July 23, 2007	Monday	Rajab 07, 1428

There seems to be a temporary but visible shift in the government’s strategy in aggressive pursuit of global depository receipts (GDRs) as the pace for the strategic sales of state-run enterprises slows down. The GDRs are an important source of foreign exchange earnings amounting to about $2 billion that help finance the widening fiscal, trade and current account deficit.

As the present assemblies are completing their term by November 20 this year, officials of the Privatization Commission (PC) are believed to have been directed to avoid disinvesting any big unit during 2007-08. But the Federal Minister for Privatisation and Investment Mr Zahid Hamid denies any such move..

The process of privatisation has remained sluggish for sometime now particularly since the Supreme Court declared the Steel Mill’s transaction as invalid. The accountability issue is said to have forced the authorities to hold back the disinvestment process for some time. .

According to PC insiders, Pakistani investors have no financial strength to participate in GDRs and are meant for foreign investors. "Our local investors are more interested in initial public offering (IPOs) and the foreign investorso go for GDRs, That is why we have decided to pursue GDRs", a source at the Privatisation Commission said. He said GDRs involve bigger companies, investment groups and banks which suit the government For GDRs, Citigroup which acted as the financial advisor of the Steel Mills for privatisation, would not be engaged and a new lead manger will be appointed for it. The lead manager will also firm up the reference price for the mills. The matter he said would soon be referred to the ministry of production and industries.

"The terms of reference for the mills will be ready within this month", he said adding that mill's transaction is expected to attract foreign investors who were reluctant previously to take part in any big deal, especially after the decision of the apex court.

However when contacted, the Minister for Privatisation and Investment, Zahid Hamid said that there was no shift in the strategy to privatise the state sector entities. The decision for pursuing GDRs was taken last year and it was wrong to say that the government took the decision suddenly as many believe in the country. "We are pursing an approved privatisation programme for the financial year 2007-08 and beyond”, he added.

The government plans to collect Rs75 billion in 2007-08 through its privatisation programme. Last year, it was the same amount. The government will most likely achieve its Rs75 billion target which was in accordance with various budgetary proposals, the minister added.

A number of transactions are expected to be completed during the next few months starting with GDR of Habib Bank Limited. The HBL's IPO will be launched in July to be followed by GDR of Kot Addu Power Company (KAPCO).

Similarly, he said the strategic sale of Jam Shoro Power Company, Pakistan Machine Tool Factory (PMTF), Heavy Electrical Complex (HEC), Hazara Phosphate Fertilizer, National Power Company, Small and Medium Enterprise (SME) Bank, National Investment Trust (NIT), Cold and Salt Mines and 26 hotels and motels of Pakistan Tourism Development Corporation (PTDC) will be privatised during 2007-08.

Asked about the disinvestment of Pakistan Petroleum Limited (PPL), Sui Northern Gas Pipeline Limited (SNGPL) and Sui Southern Gas Company (SSGC), Zahid Hamid said that their financial advisors were sorting out some remaining issues after which they will be put up for privatisation.

He denied that PC was facing any opposition by the ministry of petroleum and natural resources to disinvest oil and gas entities. "In fact we are receiving all their cooperation to privatise these important power sector entities quickly", the minister said.

He said it was the government's consistent policies and level playing field that brought unprecedented foreign investment during the last financial year. Over $7 billion foreign investment also included $2 billion portfolio investment, including GDR of OGDCL ($738 million) and UBL's ($565 million).. .

"This is the most successful year in terms of privatisation proceeds", he said. About 20 per cent foreign investment came in the manufacturing sector, 11 per cent in the oil and gas exploration, 33 per cent in telecommunication, 21 per cent in financial business, three per cent in power and 10 per cent in other services.

The minister dispelled the impression that major foreign investment was attracted from the Middle East.

Answering a question, he said that the biggest portfolio investment came from the United States, followed by the United Kingdom and Singapore.

"On both the privatization and investment fronts, we are very successful", he said adding the privatisation process was very transparent as anybody could seek details about any transaction.