THE ENABLING ENVIRONMENT
interview with Altaf M. Saleem, Federal Minister for Privatization
SHABBIR H. KAZMI
May 13 - 19, 2002
It is not important how quickly we can sell
state-owned enterprises. The aim should be soliciting attractive bids
and ensuring decent return to strategic investors. We are trying to
create enabling macroeconomic environment. In the absence of such an
environment, investors seek and often demand sovereign guarantees. We
have committed this mistake in the past and also experienced the fall
out. Now the efforts are to let the investors evaluate the working
environment, estimate the potential returns and risks. Only once the
investors are confident and feel they have the expertise, can make a
strategic decision to enter or not to venture in Pakistan.
It may be said that we are too slow but we, at the
Privatization Commission, strongly believe that the strategy has
started yielding results. This is evident from some of our successes.
We planned to off-load five per cent shares of National Bank of
Pakistan, through stock exchanges, but were able to sell ten per cent
shares only because of the keen interest of investors and market
appetite. We received an attractive deal in case of Pak Saudi
Fertilizer. We also succeeded in convincing the bidders of Badin-I
oilfield to improve their offer. We managed to conclude these
transactions in the post September 11, 2001 era.
Some of our critics say that two of the above
transactions were concluded with local investors — not a big deal. I
have my own rationalization. The level of confidence in an economy is
gauged by the interest of local investors. If the local investors are
shy, no foreign investor would come forward. Besides, in case of a
large transaction, foreign investors are keen in joining hands with
credible local partners.
To further dilate my point I would say that
portfolio investment by foreign fund managers also substantiate my
point. Historically, these fund managers have invested in the shares
of those companies which enjoy sound fundamentals, management is
prudent and also share the profit earned with the shareholders.
Therefore, involvement of a credible local partner is very crucial for
the successful operation even when the larger stake is held by a
We pronounced our privatization plan in early last
year and also disclosed our strategy. Once the strategy was there, we
started the marketing. We made the details, about the companies being
offered for sale, initiated financial restructuring and even appointed
financial advisors. Then came the September 11, 2001 incident and the
subsequent events. How could we expect the foreign investors to
respond to our calls, when they were grossly involved in overcoming
the key issues being faced by them.
Luckily, Pakistan economy has emerged stronger. The
biggest gain achieved, was reprofiling of our external debt, inflow of
fresh funds at concessional rates and renewed interest and confidence
of foreign investors in the economy of the country. The investors'
confidence was also displayed at the recently held conference of
International Chamber of Commerce in Karachi. They also pronounced
their specific areas of interest, oil and gas being the most
At present the process of privatization of Pakistan
Telecommunication Company (PTCL) and Pakistan State Oil Company (PSO)
is at an advanced stage. Investors are also show their keen interest.
We should be ready to go for the bidding of these units in August
and/or September this year. We have also achieved financial
restructuring of Karachi Electric Supply Corporation (KESC) and
appointed Financial Advisor for the sale of Sui Twins. The necessary
regulatory framework, establishment of Gas Regulatory Authority and
deregulation of POL trade, has been ensured. I am sure that we have
been able to overcome most of the concerns expressed by the strategic
The most important message that we have been able
to convey to strategic investors is the firm commitment of the GoP
towards the process of privatization in the country. While the GoP has
been able to gradually curtail subsidy on gas and electricity, it has
also improved guaranteed of return for gas marketing companies. It is
also on record that both the companies (Sui Twins) are actively
involved in revamping and expanding their transmission and
distribution networks. It was possible only because the production of
gas has increased in Pakistan.
To conclude, let me say, it is not an easy task.
While we have been making our best efforts, the renewed confidence of
investors in the resilience of economy of Pakistan, provides us the
courage. As the process gains momentum and adverse impact of
synchronized recession is subsided, we will be able to achieve our