LONDON: Pakistan is nearly ready to launch a privatisation programme which aims to bring in foreign management expertise and tap international markets to turn around its flagging state-owned industries, the privatisation minister Waqar Ahmed Khan said in an interview. “You will see in the next 12 months about 5 or 6 deals coming on the block,” he said on Sunday, adding that he expected the first deal in January.
Pakistan privatisations in the past have been dogged by allegations of corruption and accusations of companies being sold off too cheaply.
Khan said this time the government planned to sell minority stakes or offer equity-linked investments such as convertible bonds to bring in foreign firms to provide management expertise necessary to raise the value of the companies before bigger stakes are sold.
Pakistan also hoped to announce early next year that it had found one or two such foreign companies, or strategic investors, to buy into Pakistani state-owned firms, which, he said, “will lend credibility to the whole process”.
He declined to name them, but said Pakistan was looking for companies with the experience, technical, management and financial capabilities to help firms realise their potential. He also said he was looking at multiple stock exchange listings, which would subject the privatisation process to international scrutiny and bring investment into Pakistan. “We want to give tremendous credibility and total transparency to this whole privatisation programme,” he said.
Among the companies Pakistan is looking to open up are electricity companies, the railways, steel, oil and gas. “You will see a first deal coming on the block by the end of January,” he said. According to an official, this would be the Islamabad Electric Supply Company (IESCO). The government, led by the Pakistan People’s Party (PPP), is struggling to turn around a weak economy, while also battling an Islamist insurgency. Its economy is propped up by an $11 billion loan programme from the International Monetary Fund.
Khan said that while Pakistan had turned to the IMF “for immediate sustainability”, it now needed to focus on long-term growth by revitalising industry and reviving investment. Khan, in London to meet financial institutions, also said the government had tried to forge a cross-party consensus on privatisation so there would be no discontinuity in the process. “The most important factor the government of today realised is that we need to give political stability,” he said. “We want the benefit for the people of Pakistan,” he said. “We really are not looking for day traders.”
Strategic investors would be required to meet performance criteria, with clauses built into contracts to claw back their stakes if they failed to meet them. “We want to be sure the true potential of these companies is realised.
You don’t want anybody taking a majority stake at this point when the optimisation of value has not taken place.” Asked about whether worries about corruption would deter potential investors, he suggested that these fears would be eased when the government steps back from running state firms.
“People talk about corruption; there is corruption everywhere; it’s about managing it, it’s about efficiency,” he said. “When you step back from running the businesses then the issues of inefficiencies … then you get away from that.”
