Govt downbeat on recovery of $800m from Dubai-based firm

Expects Rs141.8 billion from US as part of Coalition Support Fund

ISLAMABAD: Pakistan has budgeted $1.3 billion Coalition Support Fund (CSF) receipts from the US, but has not shown $800 million outstanding privatisation receipts from a Dubai-based company as the country’s finance minister pleaded that ‘no over-activism’ should be shown on the matter.

“The issue of $800 million outstanding receipts from Etisalat is a sensitive matter and there should not be any over-activism on this matter,” Finance Minister Ishaq Dar said while addressing a post-budget news conference on Saturday.

Dar was responding to a question as to why the government did not show the privatisation proceeds from Dubai-based Etisalat on account of sale of shares of the Pakistan Telecommunication Company Limited (PTCL) as part of the new budget.



The minister also hoped that Pakistan would receive Rs141.8 billion or $1.33 billion from the US on account of the CSF disbursements, although he downward-revised the receipts for outgoing fiscal year. Against the original budget estimates of Rs170.7 billion, the government has now adjusted the amount to only Rs74.5 billion.

After a change of administration in Washington, many issues between Pakistan and the US remain unresolved including future assistance to Pakistan, according to people privy to the developments.

On the issue of PTCL arrears, Dar said the matter had foreign policy implications like the Yemen issue. “I have sent a secret note on the delay in realisation of receipts to Prime Minister Nawaz Sharif,” he said.

The $800 million in arrears from the PTCL privatisation are again not mentioned in 2017-18 budget books. The explanatory memorandum on the federal receipts book for the next fiscal is silent on the outstanding proceeds owed by Etisalat to Pakistan for buying 26% stakes in the PTCL for many 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 Rs84.6 billion. In July 2005, Etisalat had bought 26% shares in the 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 on the offer.

The 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 installments until September 2010. Moreover, he committed to transferring the properties owned by the PTCL to Etisalat.

However, Finance Minister Dar maintained that Pakistan has not surrendered its right on the privatisation receipts and is pursuing the matter. He said the government of General Pervez Musharraf made a wrong decision of amending the contract after the bidding process.

This mistake, according to Dar, 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. Pakistan has already transferred about 3,215 properties but the remaining properties could not be transferred.

Cause of conflict

As per the agreement, in case of a dispute over valuation of property prices, the higher value of both will be considered as final price. According to the finance ministry officials, Pakistan has shared its valuation about two years ago with the Etisalat but the company has not shared its valuations with Pakistan.

They said one of the options in front of Pakistan was to take the matter for arbitration but for that political courage was required which the government was not showing at the moment.

According to sources, the Etisalat wanted Pakistan to sell it 25% more shares. There was also an option to buy back 26% stakes from the Etisalat at the current market price.



Answering a question, Dar said his government could not implement the privatisation agenda due to politics on the matter. “All the political parties should agree to a Charter of Economy to put the country on the path of sustainable development,” he added.

The finance minister also defended his new budget and said despite the upcoming general election, the government did not open the purse for public. “The new budget is presented with an aim to consolidate gains made during past four years,” he claimed.

He also offered the opposition parties to agree on the next five years economic reforms agenda in order to ensure consistency of policies, irrespective of which party forms the government at the Centre after the next elections.



The minister said that the PML-N government would present the next budget which will be its sixth in a row. He said it was not the job of the caretaker government to formulate policies, and the PML-N government would exercise its right by giving budget before June 4, 2018.

“The government plans to achieve next year’s economic growth rate target of 6% on the back of Rs2.113 trillion development spending. The proposed Pakistan Development Fund and Pakistan Infrastructure Bank will support to stimulate economic growth,” the minister added.