Outflow of profits to hit $102m this year: Privatised units
By Shahid Iqbal
KARACHI, Aug 12: The outflow of foreign exchange in the wake of privatisation has started taking a painful twist for the country and may prove counterproductive if foreign investors buy more local units.
The government has been making efforts to attract foreign investors to buy units which are included in its privatisation list. So far the foreign investors who have no restrictions to remit their profits and dividend have purchased five major units.
The estimated outflow in the form of dividends of the four units would be around $102 million (Rs6.149bn) in 2006. Assuming no more privatisation and same profit earnings at the current rate, the estimated total outflow in 2007 would be around $110 million and the next year it would be $119 million.
The 51 per cent shares off-loading of Habib Bank paid the government a total $390 million. The outflow of HBL’s dividends at the estimated rate of Rs2 per share would be around Rs704 million in 2006 and Rs880 million and Rs1,056 million in the year 2007 and 2008.
The outflow of United Bank’s dividend at the estimated rate of Rs3.5 per share would be around Rs924 million, Rs1,188m and Rs1,452m in 2006, 2007 and 2008 respectively. UBL’s 51 per cent shares were sold.
In case of National Refinery, of which 51 per cent shares have been off-loaded, the outflow would be Rs542 million, Rs614 million and Rs674 million from 2006-08.
The biggest outflow will appear from the Pakistani Telecommunication Corporation (PTCL) of which only 26 per cent shares had been sold. PTCL’s 1,326 million shares were sold out and the estimated dividend is about Rs3 per share. The outflow is expected to be Rs3.978 billion in 2006 and would remain the same till 2008.
Karachi Electric Supply Corporation’s 73 per cent shares had been sold out but no dividend was expected in the next two years.
The simple calculation of a top research house said when all the shares of these four units would be sold out, the outflow would be double.
But the situation would not remain stagnant at this point as the government has been making effort to sell out Pakistan Steel, Sui Northern Gas and Sui Southern Gas companies. If the foreign investors also purchased these units, the outflow of foreign exchange in the form of profits would turn into a nightmare for the country.
The government wants more foreign exchange to finance its record trade and current account deficits and trying to manage the very high demand of foreign exchange through sale of local units.
Economists and analysts have been criticising the government for financing the deficits instead of improving the situation. The source of concern is that only few attractive units have been left to privatise and it could help the government during the current year or next year.
“Just after two years, the inflows of privatisation proceeds would be ended and the outflow of dividends would severely hit the country’s shrinking ability to meet the trade and current account deficits,” said an analyst.
He said the balance sheet of the foreign exchange account will change in next two years as imports and exports have lost the equilibrium. The disproportionate growth of exports and imports has pushed the economic managers to find some other way to meet the rising trade gap. The country’s dependence on foreign direct investment and overseas workers remittances are not enough to meet the rising demand of foreign exchange.
