In a major setback to the government’s effort to bridge the widening gap between income and spending through recovery of $800 million from Etisalat, a secret mission, led by Interior Minister Rehman Malik, has failed to convince UAE rulers to use their influence on the company and get the withheld amount released.
Pakistan’s offer that if Etisalat – the buyer of 26 per cent shares in Pakistan Telecommunication Company Limited (PTCL), makes an emergency payment of $600 million (Rs51.6 billion) it would consider writing off the remaining amount was also rejected, said finance ministry sources. Instead, they added, Etisalat hinted at releasing money against getting more shares.
Sources told The Express Tribune that Rehman Malik and Secretary Privatisation Imtiaz Kazi flew to the United Arab Emirates last Saturday for resolving the issue of the $800 million (Rs68.8 billion) installment. Malik held meetings with the Emir of Dubai and the minister of state for finance.
“They promised to look into the matter but did not make any commitment,” said Secretary Privatisation Imtiaz Kazi. He said the Etisalat chief may visit Islamabad next month.
The finance ministry has been striving to get the $800 million released before June in a bid to utilise the money for financing the budget deficit. This will help lower the deficit by 0.4 per cent of total size of economy. The ministry insists that it can still manage to restrict the deficit to 5.5 per cent or Rs941 billion by the end of June.
In July 2005, Etisalat bought 26 per cent shares in PTCL with management control at a price of $2.6 billion. However, after coming to know that the second lowest bid was only $1.4 billion, the company tried to backtrack from the offer. Finance Minister Dr Abdul Hafeez Shaikh (then privatisation minister in the Musharraf cabinet) 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 transfer properties owned by PTCL to Etisalat.
People familiar with the deal say the then privatisation ministry made a mistake by committing that the government would transfer over 3,200 properties of PTCL to Etisalat.
This mistake has now become a problem for the government, sources said, adding the Etisalat management has taken a stand that Pakistan has violated the sale agreement that clearly linked the deal with transfer of PTCL properties.
Sources said though the government has transferred most of the properties, it has been unable to give clean titles due to the litigation process.
Last year, Prime Minister Yousaf Raza Gilani constituted a ministerial committee to resolve the issue of property transfer and the outstanding $800 million due from Etisalat. The committee has so far failed to give a workable formula.
Sources said Pakistan also asked Etisalat to release money for the properties that have so far been transferred. The value of such properties has been estimated at $300 million, but the PTCL management did not agree to this.
Published in The Express Tribune, May 19th, 2011.
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