with a long-term industrial policy spread over 5 to 7 years. The government is considering various options including debt equity swap of sick industrial units, in its efforts towards their revival.

He also said that various options are being studied by respective committees for the revival of sick units. Accordingly, loan rescheduling, debt equity swap, financial restructuring, financial engineering; appointment of administrators, declaration of companies as sick and change of management/sale of economically viable units would be part of the policy. The government seeks greater participation of stake holders in developing the industrial base of the country. The present government has adopted a participatory model for the development of industrial growth strategies and action plans whereby representation from all sectors has been invited to contribute for the formulation of sectoral/ subsectoral industrial plan for 2000-05 long term plan.

In order to improve industrial mechanism, major industrial support institutions like Board of Investment (BoI), and Smeda and EDB have been placed under the control of Ministry of Industries and Production to improve their efficiency. Moreover, National Productivity Council (NPC) is being established under the aegis of Asian Productivity Organization (APO) of Japan to seriously enhance the quantum of productive activities in Pakistan through improved technology, quality and manpower training with active support of the private sector.

While dilating on pros and cons of the privatization, Yusuf Shirazi said that the process should not be influenced by the dictate from of multilateral donors but should be according to the needs of the country. To expedite the process of economic recover, efforts should be made to restore the confidence of investors and redefine the policies which are a source of irritation for the investors. Later on, during the question answer session he was quick to respond to an observation of Saleem Altaf on the privatization. He strongly pleaded that banks and the socio-physical infrastructure related projects should not be handed over to foreign investors.

Altaf Saleem made a presentation on what the Commission has done over the years and also explained the highlights of the policy of the new government. The new policy is aimed at privatizing the state enterprises in such a manner that all the stake holders get the benefit. Necessary regulatory framework, a prerequisite, is being implemented. The GoP intends to use privatization proceeds for the retirement of debt. The GoP is also ready to liquidate those state enterprises which economically unviable.

The new policy also aims at selling shares of public sector units by exercising two options: sale of a certain percentage of total capital for transfer of management and off-loading of certain percentage according to the appetite of the domestic capital market. However, a key issue is that plant and machinery, in certain cases, has become technologically obsolete and strategic buyers would have to make massive investment to make the unit economically viable, competitive and beneficial for all the stake holders.

An expeditious privatization process can help the GoP in two ways: reducing the debt and avoiding huge losses. This will ultimately help in reducing the budget deficit — a major source of concern for the nation as well as the donors. A large number of state enterprises, particularly Pakistan Railways and WAPDA, incur huge losses every year.

Syed Babar Ali shared with the audience some of the short, medium and long term recommendations made by the sub group he heads for promotion of investment. These include:

* Improving Pakistan's image

* Development of policies through consultation

* Honouring commitments

* Rationalizing import tariff

* Restructuring tax system

* Reducing number of monitoring agencies

* Exempting companies employing less than 100 people
        from labour laws

* Curbing smuggling

He also said that while China received over US$ 32 billion foreign investment, Pakistan got only US$ 100 million such investment last year. It was mainly due to a poor image of Pakistan in the global markets. "We have to change this image not through making loud claims but demonstrating by actions.