Pri­vati­sa­tion sig­nals

The Pak Banker - - 4EDITORIAL - Af­shan Subohi

THE ap­proval of the di­vest­ment of the gov­ern­ment's 88pc shares in the Na­tional Power Con­struc­tion Com­pany by the Cab­i­net Com­mit­tee on Pri­vati­sa­tion last week can be read to sig­nal the ini­ti­a­tion of the next ma­jor drive to­wards pri­vati­sa­tion. Dur­ing the fi­nal bid­ding su­per­vised by the Pri­vati­sa­tion Com­mis­sion (PC), Saudi com­pany Man­sour Al Mo­said emerged as the win­ner out of three com­pa­nies with its high­est of­fer of Rs1,420 per share, valu­ing the deal at Rs2.49bn. The of­fer was 26.9pc higher than the cab­i­net com­mit­tee's ap­proved ref­er­ence price of Rs1,119 per share.

The gov­ern­ment di­vested its hold­ing of 1.76m shares, while the re­main­ing 12pc of the com­pany's stock (240,000 shares) is owned by the NPCC Em­ploy­ees Em­pow­er­ment Trust un­der the Be­nazir Em­ploy­ees Stock Op­tion Scheme.

We un­der­stand the sen­si­tiv­i­ties, but the gov­ern­ment can no longer af­ford to let scarce public re­sources bleed - PC Chair­man Mo­ham­mad Zubair The other two par­tic­i­pants had quoted much lower prices. The Habib Rafiq Con­struc­tion Com­pany and the Fron­tier Works Or­gan­i­sa­tion ( FWO) had of­fered Rs925 per share, and the Zahir Khan Con­struc­tion Com­pany had of­fered Rs344.50 per share. The process is sched­uled to be com­pleted in 45 days from the day of the ac­cep­tance of the bid, con­firmed the PC.

Pri­vati­sa­tion Com­mis­sion Chair­man Mo­ham­mad Zubair dis­missed his po­lit­i­cal op­po­nents' ar­gu­ments against what he termed ' a win­ning deal' as pop­ulist rhetoric.

"The ac­cu­sa­tion that we sold the NPCC cheap is pre­pos­ter­ous. The price we got was bet­ter than our ex­pec­ta­tion. The floor price worked out by the con­sor­tium of fi­nan­cial ad­vi­sors was Rs975 per share, which would have raised Rs1.7bn ($17m). It was worked up by the board of the PC to Rs1,075 to fetch Rs1.9bn ($18.5m). It was jacked up again by the Cab­i­net Com­mit­tee on Pri­vati­sa­tion to Rs1,119 per share, which would have raised Rs2bn ($19.5m). The ac­cepted bid was higher by 27pc. Can some­one ex­plain how this was cheap?" he com­mented over phone from Is­lam­abad.

When his at­ten­tion was drawn to the Rs5bn pro­jected as­set base of the com­pany, he pointed to the li­a­bil­i­ties of about Rs3bn on the profit-mak­ing firm's bal­ance sheet.

"It was a long-drawn, trans­par­ent process that in­volved recog­nised pro­fes­sion­als. The price we got was bet­ter than the one as­sessed by the IMF. They had worked out $20m as a fair price, and we made the deal for $24 m. So, much of the op­po­si­tion is just for the sake of op­po­si­tion."

But he ad­mit­ted that the path ahead for the PC when it putting big­gies on the block is not go­ing to be easy. "De­sir­able eco­nomic de­ci­sions are not known to be pop­u­lar. We un­der­stand the sen­si­tiv­i­ties, but the gov­ern­ment can no longer af­ford to let scarce public re­sources bleed. The cor­rec­tion has to be made and the Nawaz Sharif-led gov­ern­ment has the will and the ca­pac­ity to fol­low through on its com­mit­ment to put the coun­try's econ­omy back on the rails," he stated.

Over the past 25 years, two phases have been iden­ti­fied when the pri­vati­sa­tion pol­icy de­liv­ered in the coun­try. The first PML-N gov­ern­ment - inspired by the poli­cies of Bri­tain's Mar­garet Thatcher - crafted and im­ple­mented the pri­vati­sa­tion pol­icy of 1991-93. The then prime min­is­ter Nawaz Sharif presided over the de­na­tion­al­i­sa­tion of the bank­ing sec­tor, start­ing with MCB Bank, and some other in­dus­tries.

The sec­ond phase was guided by the Shaukat Aziz/Gen­eral Mushar­raf gov­ern­ment with the stated ob­jec­tive to min­imise the role of the gov­ern­ment in busi­ness, which was stated 'not to be a busi­ness of the gov­ern­ment'. The KESC and the telecom­mu­ni­ca­tion gi­ant PTCL were pri­va­tised, but the drive ended when the Supreme Court struck down the sale of Pak­istan Steel Mills. Since 1991, around 115 big and small en­ti­ties have been ei­ther fully pri­va­tised or some of the gov­ern­ment's stakes in them di­vested, like the un­load­ing of 10pc shares in SNGPL through the cap­i­tal mar­ket.

Pri­vati­sa­tion has been met with re­sis­tance in Pak­istan be­cause of al­leged cor­rup­tion and favouritism, per­ceived un­fair­ness, con­cerns over lay­offs in an en­vi­ron­ment of lim­ited em­ploy­ment av­enues, and the fur­ther ben­e­fit­ing of the priv­i­leged in an econ­omy marred by huge wealth dis­par­ity.

In the ab­sence of strong reg­u­la­tory bod­ies to mon­i­tor the mar­ket, curb mar­ket ma­nip­u­la­tion, en­sure com­pe­ti­tion, pri­vati­sa­tion led to the rise of big ty­coons with enor­mous as­sets, fur­ther widen­ing the wealth gap and in­creas­ing gen­eral dis­con­tent.

Ear­lier pri­vati­sa­tions had ush­ered in an ex­plo­sion in the com­mu­ni­ca­tion and tele­com sec­tor and trans­formed banks from loss-piling firms to some of the most prof­itable busi­ness en­ti­ties in the coun­try.

But the per­for­mance of K-Elec­tric in terms of the qual­ity of ser­vice has left the con­sumers highly dis­sat­is­fied. It is, there­fore, not just the trade unions that have pledged to op­pose the pri­vati­sa­tion drive tooth and nail, but the op­po­si­tion par­ties have also joined them. Even some lib­eral ex­perts - known pro­po­nents of an un­fet­tered mar­ket - have ex­pressed reser­va­tions over the re­cent moves or the mode of pri­vati­sa­tion. "Ev­ery­one knows what's the hurry. The IMF is breath­ing over the gov­ern­ment's shoul­der and Dar's team has given an un­der­tak­ing on pri­vati­sa­tion to get the Fund's money," said a PPP leader. PTI's Dr Arif Alvi was against the blan­ket pri­vati­sa­tion of public as­sets. "One ought to be care­ful with valu­able as­sets. I see no rea­son for the haste. My party is for slower and more de­lib­er­ate pri­vati­sa­tion," he said.

"Frankly, I am not par­tic­u­larly gung-ho on pri­vati­sa­tion in gen­eral and am ac­tively op­posed to the idea of dis­pos­ing off strate­gic as­sets such as PIA or the power dis­tri­bu­tion com­pa­nies," said for­mer fi­nance min­is­ter Dr Hafiz Pasha.

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