State-owned companies to be offered to UAE

PM Sharif to visit UAE from January 12 to January 13 to advance investment ties

ISLAMABAD:

The request to rollover the maturing $2 billion debt will be on top of Prime Minister (PM) Shehbaz Sharif’s to-do-list during his visit to the United Arab Emirates (UAE) this week, as work on a proposal to offer 10-12% stakes in listed government companies is still in its infancy stage.

A coordination committee setup to make preparations for the premier’s visit, on Tuesday, reviewed the list of entities that could be offered to the UAE for investment, including the Pakistan Telecommunication Limited (PTCL), the government sources told The Express Tribune.

Almost all decisions, however, were deferred for the PM’s review, including PTCL, due to a dispute of over $800 million that remain outstanding from the previous privatisation. There was also opposition to another proposal that suggested handing over Qasim International Container Terminal (OICT) to the UAE until 2065.

Headed by Commerce Minister Syed Naveed Qamar, the committee reviewed the list of entities that could be offered – no final decision was taken on Tuesday.

After the meeting, it emerged that the only concrete proposal so far was to request the UAE to extend the $2 billion debt that is set to mature between February-March. The loan had been taken by former Prime Minister Imran Khan in 2019 but the country remains unable to repay it.

Currently, Pakistan’s foreign exchange reserves stand at $4.5 billion, too thin for the country to lose another $2 billion. There was also no progress with the International Monetary Fund (IMF) in the talks held on the sidelines of the Geneva conference. In April 2022, PM Sharif visited the UAE to seek additional funding, however, Dubai offered to buy stakes in listed government entities equal to $2 billion instead. Since then, the government has been unable to finalise the modalities of the entities it can offer.

Invited by UAE President, Sheikh Mohamed bin Zayed Al Nahyan, PM Sharif will visit the UAE from the 12-13 January 2023, according to a statement from the PM’s office. This will his third visit to the UAE after assuming office.

During the visit, the PM’s particular focus will be “on advancing economic, trade and investment ties between the two countries, and creating increased opportunities for the Pakistani workforce in the UAE,” it added.

Pakistan and the UAE have been discussing a proposal to allow the commercialisation of PTCL properties to settle some of the $800 million outstanding – a dispute that may become a hurdle in further sales of assets to Dubai.

According to sources, another hurdle in offering Etisalat –the UAE’s telecom giant – 25% additional shares from PTCL is Etisalat withholding $800 million in dues on account of the remaining payments against 26% PTCL shares. Last year, the UAE also linked all future financial packages with the sale of assets due to the country’s inability to pay back old loans. The sources said that, in a recent meeting with Advisor to PM Ahad Cheema the issue of property commercialisation was discussed. The Pakistani authorities, however, have linked the permission to commercialise with the payment of at least $500 million in outstanding PTCL dues.

Ahad Cheema was not available for comment.

In 2019, Etisalat offered to settle the dispute by paying $263.7 million. The offer was lower than the $400 million that Etisalat was ready to give in 2015. Etisalat had valued the non-transferable properties at Rs31 billion. Instead of taking the foreign exchange rate of Rs140 to a dollar prevailing in 2019, it converted the amount of Rs31 billion at the rate of Rs62.75 to a dollar in January 2008, which came to $499 million, according to the sources. “This was not a fair offer,” they added.

The Pakistani authorities are of the view that of the 33 properties, the ones in Gizri Karachi and Multan Road Lahore have a share of 60/40 between PTCL and Pakistan Post, which is also acknowledged by the PTCL. Moreover, in Dhana Singh Lahore property, 660 kanals, or 92% out of 710 kanal stand mutated.

Etisalat already has Rs30 billion stuck in Technical Service Assistance (TSA), which it now wants to settle against the $800 million. They are of the view that if Etisalat is allowed to convert these properties for commercial use, it can raise Rs40 billion that can be paid to Pakistan, according to Pakistani authorities.

During Tuesday’s meeting, the committee reiterated that Pakistan will retain majority stakes in the companies and at this stage, a fair price tag cannot be offered due to the depressed market prices. At best, Pakistan will offer a list of companies and based on Dubai’s interest financial advisors will be appointed to determine the price, according to the officials. There are around a dozen and a half government companies listed on the stock exchange. The big ones are OGDCL in which the government has 67% stakes, Pakistan Petroleum Limited (68% GOP share), Sui Southern Gas Company Limited (53%), Pakistan State Oil Company Limited (22%), Sui Northern Gas Pipelines Limited 32% and Mari Petroleum Limited. Along with some other companies owned by the military including, Fauji Fertiliser Company Limited, Fauji Cement Company Limited etc.

PSO, SNGPL and SSGCL, however, cannot be offered to the UAE as the government will lose management rights.

Due to low market prices, however, and with a plan to offer only 10% shares, Pakistan may not make enough money to permanently end the risk of default.

 

Published in The Express Tribune, January 11^th, 2023.

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