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1- FOREIGN EXCHANGE RESERVES
2- BED LINEN: PAKISTAN FACES ANTI-DUMPING DUTY
3- SECURITIZATION
4- RS 10 BILLION LOSSES DUE TO SICK UNITS

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RS.10 BILLION LOSSES DUE TO SICK UNITS

 

A total loss of Rs.10 billion due to an unnecessary delay in the liquidation process 
of sick units and merger of organizations

 

From SHAMIM AHMED RIZVI, Islamabad
Feb 03 - 09, 2003 
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The report of the Public Accounts Committee has confirmed the reports published recently in the national press criticizing the poor performance of the Corporate & Industrial Restructuring Corporation (CIRC) and organization set up by President Musharraf's government exclusively to arrange sale and liquidation of irretrievable sick units.

The CIRC was established in March 2000 with all the powers and was assigned the tasks of disposal of 868 sick units found irretrievable and arrange their sale or liquidation by March 2003. The CIRC is far behind the schedule and has not yet completed even on 1/5th of its target.

The Public Accounts Committee after reviewing the audit report for the financial year 2000 to 2002 has concluded that the federal government suffered a total loss of Rs.10 billion due to an unnecessary delay in the liquidation process of sick units and merger of organizations.

According to the report signed by the committee's Chairman HU Beg and all other members except Lt.Gen (Retd) Talat Masood, the government's decisions regarding the merger and liquidation of sick units/orgranisation were delayed unnecessarily causing huge losses to the national exchequer.

The then Chief Executive Gen. Pervez Musharraf in March 2001, had approved the sale of 868 sick units through open public auctions these units were identified by the Corporate Industrial Restructuring Corporation (CIRC) in consultation with the concerned banks as these units closed for years, owed over Rs.107 billion to the nationalized commercial banks.

 

 

After a detailed presentation to the Chief Executive, also attended by Ministers for Finances, Industries, Privatization, apart from Governor State Bank and Secretary General Finance, the Chief Executive of CIRC, Mr. Tariq Hamid told newsmen that a priority list of 102 units had been prepared for the auction of which will start from next month. These units owe over Rs.12 billion to United Bank, Habib Bank, National Bank and NDFC. "We are beginning with the worst units", Mr. Tariq Hamid claimed.

He said the CIRC will take over these assets from the government owned banks and financial institutions at their book value and in return the government will issue bonds to these banks at the time of privatization of the unit or after three years of take-over, whichever is earlier. The bonds at the book value of units will have 5-year maturity period with government guarantee at a profit fixed by the federal government form time to time in accordance with State Bank rates, he added.

The strategy to auction the irretrievable sick industrial units having been approved by the Chief Executive was seen as a last ditch attempt by the government to solve the twin problem of sick industries and non-performing loans of the NCBs/DFIs which constantly threatened their operational liability. It appeared that the creditors banks and DFIs have not been able individually to change the management of the sick units owing sizable amounts of loans through open auction in the market. This may be partly to the fact that the task requires concerted action by the management of the banks and that would destabilize their daily working as the number of defaulting units has been increasing rapidly in each bank. In this contest creation of a single specialized institution like the CIRC is the right step to exclusively attend to the task.

From slow pace of work assigned to CIRC it appears that not many buyers/investors both domestic and foreign are not coming forward as was initially expected. It was hoped that some overseas Pakistanis may enter the scene to buy suitable enterprises from among the sick units. Additionally, foreign investors from the Middle East countries may also be interested in exploring the opportunities to make investments in relatively medium scale amounts. These expectations, however, did not prove correct.