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.