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Process will now be completed by March 2002 instead of December 2001

From SHAMIM AHMED RIZVI
Islamabad
 Jan-07- 13, 2002

Although it is not substantiated by the ground realities, the minister for Privatization Mr. Saleem Altaf claimed that despite delay in the first phase of privatization due to geopolitical situation in the region he will achieve the target of 3 billion dollars from the Privatization process by Dec. 2002.

Previously the target was of $ 4 billion, $ one billion by Dec. 2001, another $ 2 billion by June 2002 and the rest by Dec. 2002. In a press interview Mr. Saleem Altaf said that he expected proceeds of $800 million to one billion dollars from the strategic privatization of government assets during by the end of 2001 will face the delay of three months and the prevailing process will now be completed by March 2002 instead of December 2001. He said the bidding date for the first phase of major assets was October 18, 2001 but that was delayed for three months on the request of potential bidders. "Now we are receiving signals from these bidders that they are ready to come in the first quarter of next year". Independent economists, however, do not agree with the Privatization Minister. According to them the bidding dates will have to be further extended in view of the growing tension between India and Pakistan. Foreign investor will avoid making any investment in Pakistan in this tense atmosphere and war like conditions between the two nuclear powers.

The Privatization programme of the government of Pakistan received a serious jolt in the aftermath of Sep. 11 scenario and US attack on Afghanistan. As a result Pakistan's recession hit economy received another set back as it raced a shortfall of about 1000 million dollars due to withdrawal of interested foreign investors to bid for giant public sector enterprises such as PTCL, UBL and nine oil and gasfields which were scheduled to be privatized by Dec. 2001. This programme involving foreign investors was put on hold because all the major interested investors in the sale process of major entities had cancelled their visits to Islamabad in view of war breaking out in the region.

The economic managers of Pakistan have been trying to kickstart the derailed economy but, known as they are for setting unrealistic targets, their efforts relating to privatization process were among the ambitious targets. The government has yet to make any significant achievement in this connection and most of the last two years were spent in providing legal cover to this whole process. The government succeeded to promulgate an ordinance in this regard. "We intend to increase the pace of the process in the current fiscal year and a schedule has been finalized of major transaction but the prevailing situation has created impediments in the way of achieving the desired results, an official said adding that "No one will be ready to come in Pakistan until the hovering clouds of war are removed". The Cabinet committee on privatization (CCOP) which met in Islamabad last month, took stock of the present situation. The meeting which was presided over by the Finance Minister Shaukat Aziz however, asked the PC to go ahead with the transactions where foreign investors were not involved.

In a very candid and open interview, the Minister said the privatization of major assets have been delayed but minor units privatization continued from which government till now has earned Rs.2 billion. "The bids of the strategic assets have been delayed on the request of international bidders due to the prevailing situation in the region though we were ready to go ahead with the process in accordance to our time schedule," he added.

He was of the view that the recent visit of president Pervez Musharraf to China will have a very positive impact on the privatization process as a large number of Chinese oil and gas companies have shown great interest in the oil and gas field of Pakistan. "We are hoping that they will definitely participate in the privatization of PSO and OGDCL", he added.

Mian Saleem Altaf said that the due diligence of "United Bank has started and it will be offered for sale in the second quarter while Habib Bank will be offered for sale in third quarter of 2002 as final decision in this regard will be taken by June. "I am in favour that all banks should be privatized and government should not be involved in business and when the appropriate time will come the complete privatization of National Bank will also be considered," he added.

It was due to this consideration that 10 per cent shares of National Bank have been off-loaded through stock exchange and now 28,000 small investors have become its co-owners. "Now government is considering to dislodge its 30 per cent shares in Bank Al-Falah by March 2002", he added.

He said Oil and Gas Development Corporation Limited (OGDCL) will now be offered for sale in September 2002. Dispelling the criticism that institution being a profitable entity should not be privatized, the minister reminded that the OGDC during the past 50 years have drilled only 16 wells while in Canada 16,000 wells are drilled every year. We want such an investor should take the corporation who can increase the number of drillings which will be beneficial for the country in the longer run", he added.

He disclosed that all the 14 bidders who before the delay were to participate have confirmed to us that they will be participating in its sale when offered next year.

He did not agree with the impression that Privatization Minister has shifted from its policy of strategic sale to sale through stock exchanges. "It was our confirmed decision to have a two pronged strategy right from the beginning and wherever we are finding it feasible and atmosphere congenial we are opting for sale through stock exchange," he added.

While fully agreeing that privatization programme should continue, the independent economists are, however, of the view that entire process should be put on hold for the time being in view of the recent development in the region. At the present juncture the investors confidence in the stock market stands shattered and equity values are moving on a slippery path for reasons which have originated largely from external events following the US attack on Afghanistan and hovering war clouds in the sub-continent.