Much depend on the government policies

Jan 13 - 19, 2003

Recently, Dr. Abdul Hafeez Sheikh, Advisor to Prime Minister on Privatization and Investment visited Karachi. He also visited Karachi Chamber of Commerce and Industry (KCCI) to seek the opinion and feedback on privatization and investment policies of the GoP. The purpose of this visit was to let the business community know more about the ongoing privatization programme, remove the ambiguities so that the process can be accelerated.

As regards attracting investment in Pakistan, Dr. Sheikh did not mince his words. He said, "The capital has no nationality and only reaches those destinations that offer attractive rate of return." He also suggested that there should not be any discrimination between local and foreign investors." Therefore, the policies of any government, including the GoP, should be aimed at creating conducive environment for investment, letting the private sector make its investment decisions and removing the irritants, if there exists any.

As regards the on-going process of privatization, Dr. Sheikh reiterated the GoP policy. The policy is aimed at encouraging the private sector to play its due role. Constant injection of funds into state-owned enterprises is a burden on national exchequer. The global experience shows that all the stakeholders have benefited from privatization. The GoP is committed to privatization and also making concerted efforts but little success has been achieved so far.

Shaukat Iqbal, President, KCCI, in his welcome address pointed out some key issues the trade and industry facing. His complaint was that despite injection of billions of rupees in the KESC, consumers were forced to pay high electricity tariff that erodes competitiveness of locally produced goods. He also hinted that financial institutions were reluctant to commit long-term lending, for the fear of bad debt.

It may be said that the process has moved slow partly due to geopolitical situation in the region. However, it is also necessary to identify those who have been resisting the process. It may be correct to say that those who have vested interest, be it the management or employees, are the biggest critics and the opponents of privatization. They try to create hurdles and often divert the attention of the GoP from key issues to non-issues. This distracts the process and causes delays in concluding the transactions. Due to the unnecessary delays the investors also loose interest and/or the price offered becomes unattractive.

It would not be out of context to refer to privatization of Pakistan Telecommunication Corporation (PTCL). It is on the list for almost a decade but the transaction could not be concluded. Some experts say that it has become a 'lost opportunity'. In the early nineties, when the buyers were keen in acquiring telecommunication companies, Pakistan failed in concluding the transaction. Now the GoP is making desperate efforts but the telecommunication sector has very little attraction for the global investors.

During the discussion the role of various regulatory authorities was criticized. Zubair Motiwala, one of the past presidents of KCCI, referred to a recent decision of National Electric Power Regulatory Authority (NEPRA). He said, while the KESC had asked to a tariff hike, the Authority allowed the utility to raise 'Fixed charges' a request never made by the applicant. Zubair also demanded that there should be proper representation of consumers on regulatory authorities.

Members of KCCI also suggested for restructuring of Board of Investment (BoI). It is interesting to note that almost all the ministries and departments are working for the promotion of investment in the country. However, the pace of investment is still too slow. One of the rationalizations is that the various industries are still suffering from under utilization of installed capacities. Unless these industries achieve optimum capacity utilization, sponsors may not be keen making fresh investment. However, the experts strongly believe that the sufferings of manufacturing sector have intensified due to lack of timely BMR. They also warn that unless the manufacturing go for massive BMR and add new capacities, the quality of local products cannot be improved.

Dr. Hafeez Sheikh reiterated the GoP commitment towards privatization and also said that the process was on track. Privatization of PSO, HBL and KESC is being actively pursued. The second pre-bid meeting of PSO bidders is due shortly.

Though one may say that the GoP has succeeded in concluding only two major transactions (Saudi Pak Fertilizer and United Bank) in last three years. However, the fact is completion of these transactions according to a laid down schedule and the transparency of the process has boosted investors' confidence.