The Cabinet Committee on Privatization (CCOP) during
its meeting in Islamabad last week with Finance Minister, Shaukat Aziz
in the chair, approved privatization plan for the first quarter
(July-September) of the fiscal year 2003-2004. It included offloading of
various public sector entities shares through stock market. Some of
these are National Bank of Pakistan (NBP), Sui Southern Gas Company (SSGL),
Oil and Gas Development Company Ltd (OGDCL) and the PIA.
OGDCL's 2.5 per cent shares will be offered to the
public in the first go. Five per cent shares each of NBP, SSGC and PIA
will be offered in the first bidding with option of further five
percent. Fifty one percent shares with transfer of management will be
offered in case of National Refinery while Faletties Hotel Lahore and
Kohinoor Oil Mills will be put on outright sale. Sale plan of Malam
Jabba Hill resort was also approved.
The CCOP also approved the pre-qualification of 3
prospective bidders for the PTCL and directed the Ministry of Science
and Technology to expedite the deregulation of the communication sector
so that privatization of PTCL could be under taken. The representative
of the Ministry of Science and Technology informed the meeting that the
deregulation policy was awaiting cabinet approval.
Let us hope that this quarterly target will be met by
the Commission. As per our previous experience such targets are rarely
met. Privatization Commission annual report 2002 enlisted 20 units for
sale for fiscal year 2002-2003 only one could be disposed. However,
explaining the reasons for the slow speed, a spokesman of PC said that
privatization of major units such as utilities requires a stable and
attractive investment climate, appropriate pricing policies, and
adequate regulatory frameworks. It also requires support from the
relevant ministry, the relevant regulatory, and the management of the
entity being privatized. These take time to build up. Absence of these
factors has made it difficult to close major privatization transactions.
The problems have been exacerbated by excessive litigation. To overcome
these factors, GoP took several measures to improve the enabling
environment and enhance transparency. The measure include the
restructuring and strengthening of the Privatization Commission by
promulgation of Privatization Commission Ordinance, 2000, establishing
and strengthening of regulatory framework, deregulation. It was
rewarding for its attempts by many expressions of interest for some
large transactions last summer. However, the disruptions following the
September 11 events again made most investors shy away, forcing
postponement of number of transactions at the request of bidders.
Preparations for major transactions are, however, largely on track.
The PC claims that the existing privatization
programme is progressing satisfactorily. During 1991 to October, 2002,
128 privatization transactions had been completed and proceeds of Rs.
94,170.2 million were realized. This includes 22 transactions for Rs. 35
billion for the period from October 1999 to October, 2002. In addition,
15 industrial units were excluded from the Privatization Programme
either for liquidation purpose or being non-privatizable. Upon change of
Government in November, 2002, Dr. Abdul Hafeez Sheikh was appointed as
Advisor to the Prime Minister on Board of Investment and Privatization
and subsequently inducted in the Cabinet as Minister for Privatization.
The CCOP was reconstituted on 3rd February, 2003. The Board of the
Privatization Commission was re-constituted on 19th March, 2003, during
the period from November, 2002 to 9th May, 2003, 3,683,600 shares of ARL
were sold through stock exchange by means of CDC for gross proceeds of
Rs. 337.429 million. Similarly, 3,070,000 shares of D.K. Khan Cement
were sold for gross proceeds of Rs. 41.719 million upto 3rd January,
2003. 20,190,800 shares of POL have been sold for gross proceeds of Rs.
3.376 billion upto 9th May, 2003 and the process is on-going. In
addition the bidding for transfer of management rights of ICP SEMF was
held, bidding results approved and the rights transferred for proceeds
of Rs. 786.786 million.