Privatisation remains on back burner in five years

LAHORE: The privatisation has remained on the back burner during past five years as the government could privatise only a small fertiliser plant during this period although it aims to privatise several government-owned enterprises. Baring an amount of Rs1.34 billion got from the privatisation of Hazara Phosphate Fertilizers Limited this government has done no privatisation and only collected dues of some past transactions.

Economic experts express surprise that the government has among its ranks Dr Abdul Hafeez Shaikh who is credited with successful privatisation in Argentina. They said that no privatisation during past five years saved this government from accusations of non-transparency. They said that most of the lucrative industries owned by the state have been privatised in past two decades leaving behind companies that require massive restructuring before handing them over to the private sector.

“Privatisation of industrial units posed not much problems for earlier governments though cement sector was unduly concentrated in few hands during the privatisation done by the first Nawaz government,” said senior market analyst Dr Shahid Zia. He said privatisation of banks also went smoothly despite the fact that the process for privatising UBL and HBL was unduly delayed. “The real problems were faced in the privatisation of telecommunication, power and steel mills,” he said adding that the government has taken steel mills from the privatisation list.

He said the Musharaf regime privatised the highest profit making concern of Pakistan, the Pakistan Telecommunication Company Limited (PTCL), on the pretext that the government has no business in doing business. He said incidentally Dr Hafeez Shaikh was the privatisation minister when this deal was concluded. He said price at which the company was sold did not even cover the value of the real estate possessed by the institution in every corner of the country. He said the PTCL even after a decade after privatisation still owes around a billion dollar to the government.

Economist Faisal Qamar said the Karachi Electric Supply Company (KESC) was the largest loss making public sector entity that was privatised. He said utility was privatised without proper homework with the result that the new owner owe more money to the government than what they paid to acquire the entity. The company promised to generate its own power, but still depends on 700 megawatts electricity supply from the Pakistan Electric Power Company (Private) Limited (Pepco) to cater to the needs of its consumers. More than 90 months after privatisation the poor consumers of Karachi, meanwhile, continue to suffer. This failed privatisation, he added, has proved that it is a folly to privatise inefficient utility monopoly like KESC as such decisions impact captive consumers.

He said the success of banking sector privatisation was mainly due to comparatively strong regulator in the shape of the State Bank of Pakistan. They said such regulators were absent in other sectors. He said the SBP prudently regulated even the government sector’s banks that made it possible for the government to privatise them.

Senior economist Naveed Anwar Khan said that all regulators are not as strong as institutions as the SBP is. He said private sector excels when the regulator is fair and strong. He said Pakistan Telecommunication Authority (PTA) failed to ensure the quality of services to the consumers. He said another lapse was the inability of PTA to ascertain the true identity of subscribing base of all mobile phone operators. This process was started when much harm was done and mobile phones created security and social problems. The problems between PTCL and other telecom operators also remain unresolved, he added.

They said the National Electric Power Regulatory Authority (Nepra) and the Oil and Gas Regulatory Authority are weak operators, which has impeded privatisation of electricity distribution and oil and gas companies.

The Privatization Commission of Pakistan has generated Rs476.421 billion from privatisation proceeds from 1991 to June 2010.

The privatization commission got Rs41.023 bn from privatization of banking and financial sector companies. Energy sector netted Rs51.756 bn from sale of public sector power entities.

The highest privatisation proceeds were gathered from telecommunication sector amounting to Rs187.359 bn. Automobile sector privatisation totaled only Rs1.101 bn. The state-owned cement companies were sold for Rs16.176 bn. Chemicals fetched Rs1.642 bn, engineering Rs182.5 million, and fertiliser Rs40.281 bn.

Key PSEs privatised Proceeds PSEs privatised Proceeds

(1991 to April 2008) (Rs in billion) (April 2008 to date) (Rs in billion)

UBL 12.350 Hazara Phosphate 1.340

HBL 22 Fertilizers Limited

National Refinery Ltd 16.415

KESC 15.859

PTCL Approx. 170

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