THE PML government remains committed as ever to privatisation but it seems to be moving behind the official schedule set for sell-offs of various state enterprises despite the business opportunities offered by a fast growing economy. The reasons are stated to be quite a few and varied.

First, there seems to be a lack of guidance and leadership, due to which, the Privatisation Commission (PC) has not been able to complete its mega transactions for ports and shipping, oil companies, refineries, airports etc.

Second, for the past two months, it is acknowledged that there is hardly any movement towards privatisation. Some suspect that the new minister and the secretary, privatisation who have earlier served as minister and the secretary defence, have been sent to the Commission with a specific task: “privatise this unit and don’t privatise that.”

But others maintain that both are new and are in the learning process and that is why there seems to be some delay in accelerating the disinvestment process.

Interestingly, all the PC board members are the same and are working for the last three years. They have so far not been reportedly taken into confidence on the existing agenda.

There are credible evidence that Pakistan State Oil (PSO) and the National Investment Trust (NIT) were unlikely to be privatised by June 30, as has been directed by the Prime Minister Shaukat Aziz. Also, it is said that no work is underway to disinvest the National Power Construction Company, targeted for sale by June 2006.

The privatisation of Faisalabad Electric Supply Company (FESCO) is also not expected to come under hammer by August this year as the related issue of tariff has not been decided so far.

Insiders maintain that National Electric Power Regulatory Authority (NEPRA) had sent its recommendations about the new tariff of FESCO which was lying with the officials of the ministry of water and power, awaiting a decision.

Tariff issue, according to the plans, must be decided by June 30 if at all FESCO’s bidding has to be on schedule by August 30 this year. Six parties have shown their interest in FESCO.

A number of other transactions including Pakistan Petroleum Limited (PPL) and Oil and Gas Development Corporation Limited (OGDCL) are being delayed due to one reason or the other.

The PC officials had been saying that they would complete the PPL transaction by June 30 but there seems to be no progress about it. The transaction was largely expected to be accelerated after the increased interest shown by some international companies, particularly the Hungarian oil and gas company - MOL. The company has recently discovered huge gas reserves in NWFP.

“The prime minister wants us to complete the PPL transaction by June 30 this year but it does not seem to be heading in that direction despite the interest being taken by some foreign buyers”, a concerned official admits.

Besides MOL, 13 other companies from United Kingdom, United States, Canada, China, UAE, Austria and Pakistan had given their expression of interests (EOIs) to the Privatisation Commission in May 2005. In its last annual general meeting (AGM) on April 27 in Budapest, MOL had also expressed interest in other petroleum related transactions.

One of the major reasons contributing to slow pace of privatisation and the credibility factor is said to be the concern of investors. For example, there is no clear policy about assets and liabilities of any state sector unit being privatised.

“The government needs to come out with a clear statement about the issue of assets and liabilities”, commented an official. He recalled the MCB transaction and said when two bidders challenged the government’s claim that the bank had Rs100 billion assets, things began to go sour.

When the highest bidder insisted that these assets were worth Rs80 billion, the government refused to handover the bank to the group. Similarly, the second highest bidder also lost the bank on same account and eventually Mian Mansha group emerged as the winner.

Besides, the investors have a difficulty about the reserve or reference price of a unit put under the hammer. The concerned officials maintain that if the reference price is announced much before the transaction, the investors would be more comfortable.

“When the bidding has taken place, the government should announce its reference price to avoid confusion”, said another official. This would also make the privatisation process transparent.

The government should make sure that when every thing has been decided and the cabinet committee on privatisation (CCOP) has approved any transaction, nobody should challenge it. The decisions of the COOP needs to be protected either through presidential order or through the parliament.

The government is stated to be using these privatisation proceeds for reducing the budget deficit. It is also alleged that 90 percent proceeds are not going into debt repayment nor the remaining 10 per cent are being spent on poverty alleviation as was the original mandate of the government. The government, it is said, needs to come out with a clear policy about the privatisation proceeds not make things controversial.

It should also show where have all the billions of rupees gone, starting from the sale of 10 per cent shares of the PIA during the first Benazir government that fetched $850 million.

But the policy makers think that privatisation has been a success. “By and large the privatisation has been well received in all the quarters and the present policy is on a safe and correct course” a ministerial source said.

The agenda of reforms initiated by President Pervez Musharraf in late 1999, he said, continued to bear results both on the economic and social fronts. This agenda will remain on course in the future. These reforms have been widely acclaimed by the multilateral institutions and the investor community. Improved geo-political conditions coupled with a more conducive economic environment has created an ideal climate for investment.

The privatisation programme is part of the economic and structural reforms agenda of the government that along with deregulation and good governance seeks to enhance the growth and productivity of the economy by harnessing the private sector as the prime source of growth, he said.

But everybody believes that privatisation is a challenging task given the complexity and scope of the issues and touches all aspects of economic activity and policymaking.

Since January, 1991 and until April 2006, Pakistan has completed 160 transactions with gross proceeds of Rs395.2 billion, of which, 57 transactions worth Rs338 billion were completed during October 1999 to April 2006.