1- IMPROVED FINANCIAL SUPPORT FOR AGRICULTURE
2- DEREGULATION OF DRUG PRICES
3- PUBLIC SECTOR ORGANIZATIONS
4- PAKISTAN'S ELECTRICITY PRICING ISSUES
5- NON-PERFORMING LOANS OF FINANCIAL SECTOR

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PUBLIC SECTOR ORGANIZATIONS

 

Contributing Rs100 billion losses to the economy every year

 
By AMANULLH BASHAR
Oct 28 - Nov 03, 2002
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The public sector organizations generally identified with the stigma of inefficiency, lethargy, mismanagement and corruption were causing a cumulative loss of Rs100 billion a year to the exchequer.

This huge loss running in billions of rupees obviously met through resources provided by the people of this country out of their hard-earned money every year.

In order to plug the hole causing heavy financial drain on the public, the present government is using the tool of privatization to get rid of this menace by transferring the managerial powers of loss making organizations to the private hands.

According to informed sources, the present government has successfully privatized 23 public sector organizations. The total sale proceed received out of the sale of these 23 units is estimated at Rs36.8 billion. As a result of these transactions Rs35 billion has cut down the annual loss of Rs100 billion.

According to an analyst, the total collection of revenue by the government every year is estimated more or less around Rs400 billion however the loopholes in the public sector organizations were costing Rs100 billion for inefficiency, corruption and lethargy of the public sector organizations.

Currently, the major loss making contributors are WAPDA and KESC, which share over 50 per cent of the total losses, suffered by the public sector. Although the government had announced for early privatization of WAPDA and KESC yet the light at the end of tunnel still not visible. The government had decided to divide WAPDA in to 12 companies for the sake of easy privatization however so far no news is heard about the privatization of the largest loss making organization.

However, steps for inviting bids for major transactions like PSO, NITL, OGDC, KESC, and PTCL has reportedly been completed and bidding is expected to mature by March next year.

Besides getting rid of the loss making organizations, gaining confidence of the investors in the economic performance of the country was of primary interest of the present government. In order to achieve that goal, the government found the sale of its shares in the banking sector as an effective method to restore confidence of the investors. This brought more money each time when a gradual improvement of investors confidence was rehabilitated by the stock market investors, especially the small investors.

The present government has so far privatized 23 state owned units through which a sale proceed worth Rs36.2 billion including $306.8 million in foreign exchange were fetched during the last three years.

The size of the sold out portion of the public sector organizations indicates the confidence of the investors in the economic policies and investment climate in the country. Mainly the major foreign investment came in through the sale of LPG business of SNGPL and SSGCL, UBL and working interest in oil fields.

The Cabinet Committee has also given approval to the highest bid received for Investment Corporation of Pakistan (ICP) Mutual Funds Lot B. Dis-investment of ICP Mutual funds and transfer of management rights to a quality investor will open opportunities for the transfer of NIT transaction of the State Enterprise Mutual Fund of the ICP.

In order to broad base ownership of shares and provide depth to the stock markets, the government has divested shares of MCB and POL worth Rs800 million through the stock exchange. In addition, shares worth Rs1.15 billion for National Bank of Pakistan in the Initial Pubic Offer and secondary offer were sold to the general public. Five per cent additional shares of NBP were offered for subscription which over subscribed 4 times despite the fact that the shares were offered at a higher rate of Rs21 per share. As per the subscription details, 3,375 applications were received for 77,482,00 shares representing an amount of Rs1, 627 million.

The government exercised the Green Shoe Option of offering further 5 per cent shares to accommodate applications for 37.3 million shares. In case of NBP alone, 30,000 new small investors participated in the process of divestments.

Almost Rs3.5 billion fresh stocks were placed in the market for sale through privatization, mostly for smaller shareholders. It was because a transaction structure was rendered for the investors by the legal safeguards and iron out problems to pave the way conducive for investment climate in the country.

Due to confidence on the privatization process foreign investors made a major deal of 209 million dollars just before general elections in the country.

This was achieved only because all the concerned ministries made concerted efforts to divest the assets and at a good price to the private sector. However, if any issue risen during the course, the federal government was helpful to resolve the problem by taking the required steps.

The confidence of the investors is also linked with the privatization process at large because knowing that banking system of the country is in the hands of inefficient government departments, no one is coming here to borrow money at higher interest rates.

The privatization commission is giving priority to the banking sector in its transactions. The government shares in MCB have already been sold out, while 30 per cent of Alfalah bank shares and 20 per cent of NBP shares had also been privatized.