ISLAMABAD, July 29: Pakistan's government plans to accelerate the listing of state-run companies to take advantage of the strong demand for new issues, the minister for privatization and investment said.
Abdul Hafeez Shaikh said the government would sell stakes in Kot Adu Power Co, State Life Insurance Corp, United Bank Ltd and Pakistan Steel this fiscal year. The privatization agenda is aimed at raising funds to pay down the country's foreign debt of over $30 billion.
But the initial public offer route has stirred debate with some saying it undermines strategic sales by setting a reference price that prospective buyers may find hard to match.
"The optimal sequencing is that if you are not able to do strategic sales, then go ahead with stake sales because for that, we need momentum in the stock market," Shaikh told Dow Jones Newswires in an interview.
Shaikh's comments came after the record response to the IPO of Pakistan Petroleum Ltd., the country's largest natural gas producer, which opened for subscription on July 19, the first offer in the fiscal year that began July 1.
The 15pc, or 103-million share offer attracted over half a million applications in a country where just 0.5pc of 150 million people own stocks. "This shows the unprecedented success of Pakistan's privatization programme," Shaikh said.
Pakistan's IPO market has had a strong run in the last two years, boosted by the country's economic recovery, better corporate earnings, and improved ties with neighbouring India.
Shaikh said privatization proceeds have exceeded Rs86 billion since October 1999, when President Pervez Musharraf seized power in a bloodless coup. This compares with around Rs60 billion in the previous 10 years.
Besides paying down debt, Pakistan's privatization programme, which includes power, water, telecom and oil companies, is aimed at reducing the government's role in companies and broadening public ownership.
Shaikh dispelled the impression that the government is undermining strategic sales of profitable state-run companies by listing them and creating a reference price that would put them out of reach of prospective buyers.
"We have to deal with this aspect, but we cannot stop our share offers, which are giving us positive value," he said. Despite the encouraging response to the stake sales, the privatization of state-run companies has been slow mainly due to political risks and bureaucratic hurdles, which have deterred foreign interest.
Over the last two years, the country has sold stakes in the United Bank Ltd and Habib Bank Ltd, and some small companies from its extensive privatization list. Shaikh said the government is committed to selling the rest.
Musharraf is expected to decide on the structure of the sale of Pakistan Telecommunication Co., the country's largest telecommunications company, in a couple of weeks, he said.
The government earlier considered breaking PTCL up into at least three separate entities to spur competition in a deregulated environment, preventing the creation of a private telecom monopoly. Singapore Telecommunications Ltd has named PTCL as a "possible" investment target.
Shaikh said the government is also trying to accelerate the sale of troubled power utilities and expects the bidding of Karachi Electric Supply Corporation in October. "We are reasonably hopeful of retaining the interest of bidders and I hope to have bidding in October," he said.
