June 10, 2003	Tuesday	Rabi-us-Sani 9, 1424

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ISLAMABAD, June 9: The Asian Development Bank (ADB) has expressed its concern over the Rs53 billion subsidy offered to Wapda and the KESC in the new budget, saying the decision would not help the utilities become financially viable.

“Extending once again such a huge subsidy to both the state sector enterprizes shows ‘business as usual’, and this is a cause for concern to us,” said ADB Country Director Mr Murshuk Ali Shah.

Talking to Dawn here on Monday, he said that last year the government had extended subsidy worth Rs76 billion to Wapda and the KESC, and this year again Rs53 billion have been made available to them without any justification.

“It is a bit worrisome,” Mr Shah remarked, adding that any drastic plan to reduce losses was conspicuous by its absence.

This big amount (Rs53 billion), he believed, should have been included in the development budget rather than being provided to the state-owned companies.

The system losses of Wapda and the KESC, he said, remained 25 per cent and 45 per cent, respectively, during the last three years which could not go unnoticed.

“The government should extend only performance-based financial support to both the power companies,” he said.

He said the ADB had extended $350 million for energy sector, and one of the main purposes of this assistance was to make Wapda and the KESC financially viable for their eventual disinvestment.

About the KESC, he said, the ADB was very seriously discussing with Minister for Privatisation Dr Hafeez Shaikh the prospects for its early disinvestment. “Our special mission is arriving here soon to discuss the possibility of taking forward the KESC privatisation deal,” he said.

He added that the government was looking for some local strategic partner to buy majority shares of the company with a view to reducing its system losses. “I believe without an operator, the KESC will be in trouble again”.

He said “a lot of incentives have been offered” to the private sector in the budget for 2003-04, but here too one did not see a plan to revive the overall private sector investment in the country.

“Despite macro-economic stability, Pakistan’s private sector has not shown its readiness to become a partner in growth,” believed the ADB’s country director.

Mr Shah appreciated most of the provisions of the new budget. He made a special mention of the incentives given to the housing and construction industry. He pointed out that 25 per cent reduction in excise duty for the cement industry should help accelerate economic activity in the private sector.

Without domestic investment, it would be difficult to expect a fast inflow of Foreign Direct Investment (FDI), he warned.

Responding to a question, Mr Shah appreciated the increase in the development budget from Rs134 billion to Rs160 billion.

Nevertheless, he said, there was a need to ensure prudent, efficient and timely utilization of funds. Last year, he pointed out, 60 per cent of funds went unutilized, and that during 2003-04, the government must make concerted efforts to ensure timely releases for development projects.