Pakistan keeps mum on $800m owed by UAE's Etisalat

ISLAMABAD: The $800 million in arrears from the privatisation of Pakistan Telecommunication Limited are not mentioned in 2016-17 budget books, suggesting the government may have foregone the debt in favour of the Dubai-based buyer.

The explanatory memorandum on the federal receipts book for the next fiscal 2016-17 is silent on the outstanding proceeds owed by Etisalat to Pakistan for buying 26% stakes in PTCL for several years now.



The total privatisation proceeds the government has shown for the new fiscal is only Rs50 billion while at the current exchange rate, the PTCL dues alone amount to Rs84 billion.

In fact, a senior finance ministry official said the amount was excluded, for the first time, in the last budget.

Finance Ministry spokesman Dr Shujaat Ali did not comment on why the ministry had excluded the money from its budget books.

“We have been creating false hopes of receiving $800 million by showing the amount in the budget while the PTCL sale-purchase agreement dictates the value of non-transferable properties will be deducted from the outstanding dues,” reasoned Mohammad Zubair, the chairman of the Privatisation Commission, while talking to The Express Tribune.

He hastily added excluding the amount from the budget books did not mean that Pakistan had foregone its right. He claimed to have taken up the issue again with the Etisalat authorities last month.



In July 2005, Etisalat bought 26% shares in PTCL with management control at a price of $2.6 billion. After coming to know the second lowest bid was actually $1.4 billion only, the UAE-based firm tried to backtrack from the offer.

Then privatisation minister Dr Abdul Hafeez Shaikh lured the company by offering it to make an initial payment of $1.4 billion and the remaining amount in nine instalments until September 2010. Moreover, he committed to transferring the properties owned by PTCL to Etisalat.

People familiar with the deal say the privatisation ministry made a mistake by committing the government would transfer over 3,248 properties of PTCL to Etisalat.

This mistake has now become a problem for every government, as the Etisalat management has taken a stand that Pakistan has violated the sale agreement that clearly linked the deal with transfer of PTCL properties.



Zubair said the government already transferred about 3,215 properties but the remaining properties could not be transferred. In May last year, the Privatisation Commission chairman told the Public Accounts Committee the cost of 34 properties, which could not be transferred, came to around $92.4 million. He said the government asked Etisalat to adjust $24 million of the $92.4 million, equivalent to the company’s 26% shareholding in PTCL, and transfer the remaining amount.

However, there is a wide gulf between the valuations from both parties.

Zubair told the PAC that Etisalat did not share its valuation with Pakistan but, according to information, it was over $450 million. He said the firm had submitted its valuation to the Escrow Account agent of HSBC Bank, London.

But experts say the government’s decision to exclude the amount from the budgetary estimates would weaken its case against Etisalat. The government’s decision to exclude $800 million from its receipts has also put a question mark over the decision to transfer over 3,200 properties.

After taking over the finance ministry, Ishaq Dar had vowed to recover this money from Etisalat by September 2013.

Published in The Express Tribune, June 7^th, 2016.