PRIVATISATION IMPASSE

166 TRANSACTIONS EARNED $9 BILLION SINCE 1991

SYED FAZL-E-HAIDER
Aug 11 - 17, 2008

The Privatisation Programme Finalised by the PPP led coalition government for the fiscal year 2008 has received another jolt as seven more major privatisation transaction included in the Sell-Off list have been postponed indefinitely due unfavorable investment climate in the country.

According to a spokesman of the Privatisation Commission Oil and Gas Development Corporation Limited, (OGDCL) Pakistan Petroleum Limited (PPL), Sui Northern Gas, Sui Southern Gas, KAPCO, National Bank of Pakistan (NBP) and Habib Bank of Pakistan Limited (HBL) have been removed from the sell-off list prepared and approval by the Board of Privatisation Commission. The Board had already dropped PIA and PSO from sell-off programme of the current year.

The PC board met recently with Finance and Privatisation Minister Syed Naveed Qamar in the chair approved sell-off list for the next fiscal year. Despite stiff resistance from certain quarters, the Shaukat Aziz government had offered PIA and PSO for sell-off. The PSO sell-off plan landed into litigation at a later stage and the PIA could not be brought at advance stage due to sharp differences among different government departments.

While fluctuation in oil prices given the major reason for delaying the disinvestment of oil and gas entities, the grim security situation and the negative market sentiments were cited to be the major problems to sell the remaining share; of the NBP and HBL during 2008-09 through Global Depository Receipts (GDR).

Earlier, the Privatisation Commission (PC) had set a $1.8 billion target for privatisation proceeds for 2008-09. But now the government believed that under the present circum-stances, these mega entities would not fetch a better price, therefore, the commission should not bring them in the market. The regulatory regime of oil and gas entities is still not considered strong and they have problems of domination and monopoly. Also, the Senate Committee on Petroleum and Natural Resources is opposing these transactions.

However, a senior official of the Privatisation Commission told that 16 other transactions worth Rs 52 billion were being finalized to be disinvested during 2008-09. These also include Small and Medium Enterprises Bank, Hazara Phosphate Limited (HPL), Heavy Electric Complex (HEC) hotels of Pakistan Tourism Development Corporation (PTDC) and National Power Construction Company (NPCC), while will be privatized next month. "A very robust plan has been finalized to complete 16 transactions within this financial year despite various problems," the official said.

The Privatisation Commission is also planning to privatize 26 motels out of 43 presently being run by Pakistan Tourism Development Corporation (PTDC). The Ministry of Tourism has asked for delisting 15 motels out of the 26 included in the list of proposed sell-off during the year. The PTDC motels being privatized through the Privatisation Commission includes Astak (Sakardu), Ayubia (Abbottabad), Baffar (Swat), Bamburet (Chitral) Barseen (Kohistan), Besham (Sangla Paas), Chitral, Birmoglasht, Mastuj and Bunni (Chitral), Chakdara (Malakand), Chattar Plain (Batagram), Gupis (Ghizar), Hawks Bay (Karachi), Hunza(Gilgit), Katas (Chkwal), Khaplu (Ghanche),Panakot (Dir), Phander (Ghizar), Rama Lake (Chilas), Saidu Sharif (Swat), Satpara (Skardu), Sust (Gilgit) Taftan (Dalbaddin) and Khuzdar,(Gilgit) and Chitral.

In 1998 PTDC three main hotels, including Faletties (Lahore Beans, Peshawar ) and Cecil (Murree) were privatized, the matter of privatizing more resorts was under consideration since 2005. Unfortunately for last few years the country did not have idealistic scenario for tourism due to deterioration law and order situation and political uncertainty. The official statistics revealed that during January-October 2006 Pakistan hosted as many as 0.733 million tourists while the numbers reduced to 0.691 million during the same period of the calendar year 2007.

The other projects included in the sell-off list are Hazara Phosphate & Fertilizers Limited, Heavy Electrical Complex (90percent shares), Jamshoro Power Company (5I percent), Faisalabad Electric Supply Company Ltd. (56 percent shares), Printing Corporation of Pakistan (assets), Pakistan Machine Tool Factory (90 percent shares), Morafco Industries Limited (assets), Sindh Engineering Limited (assets), Lakhra Coal Mines Project, Khewra Salt Mines, Pakistan Steel Mills Corp; (10 percent shares) through IPO and Services International Hotel.

The PC board' also approved pro-workers policy and made offering of 10 percent shares of the public sector entities for the workers. He formed a committee to work out the modalities for the transfer of shares to the workers of state-owned enterprises prior to their sell-off. Naveed Qamar said the government was in the process to make the Privatisation process as pro-worker and pro-people as Possible and transfer the benefits of sell-off to them in a transparent manner.

Meanwhile the Anti-Private Alliance mainly comprising the leaders and activists of workers unions of Privatized or under Privatisation enterprises has demanded to hold the Privatisation for the time being and in the meanwhile a through probe may be conducted by an independent commission headed by a non-PCO judge of the supreme court to probe into the Privatisation deals made so for. The alliance alleged that the state has suffered a loss of over Rs 1500 billion because of large scale corruption and under the table commission and kickbacks. For the first time, former chief justice of Pakistan Iftikhar Muhammad Chaudhry exposed this on going fraud in case of Pakistan Steel Mills. There has been almost a lull in the Privatisation Commission since the Supreme Court stopped the deal in case of Pakistan steel mills.

Responding to a question, the officials said that the privatisation of Pakistan Steel Mills was being reviewed after its balancing, modernization and replacement (BMR) and the increasing steel prices. "Since the Mills is no more in red and has started earning profit, its privatisation was not currently being considered", he said. He further said that the issue was still in the Supreme Court and was also required to be cleared by the Cabinet Committee on Privatisation. However, the official did not think that the government would take the issue to the Council of Common Interests (CCI) for clearance.

The official said that the labour issue was also forcing the government not to take up the privatisation of the Steel Mills at least during the current financial year.

Prime Minister's Adviser on Industries and Production Mian Manzoor Wattoo, after visiting the mills last week, is believed to have submitted a report to the premier urging him not to allow the privatisation of the mills.

Six other transactions Faisalabad Electric Supply Company, Jamshoro Power Company, 10 per cent Initial Public Offering (IPO) of Pakistan Steel Mills Corporation, Coal and Salt Mine Companies, Pakistan Machine Tool factory, Services International Hotel, Printing Corporation of Pakistan and the remaining 62 per cent shares of Pakistan Telecommunications Company Limited were also not expected to come up for disinvestment during 2008-09.

Other mega transactions involving airports, shipyards and other companies, entities of engineering, bank and insurance were also being delayed. The government is expected to courage Voluntary Separation Scheme in various state sector enterprises offering 50 per cent funds so that no organisation to be privatized should move its employees for a period of one year. Ever since privatisation process started in 1991, $9 billion had been collected as part of the privatisation proceeds. During this period, the PC had completed a total of 166 transactions.