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NBP offers              5% shares to be made public

The corrective step which is in the pipeline may help restore confidence of the investors in the share market

Aug 13 - 19, 2001

The government has decided to offer 5 per cent of shares of National Bank of Pakistan to public through bourses. The Cabinet Committee took the decision to this effect on Privatization, which met in Islamabad last month.

It is however surprising that despite a lapse of almost a month; the Karachi Stock Exchange has not been officially informed so far. The Karachi Stock Exchange has not received any application from the National Bank for enlistment on board of the stock exchange. This sort of lethargic approach of the policy makers creates doubts about the seriousness of the purpose.

The present government however seems to have taken notice of the slow process of the overall privatization process as the President General Pervez Musharraf has decided to hold a meeting every month to review the on going privatization process in Pakistan. It may be noted that the Privatization Commission has a deadline of June 30, 2002 to meet the target of privatization of certain public sector entities during the given time.

According to reports, President Pervez Musharraf desires that the privatization commission should accelerate the pace of its business. The President presided over a meeting especially on this subject. The President was informed that besides other public sector organizations, the government would float 5 per cent of the NBP shares on the bourses next month at Rs10 per share.

Besides, offering 5 per cent shares of the NBP, the privatization commission has three other banks on its agenda to bring them to the private sector. The commission desires to sell United Bank by the end of the current financial year. According to reports 21 investors have shown their keen interest in buying the strategic shares of the UBL. The privatization commission is also keen in selling the remaining shares in Allied Bank provided it is cleared from the court.

The Habib Bank will also be offered to the private sector before March next year. Currently, the HBL management is busy in financial restructuring of the bank, which includes lay off of around 11500 employees and closure of its branches. According to informed sources so far some 4000 employees have opted for Voluntary Separation Scheme (VSS). The financial liabilities of the bank have to be cut down before selling the HBL to make it attractive for the potential buyers.

It may be mentioned that the governments in the past have been announcing privatization of the public sector entities through stock market, however as far as the financial sector is concerned the MCB was the only major bank enlisted with the stock market. If the NBP shares were made public as announced by the government it will be the second after MCB. The expected incentives for the stock market which include removal of the tax imposed on bonus given by the companies to the shareholders and withdrawal of the tax imposed on return of Term Finance Certificates.

The corrective step which is in the pipeline may help restore confidence of the investors in the share market, sources said.

Other public sector entities that are on the waiting list for privatization are Pakistan Telecommunication Company Ltd (PTCL) which has received bids from 11 investors.

Yasin Lakhani, President of the Karachi Stock Exchange while talking to PAGE said that things couldn't be improved through statements or reports appearing in the newspapers. Referring his discussions with some government functionaries regarding such plans to off load shares of the public entities, Lakhani said in a lighter mood that he generally ask the government functionaries to tell the year not the month or day for implementation of such schemes.

Obviously, the tone in which he made remarks were reflecting his dissatisfaction over the prevailing circumstances which he feels are not conducive for capital formation.

When his expert opinion was sought about the timings for the launch of 10 per cent NBP shares through stock market, Lakhani was of the view that currently the market may not be responsive to the offer due to certain reasons of which uncertain law and order situation is on top of the agenda. Stability of the environment is the key factor to attract the investors. Some of the NBP officials had ambitious desires to sell the shares at premium while the ground realities are quite different, some strong Scripps in the past were selling at half of the actual value.

However, it is much earlier to comment how the public is going to respond, as NBP still requires to enlist itself on board of the stock exchange for which a considerable time is needed to complete the formalities before going into business. It will be the second major domestic financial institution, after Muslim Commercial Bank, whose shares would be offered through the stock market almost after a period of 8 years.

It is believed that before making public the 5 per cent shares of the National Bank, the government may implement the decision it has taken to provide incentives to the share market to get the desired results.