The federal government has acceded to a stringent conditions loan programme from the Asian Development Bank (ADB) which aims to reform the bleeding public sector enterprises (PSEs), mainly in the energy sector, to make them viable for privatisation.
An official source told Pakistan Today that the conditions of $20 million public sector enterprise reforms project loan signed on January 27, 2015, are quite stringent and require the government to employ competent and qualified consultants and contractors, acceptable to ADB on its own terms and conditions.
This is for the first time that Pakistan will carry out its privatisation programme under the strict guidelines of the international financial institutions (IFIs). It seems IFIs are apprehensive about the government’s privatisation efforts and want the process to be completely transparent, non-controversial and beneficial, he added.
The agreement makes it binding on the government’s borrowing agency, the Privatisation Commission (PC) that “it shall carry out the project in accordance with plans, work schedules and technical standards acceptable to ADB as applicable. The PC shall furnish, or cause to be furnished, to ADB, promptly after their preparation, such plans, work schedules and technical standards, and any material modifications subsequently made therein in such detail as ADB shall reasonably request”.
Pakistan is under IFIs pressure to completely dispose its loss-making PSEs including the national flag carrier, steel mills and power generation and distribution companies. These giant companies are in the red due to rampant corruption and lack of accountability and modernization resulting in billions of rupees losses every year. The total burden on the national exchequer due to PSEs losses amounts to more than Rs 400 billion per annum.
Under the programme, the government will re-notify board of directors of all PSEs consisting of professionals which would then undertake appointment of professional management. The government was being pressed by the IFIs to implement corporate governance rules for PSEs devised by its corporate regulator SECP some two years back. Under IFIs pressure, the government has already abolished boards of all discos and gencos and has reconstituted a few of the boards.
Privatisation of loss making PSEs is one of Pakistan’s main commitments under IMF’s $6.6 billion bailout programme. The PC has already invited expression of interests for hiring financial consultants for selling off all of the discos and gencos. Pakistan has given commitment to the IMF that it will dispose off majority of PSEs during the current calendar year.
