With caution and decisiveness, privatisation plan revived

Govt moves slowly as it could sell shares of only one company out of eight.

ISLAMABAD:

The first year of the PML-N government could be seen as the one in which it has laid significant groundwork to revive the stalled privatisation programme, although it is likely to close the year with just one deal out of eight planned in the first phase.

The strategy it has embraced so far is to move slowly but decisively in an attempt to avoid controversies either in the media or judiciary that could dampen prospects of the ambitious privatisation plan.

It is generally believed that privatisation of state units will create more opportunities for the private sector to invest and manage newer assets that are part of the public sector.

The government has picked 32 enterprises out of 65 approved by the Council of Common Interests for privatisation and share float. In the first phase, eight units have been chosen for either privatisation, management transfer or share float in capital markets.

The board of Privatisation Commission (PC) has approved sale of shares in Habib Bank Limited (HBL), United Bank Limited (UBL), Allied Bank Limited (ABL), Oil and Gas Development Company (OGDC) and Pakistan Petroleum Limited (PPL).

According to the original plan, the government wanted to offload shares in these enterprises before the end of current fiscal year to raise a minimum of Rs150 billion for budget financing. However, the plan has fallen through as except for offloading 20% shares of UBL by mid-June, the rest of the enterprises will slip into the next fiscal year.

“It is not an easy task as each step is time-consuming and involves scores of stakeholders,” said PC Chairman Mohammad Zubair.

The PC has conducted road shows for UBL and is expected to take the summary for approval of the price before the Cabinet Committee on Privatisation in the first week of June. It expects to receive about $420 million from the share sale.



The PC also desired to complete the OGDC share float but could not meet regulatory requirements of the London Stock Exchange. It will now be completed in September.

The PC board has also cleared Pakistan International Airlines (PIA), National Power Construction Company (NPCC) and Heavy Electrical Complex (HEC) for privatisation.

The government has twice revised the deadline to sell 26% stake in PIA. It seems that it is divided over the issue as Adviser to the Prime Minister on Aviation Shujaat Azeem is not in favour of sell-off.

Without privatisation of PIA and Pakistan Steel Mills, the country will not be able to improve overall situation in public sector enterprises as these two are causing heavy losses to the national exchequer every year.

However, where privatisation is not possible, either a management contract will be negotiated or a fully independent management will be put in place to run state companies on purely professional grounds.

In cases like PIA, it seems that the government may end up restructuring the entity, as desired by its aviation chief, Azeem.

One view is that if PIA and steel mills are not sold to the private sector, the privatisation programme will only be raising funds for budget financing by selling profitable state enterprises rather than getting rid of loss-making firms.

The units picked for the first phase are considered blue chips, which are performing well at the Karachi Stock Exchange. On the basis of present value of their shares, the government has estimated a minimum receipt of Rs175 billion.

Reporting by Shahbaz Rana

Published in The Express Tribune, May 26^th, 2014.

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