Govt decides to sell HBFC

Puts off decision on hiring financial adviser for privatisation of Roosevelt Hotel

ISLAMABAD:

The government on Monday decided to sell House Building Finance Company (HBFC) under a negotiated deal but deferred decision on appointing a financial adviser for the privatisation of Roosevelt Hotel, New York.

The decisions were made by the Cabinet Committee on Privatisation (CCOP), which also green-lighted the handing over of Services International Hotel (SIH) to the buyer after two years of privatisation. Finance Minister Ishaq Dar chaired the CCOP meeting.

The Privatisation Commission updated the CCOP on the privatisation process of Roosevelt Hotel, said the Ministry of Finance. The CCOP, after discussion, deferred decision on a summary with the directive to submit an update on the privatisation of Roosevelt Hotel after consultation with the aviation ministry.

In July 2020, the then federal cabinet had decided to appoint a financial adviser for giving Roosevelt Hotel on lease under a joint venture. However, for the past three years, no government could appoint the adviser.

Meanwhile, Pakistan gave the hotel on a three-year lease to the New York City Health and Hospitals Corporation as an immigration detention facility.

The Privatisation Commission informed the cabinet committee that the aviation ministry was not responding to a question whether the government should still hire the financial adviser. Committee members were of the view that the hiring of financial adviser at this stage may result in an additional cost when there was no clarity on part of the aviation ministry.

Pakistan’s privatisation process has remained painstakingly slow and many privatisation transactions carried out since the 1990s remain disputed, including cases where some of the bidders are withholding payments to the government.

The Privatisation Commission also submitted a summary on the sale of SIH and updated the committee on the privatisation process.

The CCOP, after detailed discussion, allowed the commission to proceed towards successful conclusion of the SIH transaction with completion of transfer and mutation process in the name of the purchaser, said the finance ministry.

In August 2021, the government had sold the hotel to Faisal Town for a price of Rs1.951 billion. The bidder paid the full amount in January 2022 but it has not yet got possession of the property.

In the past, the CCOP has frequently referred the matter to many forums and also got fresh verification of market price of the hotel. But all inquiries simply wasted time and eroded credibility of the government.

The Privatisation Commission also presented a summary on the sale of HBFC with a single pre-qualified bidder.

The CCOP decided to allow the Privatisation Commission to proceed with a single source and a negotiated transaction with Pakistan Mortgage Refinance Company Limited (PMRCL) for the privatisation of HBFC, according to the finance ministry.

HBFC has been on the active privatisation list since 2018. Four parties had shown interest in acquisition. Two foreign bidders, ICD-Islamic Development Bank and IFIC Bangladesh, subsequently did not show interest in the transaction. The State Bank of Pakistan did not clear the third bidder, Pakistan Housing Finance Company, due to its “non-compliance status”.

The Privatisation Commission tabled a summary related to its budget estimates for fiscal year 2023-24 to the tune of Rs1.25 billion. The CCOP, after detailed deliberation, approved the summary.

It was for the first time the commission presented its budget to the CCOP as per requirements of the Privatisation Ordinance.

The Privatisation Commission also presented summaries on the privatisation of Pakistan Engineering Company (PECO) and Sindh Engineering Limited (SEL) and briefed the meeting on their status. Following discussion, the CCOP deferred decision on both the summaries with directives that secretary Privatisation Commission, secretary law and secretary industries may hold mutual consultations and come up with a future course of action in both cases.

Both entities have been on the privatisation list for a couple of decades but no decision could be made on their fate. SEL has not been operational since 2008 and its audited accounts have been pending since 2018. There are serious disputes over its two prized properties – a commercial plaza in Lahore and an agricultural land in Kasur.

Similarly, there are many hiccups in the privatisation of PECO, which include a dispute over Rs7.2 billion in receivables, a NAB inquiry, an illegal joint venture formed by the PECO managing director without seeking the government’s approval and a dispute over its prized land.

The Privatisation Commission had recommended delisting PECO and SEL from the sell-off programme but the CCOP did not agree.

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

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