PRIVATIZATION POLICY ANNOUNCED
SHAMIM AHMED RIZVI
Feb 23 - Mar 01, 2009
The Cabinet Committee on Privatization (CCoP) approved new Privatization Policy based on concept of Public-Private partnership (PPP) envisaging sale of 26% shares of state owned enterprises with management control to the investors.
The policy announced in the meeting held at the Prime Minister House, under the Chairmanship of PM's Advisor on Finance, Shaukat Tarin also approved transfer of 12% shares (previously it was 10%) of all state owned entities to be privatized to its workers. Pakistan steel, Qadirpur Gas Fields and PIA have been deleted from the list of proposed privatization and a new list of 21 state owned enterprises including Pakistan Railways has been drawn. The CCoP also approved leasing out of two power plants for 15 years.
Briefing newsmen about the new policy at a press conference Minister for Privatization Syed Naveed Qamar said that the new privatization policy has been modeled around the concept of public-private partnership and divestment of 26 per cent shares of the state-owned enterprises (SOEs).
The policy also envisages transfer of 12% of shares of all SOEs to the workers of these entities, he added. He said that the committee approved privatization of Peshawar Electric Supply Company (PESCO), National Power Construction Company (51 per cent divestment), Faisalabad Electric Supply Company (FESCO) and Kot Addu Power Company (KAPCO). On the issue of Thermal Power Stations of Jamshoro Power Company Limited (Jamshoro and Kotri), the committee advised the commission that instead of strategic sales, insert a proviso in the leasing document that stipulates time limit for enhancing production capacity of the leased units.
It also approved privatization of SME Bank Limited, Pakistan Railways, Heavy Electrical Complex, Pakistan Machine Tool Factory, Pakistan Mineral Development Corporation (PMDC), Morafco Industries (Machinery as is where is basis), PTDC Motels and Restaurants, Utility Stores Corporation, Pakistan Post, National Insurance Company, Pakistan Reinsurance Company and State Life Insurance Corporation.
CCOP further approved land issues for privatization consideration with regard to Printing Corporation of Pakistan, Services International Hotel, Sindh Engineering Limited and Republic Motors Limited. It directed Privatization Commission to constitute a committee to look into the micro details concerning management control transfer of the said companies ensuring transparency and good governance.
The committee approved Ministry of Privatization proposal for agreeing to the request of successful bidders of M/s Faletti's Hotel Development Private Limited (formally 4 B Marketing Limited) to develop hotel site in accordance with the site plan and complete the project within 36 months.
The CCoP further advised the Ministry of Water and Power and Privatization Commission to associate the Ministry of Law and Justice while finalizing the lease documents. Jamshoro Power Company Limited (JPCL), incorporated in March 1998 as a public limited company under the Companies Ordinance 1984, is one of the four generation companies (Gencos) established in unbundling process of the integrated power wing of Water and Power Development Authority (WAPDA). The JPCL operates two electricity generation facilities. TPS-Jamshoro is an 880 mw gas and furnace oil fired power plant comprising of four units whereas TPS-Kotri comprises seven units with 174 MW capacities. JPCL's sell-off process had started in April 2002 with the appointment of Price Waterhouse Cooper (PWC) as the Financial Advisor.
The government approved the transaction structure for the sale of 51 per cent of its shareholding in the company along with transfer of management. The Expressions of Interest (EoIs) for privatization of JPCL were initially invited in February 2003. Eight parties submitted EoIs, three parties shared interest however all parties lost interest due to delay in tariff determination by NEPRA. Second EoIs were invited on August 25, 2004. Twelve parties submitted EoIs but only four parties submitted the Statement of Qualifications (SoQs) by the due date. However, the transaction could not be carried forward as NEPRA had not determined the appropriate tariff and there were problems on the mutation of two out of three land lots held by JPCL.
While politicians in Pakistan rarely agree on anything, privatization is one area in which there is a consensus. Barring a few years under Zulfikar All Bhutto in the 1970 privatization has always remained a cornerstone of the economic policies of successive governments. The Pakistan Industrial Development Corporation, established in 1950, set up numerous successful industrial projects and transferred them to the private sector. In 1991, Pakistan began selling state-owned enterprises (SOEs) on the pretext that private capital was more efficient than public capital. The new privatization policy assumes the same. If the private sector were as efficient as officials believe, there would not be numerous sick industrial units needing government help.
Decision-makers often argue that a government has no business to run a business. It should rather focus on building infrastructure and ensuring a congenial environment for private businesses in order to eliminate poverty and create jobs, and put in place an efficient regulatory mechanism to protect labour and consumer rights. But that is a job poorly done. Both private business and government have dithered in their responsibilities.
Not one privatization policy since 1991, including the recent one has ever sought to properly regulate the private sector to safeguard the interests of labour and consumers, or even the economy. All policies seek to protect the investors. The privatization of SOEs has always resulted in large-scale unemployment and price hikes besides encouraging crony capitalism. No wonder workers and ordinary people dread the rise of private capital and the government's withdrawal from business.