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
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
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.