The government is working on preparing a list of public sector companies for sale to reduce the government’s footprint in the public sector, says Muhammad Zubair, chairman of the Board of Investment (BOI).
“It is not the government’s job to do business”, said Zubair on Wednesday, in his first interaction with journalists since becoming the BOI chairman. He did say, however, that the government will change some companies’ boards of directors to improve performance.
He said work is underway to separate those companies that will be privatized from those the government will restructure to make more profitable. Zubair said they hoped to complete the evaluation process within a month.
Though the list has not yet been finalized, Zubair has already confirmed that power generation and distribution companies, Pakistan Steel Mills and Pakistan State Oil will be privatized.
According to Zubair a committee will be formed to reduce the size of the government. In the power sector alone, as many as 19 state owned companies are operating at both provincial and federal levels. “The size of the government is too strong and too heavy”, said Zubair.
The privatisation of state-owned companies is one of the conditions imposed by the International Monetary Fund’s $5.3 billion to $7.3 billion bailout package. According to various estimates, Pakistan is losing between Rs400 billion and Rs500 billion due to losses incurred by state owned companies.
The inefficiency of state owned companies, however, is only one reason for the loss of money. According to Zubair, the previous government’s credibility scared investors away, who became unwilling to invest in Pakistan. This resulted in the investment to GDP ratio dropping from 23% of GDP in 2007 to below 13% of GDP in 2012. The massive drop in investment in the last five years led to a loss of $20 billion.
That is why the government is not only trying to privatise state owned companies, but also jumpstart previously stalled investments, and attract new investments. One example Zubair pointed out is the Yamaha Company delegation that has been in Islamabad for the last two months to sign an agreement for a $150 million production plant.
Zubair said bringing in new investment was one of the top priorities of the PML-N government. He said for the current fiscal year the investment target was set at $2.5 billion, up from last year’s total investment of $1.4 billion. Zubair said most of the $2.5 billion investment will be in the power sector.
Published in The Express Tribune, July 18th, 2013.
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Pakistan Steel mills is running at 9% capacity , what a strange matter, Government CAN NOT run industrial plants, it is just burden on tax payers, why not sell it to some private company, in fact steel mills is not privatized due to its political affiliations/ interests up till now. If you want this department to run in profit, it must be privatized immediately. In my view Government may run its own state affairs and matters successfully, it is merely making fool that government can run PSM like industries, all the industries privatized in the last twenty years previously are earning profits and running successfully, where as Pakistan Steel needs life saving financial injection after every exact time, so showing no trends of going into profits, even PSM can not even earn and generate resources to pay salaries to its thousands of employees. It is alarming to know man power strength doing nothing, just want salaries. PSM must be privatized immediately to save billions of tax payers money going in corruption.
govt has no choice but see privatise various deptts projects the country is being ruled by some 2000 families , these familieS WILL PURCHASE PIA RAILWAYS STEEL MILL etc.
The treatment for each Company is Different ++++++++++++++++++++++++++++++++++++ Close Pakistan Steel Mills: there is a glut in International Steel and cheaper to import Invest in Pakistan Railways: Apart from boosting economy will also get votes.For next 3 years Lease to China/Indian Railways Based on a Competetive Tender.First priority is to get a minimum number of Trains reliably running. Privatise PIA: No Govt can run a thin margin service industry PSO : toss a coin.
Mr Dar Pls forward 10 % of the savings to me.
Oh and for all intensive purposes, PIA has already been privatized ;)
Investment Bankers et. al. licking their lips.
@meekal a ahmed: If investment was maintained at 23 pc of GDP additional $20 billion would have come to Pakistan
Excellent decision, the present govt must do its home work and bring back these companies to a level where the private investors are interested in purchasing them.The govt must get a good price for these entities by selling them. PIA, WAPDA and RAILWAY should be considered along with the NATIONAL BANK OF PAKISTAN. I hope that it will be done in next two to threes years time. Please ensure this whole process is transparent and the money earned from the privatization is spend on the construction of Bhasha Dam as it is the most important project and life line of Pakistan and its future generations.
@oilman: . *is it going to be Mansha, Kuwait petroleum or Abraaj group??? Seems the deal has been done, only first shot fired!!!!
Enough reasons to justify the above 3 names…..* . I feel that the Pakistan Steel Mill will be taken over by the Chinese. . Cheers
Mian Mansha's dream to own PSO may finally come true.
Anyone need insights of Pakistan Steel Mills? I was the auditor of it. Just ask me any question related to PSM and I hope I won't disappoint you.
@Sadaf During an industrial salary survey, I visited the steel mill. I was told that permanent employees didn't work and the managent relied on contracted employees. The salary data given to me revealed that cost of medical facility extended to the employees was more than the wage bill because of fake medical claims. The quality of management employees I met were far inferior / less professional than one would find in a commercial organisation. The steel mill was making losses. This was mid 80s. By the way tell your mother not to worry as long as the Chief Justice is around.
Great decision! Do it fast. Government has no business running these entities. Instead, Governtment can focus on consumer protection, regulation that helps consumers and peace which will bloster business. Less Government there is the better people are!
@ All those who think selling national "assets" is not right! These are not assets period. Yes people will loose jobs but why should people have jobs in companies that are not making money ? A smaller, leaner and profitable company is better for economic development than a giant and lousy company run by the Government where people are just drawing salaries.
How was the Rs 20 billion loss from the drop in the investment ratio calculated?
I agree with you, but a little difference of wordings in my and your comments. The word "business" usually have two meanings in different contexts, Government job is not to do business if business means "activity that generate profit", but its definitely the govt's job to do business if business means "activity that serve the nation".
@Hasan: I am tired of supporting these through my taxes. Government officials are particularly unsuited to run businesses, not in the least because they are not accountable. State run enterprises are not accountable because they don't have to. That is the main lesson of the 20th century.
I have my concerns about non-transparent sales but by and large this is a good move
Time to reward opportunists like Mian Mansha who funded PMLN in elections.
@Only In Pakistan: Please do not compare Pakistan with Singapore. In Singapore the Government and visionaries like former PM Lee Kuan Yew are dedicated to the betterment and progress of common citizens and the country and conduct their affairs with complete transparency and integrity. You never had leaders like that. Just hope PML N does not give away these assets at "fire sale" prices to cronies and supporters and deals are transacted at arm's length in the interest of the people of Pakistan.
I also notice that PIA's mention is conspicuously missing in the news report. PIA should be privatized even before PSO.
@Asharaf: You nailed it.
I can bet these state units by hook or crook will be going to Mian Mansha Group.
@asim: You have just made an angry-stupid point
.......and why not PIA ????
in india the psu were given autonomy under some scheme depending upon the scale of operation. this freed them of ministerial and bureaucratic redtapes and on the other hand they lead to increasing the size of psu and increase in efficiency.
ntpc one of them is now double the size it used to be and earning profit of billions of dollars every year
and they criticized Musharraf when he was selling steel entity fair and square on the basis of calculation of Mittal formula. Its a formula in the steel industry clearly defining productivity expectancy of a steel entity. A Saudi group conglomerate was buying it back then as they were already setting up the infrastructure for amongst world largest steel mills nearby and for that to lay vast its infrastructure but sadly due to doldrums created the investment just disappeared.
I agreed to your point but let me tell you the facts as well as my father was an engineer there and there were times when workers used to work in live burning furnace to repair for the saving millions Rupees as an expenditure to the org and what i believe is the management is the one who control the stances you quoted...in Musharaf Era where all these discrepancies gone??
The same Pak steel used to provide Cheap Electricity as they have Separate Power generation Plant and today what are the circumstances that what we have witness..
what my point is that do anything for the betterment for the org but not on the neck of employees.
@Hasan: in india privatization has done wonders.its a good decision by pak govt.private business will brong efficiency and productivity with othet dividends.
The rulers never privatize their own assets they sell the state assets... How funny
the present regime think that it is only their and their family right to do business so every stupidity is carrying out.......
Employees shouldn't fear losing their jobs. Its not going to be as if the new owner will fire everyone and hire new faces. Those that were hired on political basis should fear. Second, the monetary value of Pak Steel is low at the time being due to debt, losses and severe corruption by the management. Things will improve because no idiot would buy the company to incur loss. The government needs to get rid of this source of corruption and invest into other matters.
PSO has been driving the wheels of the national economy and is the first public company to pass the 1 Trillion rupee revenue mark. (51% state owned)
PSO has the honor of being ranked 20th in the 7th Annual 'Dinar Standard survey' published in the 'Top 100 Businesses of the Muslim World'. The only Pakistani co. on the list.
46% of the total tax revenue of Govt is through tax on Petroleum products. and more than 75% of that share is submitted by PSO (75% is PSO's market share in retail sector of Pakistan).
PSO's accountability systems are extremely prim and proper. With very strong internal audits, External audits by all the major auditing firms of Pakistan (due to magnitude of PSO all of the the big four auditing firms are employed), Govt. Audits.
PSO's stock price is also very high.
The best thing that can happen to PSM, PIA, PR, and other subsidy eating SOEs. Salams
is it going to be Mansha, Kuwait petroleum or Abraaj group??? Seems the deal has been done, only first shot fired!!!!
Enough reasons to justify the above 3 names.....
.it will be great day when these corrupt department will be privatize, other management will run these projects properly by this production will increase and ultimately revenue will generate and economy of Pakistan will be strong.. so let us see....Its very difficult decision but its requirement in the favor of Country.
[email protected] Very sad to read yr comment that yr MOM cried due to Power cut by KESC,but it was not surprise for us to see this situation due to these Employees , those are working since 24 years or more than, you are best witness that the Bang lows , luxuries , separate vehicle for individual family member of PAK STEEL EMPLOYEE,from whom these came? corruption ??????I have seen the Buses of Pak steel ,the people are going for job by the support of stick, by support of other Employees or their Child to reach at office with the shopper of medicine, my relatives are also working with same condition so sorry to say that these Employees are directly or indirectly responsible for this situation.those workers are sincere with own department the results are coming better at the same umbrella under the same Govt , Motorway Police department is example . so its better that sell out at least 50% of these hungry department and change all the employees on merit.PTCL is good example...
How is the stupid condition by IMF, and stupid acceptor. Do not need to sell anything, just reduce corruption in every area mosly income tax sector... Otherwise Pakistan will go in bad condition more then today.
@Rumormonger: Agreed. I was not questioning the merits of these transactions, just their dubious nature due to the selfish priorities of the powers that be in our country.
if privatised, will the government and political parties not meddle in their affairs? as most of the staff recruited in these state owned companies are on political basis, who don't like to work and go for strikes if something is done not in their favor. plus we will have to brace for downsizing and rightsizing as well in these companies.
Right, its not the government's job to do business (or make profit), but its definitely the government's job to protect public interests and serve the public.
Therefore, any such institution which involves interests of a large no. of citizens of Pakistan, should not be privatized. The new private owner of sold institutions will not have any sympathy/interest for pakistani public, his only interest will be to protect/increase his profit no matter what happens with the public. The thought that the public interest will be controlled/protected by Regulatory authorities, has not proven to deliver, various examples of OGRA, PTA, PPRA are there, regulatory authorities, take bribe and sell the public interest. And see if the only reason for privatizing is inefficiency due to being in government ownership then afterwards we will have to privatize the regulatory authorities also because they are also in government ownership.
Instead of privatizing, the government should rectify the administrative issue in these state owned organizations and bring them into stable condition.
start with PIA!!! & the railways!!
I belong to the family where my mother is working for Pak Steel for more than 24 years and when she got a news that power cut by KESC,She cried as the employees are not liable for all this and this is the same Pak Steel which was taken as Gold Mine and treated well enough in Musharaf Era..
4 months Salary is due...people are in debt as its a holy month of Ramadan...
Bail out Package which Mr Raja Perwaiz Asharaf announced is not paid yet so what???
Do privatize or anything but employees who served even more than 35 years need to be accommodate first.
Just think about the people who work on Lower Level posts and what their lives have been suffered now a days..
@hasan: prime national assets? Steel Mill employees have not received their salaries for the past 3 months! Do some due dilligence before you make such bold statements
This is just another way of doing corruption. Government will sale the companies to their favorite people for cheap rates. Same what happened with MCB back in the day,
It's good decision if everything would go through the proper process and laws. And yeah it shouldn't be allowed to politicians. Otherwise they gonna buy all these in very good price I hope you know what I mean lol
@Ali: People in financial distress sell their household goods, does that also please you? See the connection here?
@Jap: If you take into account the losses of PSM, if it was sold at the time when SC blocked its sale, the Pakistani coffers would have been better off today.
Privatisation of PSO and steel mill does not seem to be a sane idea. lets just start it off with railway, PIA, PTV power distribution sector like KESC.
@Hasan: Yeah whatever, but at least Tax Payers will be spared to feed them.
WOW, Made my Day im very happy with the ideas of this government lets just hope they manage to implement them and sell them at proper prices beneficial to the government. Soon enough we will see great changes in Pakistan.
Yeah right! All the government knows is how to BLOW the JOB. Lol....Nawaz Shareef wake up call? If PMLN won't learn from past this might be the last nail in their coffin too. There goes the neighborhood. Afterall what happened to ANP......things just seem to get bigger and better. Fools paradise with blind loonies.
@Iqbal::::Dear do not get so worried about government running or not running the companies,as they are only SELLING them.It is not the time for lamenting,rather the time is to pray.So let's pray together for God to bless Pakistan.Btw,the sale of tranquilizers is already very high among those who,unfortunately for them,understand the difference between the-state and the-government,and 65 years of their hue and cry has never done any good nor is it going to do anything,in at least near future.God bless
It is very important that the process of privatization be transparent and above reproach .
Selling the steel mill is not the solution.Have some control on it for God's sake. Sell PTV just for a start.
If private sector can run these companies profitably then why not government? Just appoint the honest and competent officials and reap the resultant profits. Sadly PPP did its level best to destroy every single state owned company by appointing corrupt, incompetent and ignorant officials. May be they wanted this result that these companies will be sold somehow and they can buy them at good price at the cost of Pakistan's economy.
Good, they're liabilities anyway
Very good decision for country.Please resist those elements who would try to sabotage this for thier oen pety interests.
A horse, a horse; a kingdom for a horse.
This is a sad day... these important assets will now be sold to private companies or even worse to the shrewd chinese.. thousands will lose jobs.. families ruined. Instead govt should have looked for ways to increase efficiency and productivity.. I wonder who is controlling the govt from behind in selling these prime national assets, one after another to foreign private companies and these chinese.. no one protests here..
I would have prefered a partial privitization, with 51% owned by the state and 49% owned by the private sector, this would have allowed efficieny, transperancy and professionalism to come into the mechanism while at the same we, the people, would have remained owners of those companies, simply the way state companies are run in Singapore. This solution proposed by the government, might not be my favourite but it is still better than the status quo. And hopefully these will transparent, corruption free privatizations and not like those we have seen in the previous two Nawaz Sharif governments in the 90's.
OMG, they got it wrong - they are state-owned, the "government" is not supposed to "run" them, but they do that for their personal "interests"