Chairman of Pakistan's Privatisation Commission Mohammad Zubair speaks during an interview with Reuters at his office in Islamabad January 29, 2014. PHOTO: REUTERS
When the prime minister left the table, a colleague of former IBM executive Zubair rushed to his side.
"Are you mad? Three privatisation ministers have gone to jail and most have corruption cases hanging over their heads," he said. "Don't take this job."
But the country's new privatisation tsar is determined to find buyers for 68 public companies, most of them loss-making, including two gas companies, an oil company, about 10 banks, the national airline and power distribution companies - all within the next two years.
The government sees the sell-offs as a life saver for the $225 billion economy crippled by power shortages, corruption and militant violence. Successful privatisation is Nawaz's top political and economic goal.
"We lose 500 billion rupees annually because of failing enterprises," Zubair told Reuters. "Every day a file lands on a bureaucrat's desk and he has to take a decision he isn't qualified to. This can't go on, no matter what."
Pakistan can raise up to $5 billion in privatisation revenue in the next two years to ease pressure on strained public finance, Zubair said.
Last September, the International Monetary Fund saved the country from a possible default by agreeing to lend it $6.7 billion over three years. In return, Pakistan must make good on a longstanding promise to privatise loss-making state companies.
Privatisation officials, requesting anonymity, said several foreign investors, including the World Bank's private-sector arm, the International Finance Corporation, and the US mutual fund Fidelity Investments have shown interest in the companies.
But for Zubair, a former IBM chief financial officer for the Middle East and Africa, the real challenge is overcoming resistance from thousands of workers who will have to be laid off and opposition parties who are against the plan.
Once a source of pride, Pakistan International Airlines is struggling to stay aloft, having accumulated losses of more than 250 billion rupees. A quarter of its 40 aircraft are grounded. Flights are regularly cancelled and engineers say they have to cannibalise some planes to keep others flying.
Unions strongly oppose the privatisation. The IMF wants the airline partially privatised by December.
Another asset is Pakistan Steel Mills, which has accumulated losses of more than Rs100 billion. Overstaffed by at least three times, employees haven't been paid since October.
An attempt to privatise the mill in 2006 was blocked by the then chief justice. Foreign investment dwindled as deals got caught up in court. Now, under a new Supreme Court chief, officials say the prospects of reform have improved.
'No magic wand'
Under IMF conditions, financial advisers must be hired to evaluate the assets and examine accounts by June.
Zubair's daily work includes visits to opposition lawmakers, parliamentary committees and unions to convince them of his plan. But he has few takers.
"The answer to our current economic malaise lies not in hawking of state-owned institutions but in restructuring these industries," Bilawal Bhutto, patron-in-chief of Pakistan People's Party, wrote in a commentary.
Pakistan Tehreek-e-Insaf MNA and former chief executive of one of Pakistan's largest conglomerates Asad Umar said privatisation was being pursued on an unrealistic time frame and the criteria for identifying entities was inconsistent.
For Umar, it makes no sense that on the list with a bleeding airline are Oil and Gas Development Co Ltd and Pakistan Petroleum Ltd, which made profits of 91 billion and 42 billion rupees respectively in 2013, and have zero debt.
Not all sell-offs are expected to go smoothly.
A nine-year dispute between the government and Etisalat, the United Arab Emirates' largest telecoms firm, over payments from the privatisation of Pakistan Telecommunication Company Ltd, is seen as a discouragement for investors.
But Zubair says no plan is without risk.
"There is no magic wand to ensure that all these ventures will be successful," he said. "But the bottom line is that I'm not going to hold off privatisation for anyone."
COMMENTS (30)
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I dont think private investors in Pakistan neither have potential nor environment to run these injured corporations, eventually these organizations will shut down and the public will left out with nothing
Even more interesting is empirical evidence from Pakistan which shows that privatisation does not necessarily improve either efficiency or profitability of firms. In fact, Akhtar Hasan Khan, citing studies, shows that only 20pc of firms perform better after privatisation, while 35pc performed worse after privatisation. Moreover, many units end up being closed and their assets stripped. They have often been undersold. Pakistan’s history of privatisation has not been a good one.
http://www.dawn.com/news/1084140/rethink-privatisation
@Proletariat: that in the past some of the public-sector enterprises were sold to groups who had no previous experience in that line of business, and to foreign buyers who now remit profits away.
When you are selling off something, do you consider how the next person will use it? Suppose you want to sell your refrigerator, Will you consider if that person has ever used it before? or what is he going to store in it? Mellons or Cakes won't bother you, its cash which you will consider. None of these companies is vital to the extent that state operations will stop without owning it. And when that is the case, lets focus on money.
How much of the proceeds will be going to the pockets of Zubair Umar and Sharifs?
Intelligence demands that loss making companies be privatized on priority, However it now appears that the first three on the privatization anvil likely to be PPL, OGDC and PSO. In my opinion seeing results that KESC has achieved power sector should be dumped ASAP. PIA & Pakistan Steel should be privatized and if that cant be done than liquidated. With regard to railways Govt should restrict itself to maintaining railroads with private operators running trains. None of this will actually happen though as govt in power must honor commitments made to its benefactors at election time.
one day when i will become the Prime Minister, i will also go on cruise dinners with the tax payers money.
Privatize ONLY loss making companies like PIA and steel Mill. Do NOT privatize profit making companies like PSO.
Privatisation is not the only option. If one of the largest state-owned enterprises anywhere in the world, Indian Railways, can be made profitable, so can Pakistan Railways. Importantly, there was never the intention to privatise Indian Railways, only to improve its performance and to make it profitable. Better management and governance structures in the public sector are an option worth considering.
Akhtar Hasan Khan has also shown, that in the past some of the public-sector enterprises were sold to groups who had no previous experience in that line of business, and to foreign buyers who now remit profits away. In almost all cases, retrenchment of labour was a certainty following privatisation, often a pre-requisite.
Ownership does not determine performance. Given the inefficiencies and huge tax evasion in Pakistan’s private sector (not just the state sector), the choice is basically between crony private-sector capitalism and crony state-sector capitalism. Clearly, the single-minded intention of selling state-owned enterprises needs to be rethought.
http://www.dawn.com/news/1084140/rethink-privatisation
IF, OGDC and PSO get sold.............and PIA and Pak Steel do not ........then you know its a farce.
These govt owned enterprises were used to gain political support by over recruiting, appointing workers over the needed capacity, bankrupting these units. Who would buy an enterprise with excess workers? The people in the govt can run their own private owned airlines and industries with huge profits. These units will only profitably if a HIRE AND FIRE policy is implemented.
@Shahid Kinnare: Because nobody would want to buy a loss making entity at fair or premium prices. Any investor would obviously price in the risk of failure or time taken to turn-around the entity.
Privatising Oil and Gas Development and Pakistan Petroleum doesn`t make any sense... I agree with PTI MNA Assad Umar that the list and time frame should be reviewed.
A perfect example that comes to mind is KESC - a crucial utility provider with regular losses, electricity theft, and full of heavily politicized unions in Pakistan's most violent city. Within eight years, the right private management and a dedicated private investor were able to turn it on its head - now Karachi has one of the lowest loadshedding in Pakistan, areas with regular bill collection (including most middle-class areas) have virtually no loadshedding, and it's the only power utility in Pakistan that's turning a profit for the past two years.
However, KESC had to deal with a lot of flak to get there - their CEO was fired on when they initially laid off thousands of useless employees, I remember when they launched a full-scale media campaign against the political unions and only then did the CJ take action.
However, privatization is the only hope - it's pointless to expect these industries to turn around on their own given the way things are.
Go Ahead Mr. Sharif and privatize 31 organizations; trust me it will be good for Pakistan. ( provided it's been done on transparent basis)
i dont know why media and opposition parties are against privatisation. aren't we better off with current PTCL as compared to 12 year old PTCL when it was goverenment institution. dont we feel more comfort when v deal withj allied bank or HBL or MCB as compared to our dealing with NBP. can anyone imagine if all mobile companies were under goverenment. opposition should not do politics on this issue.
Privatisation of sick units if transparent is the need of hour.... Govt employees need a major jolt and employers need to stop acting like kings in appointments....There should not be any free meal to anyone who doesnt want to work....
Quite strange isnt it that the person giving the most hammering to the Privatization Chief is his own real younger brother PTI MNA from Islamabad Mr. Asad Umar.
Tsar? More like fire-sale in chief.
PSO is the only trillion rupee revenue earner/company of Pakistan. Earns Billions for the national exchequer each year. OGDCL has billions in cash reserves.
Why is govt trying to sell these assets?
According World Bank assets has to be privatize below their real value. Can some one explain how its going to help Pakistan?
We go to non state companies for filling fuel, maintaining bank accounts, purchasing groceries, Phone & internet, travel etc. But we cant digest selling off govt companies for good. Other than $5 earning from sale of these units (which i believe is a big understatement), we will be saving 500 billion every year by avoiding spoon feeding. Other than emotional rhetoric, 500 billion is quite an amount.