Privatisation thru’ bourses

Published Jul 01, 2013 08:34am

STALLED since the last six years, the new government now plans to trigger the privatisation process for ‘big ticket’ companies.

The website of the Privatisation Commission shows that the last of the major transactions took place as far back as in 2006, when the sale of 73 per cent stake in the Karachi Electric Supply Company was completed.

Stock market participants lament that privatisation was never a priority in the PPP’s just-ended tenure, when not a single entity was put up for sale. Conversely, in the PML-N’s previous days in power, dozens of ‘big ticket’ public sector enterprises (PSEs) were placed on the auction block, which went on to enrich both the market and the investors.

In its desperate bids to fund the fiscal deficit, feeble attempts were made by the previous government to go global with eight planned Initial Public Offerings (IPOs) and Secondary Public Offerings (SPOs). The development followed the approval of the Privatisation Commission’s proposal under the pompous title of ‘Capital Market Transaction Road-Map’ in March 2012. However, over a year has passed, and yet the ‘road-map’ has led nowhere.

The PML-N, now in power, had promised in its manifesto “to identify and pursue privatisation of public sector enterprises”. But the budget 2013-14 documents nowhere mention the sale of public sector companies. It is under the external receipts that the government has allocated Rs79,200 million as privatisation proceeds.. That apparently is the sum of $800 million that the government intends to recover as the unpaid portion of the sale of PTCL.

All of this raises the question if privatisation would still be a priority of the government that is now in the saddle?

The Minister of State for Privatisation, Khurram Dastagir Khan, speaking over phone, said that his government was not in favour of a knee-jerk start to the sale of public assets. “Privatisation only works when it is properly restructured,” he asserted. The minister informed that a new Privatisation Board would be appointed in the next two months, after which the process would begin in a transparent manner.

He also observed that there were various ways of restructuring and selling PSEs under international best practices such as SPOs, Global Depository Receipts (GDRs) and Follow on Public Offering (FoPo). “One of them could even be sold to an outsider, with the government retaining the management control.”

Meanwhile, Khurram Schehzad, head of research at Arif Habib Limited, observes that there are suggestions of selling 5-10 per cent shareholding in around a dozen banks and energy companies. These could include selling of a part of such interest in PTCL, PSO, OGDCL, SNGPL, PPP, UBL and NBP. The analyst estimates that the government would be able to raise Rs150 billion through such sales, which would go on to reduce the estimated budgeted fiscal year 2013-14 deficit of 6.3 per cent of GDP by 0.06 per cent to bring it to 5.7 per cent.

Another person in the know of things confided that plans were already afoot to begin the sale process by end of September or early October. “By that time, the ongoing talks with the IMF would be over, and whatever the government would be able to mobilise through the privatisation would go to fund the fiscal deficit.”

A person privy to the Privatisation Commission said that the stakes of non-listed public sector holdings to be offered by the Commission include those of State Life Insurance, Pak Arab Refinery, National Insurance Company, Islamabad Electric Supply Company and the Faisalabad Electric Supply Company. It has to be seen if the government decides to retain in its fold highly unviable state entities like PIA, Railways, Wapda and Pakistan Steel, which consume more than Rs5 billion of the country’s resources every year.

Veterans at the stock exchange recall with relish how the number of investors in equities multiplied the last time the government opened up IPOs to the general public. Ordinary people filing applications for government IPOs in OGDCL, PPL and NBP had made astonishing sums of money, as the prices of these stocks had spiraled upwards.

Everyone agrees that at a time when private companies are hesitant to come up for listing and when equity values are at their peak at the stock exchanges, the government should seize the opportunity to seek the best price for profitable companies under its control.

The privatisation minister, Mr Dastagir Khan, admitted that the sale of part of ‘big ticket’ PSEs through stock exchanges was definitely an option.


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