The overwhelming response received by the public
offer of shares of Oil & Gas Development Company (OGDC) and Sui
Southern Gas Company (SSGC) has created records. Keeping in view the
response, the expectations were that shares of Pakistan International
Airlines (PIA) and Pakistan Petroleum Limited (PPL) would also be
offered before June 30, 2004. However, it seems that the offer has been
deferred, at least for the time being.
The reason for the complacency seems to be above
expectation response to these transactions as well as offer for the sale
of 51% shares of Habib Bank (HBL). While experts have contradictory
views regarding the bid accepted by Privatization Commission, some
analysts say, "It was not too bad a deal keeping in view the bid
accepted for United Bank (UBL)".
Dr Abdul Hafeez Sheikh, Minister for Privatization
and Investment has often reiterated the GoP stance regarding its
privatization plan. The GoP is following two-pronged policy — making
efforts for sale of strategic stake along with transfer of management
control and divestment of shares of state-owned enterprises through
stock exchanges. The Minister has pronounced the divestment policy being
followed by the GoP 'Privatization for People'. However, some of the
analysts strongly believe that the policy may help the GoP to sell part
of its stake in the state-owned enterprises but need of the hour is to
improve franchise value of these entities which cannot be achieved
without transfer of management of these companies to private sector.
The GoP is expected to offer shares of PIA, PPL, Kot
Addu Power Company (KAPCO) during the next financial year. According to
an analyst, "All these entities can be termed 'blue chip' offer for
sale of shares is expected to receive. However, the growing concern is
that PIA has not declared any dividend for the last several years. If
its name is transferred to 'Defaulters Counter' it may jeopardize the
plan. Therefore, the GoP has to ensure that PIA declares dividend for
the financial year 2004, even though symbolic only".
However, prospects of privatization of Pakistan State
Oil Company (PSO), Pakistan Telecommunication Company (PTCL) Karachi
Electricity Supply Corporation (KESC) and corporatize entities of Power
Wing of WAPDA in the near future remain bleak. The only feeling one
tends to get is that the GoP still lacks will for selling these
entities. Even if the GoP is serious it has not been able to show its
firm commitment, at least by act.
According to an analyst, "In order to keep the
interest of prospective bidders live in case of PSO, fabulous dividend
is paid every year. To ensure this, a significantly high profit has to
be posted at the cost of POL users. Over the years, the GoP has been
able to get twin benefits, collection of colossal tax and benefit of
dividend. While the GoP has not succeeded in selling the entity, the POL
consumers have been fleeced."
In an attempt to keep KESC 'live' the GoP has
undertaken various financial restructurings as well as injection of
fresh funds but losses keep on mounting. According to an analyst, KESC
suffers from two serious problems — entirely dependent on thermal
power generation and huge T&D losses. Unless these two issues are
resolved injections of billions of rupees cannot make it economically
As regards corporatized entities of Power Wing of
WAPDA it is sufficient to say that the status quo prevails only due to
lack of commitment. Initially the process of restructuring took more
than desired time and even when the entities were created their annual
accounts could never be prepared in time. If the financial statements
are not available, how can the GoP expect any buyer to take any interest
in these entities?
One must accept the fact that initially the process
of privatization was imposed on Pakistan by the multilateral donors and
the resistance was natural. Privatization was initiated to achieve two
objectives — retirement of debt and making the public sector entities
efficient. Over the one and a half decade the situation has changed
completely. The issue of retirement of debt has become irrelevant to a
large extent and some improvement has been attained in the performance
of public sector entities. Therefore, now a homegrown plan has to be
prepared and pursued.
The facets of homegrown plan are evident and the GoP
has also established its commitment, to some extent. However, at times
emergence of inter-ministerial disputes and delay in resolving the
issues give an impression that the government lacks commitment. It is
also true that external factors have also adversely impacted the
At this juncture some difficult decisions have to be
made. The prospects get bleak only due to uncertainty. Only coming up
with firm plans and following the deadlines can remove the uncertainty.
If the Commission can sell off UBL and HBL it can also find credible
buyers for PSO and PTCL.