AFTER touting its achievement in attracting large foreign inflows in the first half of the year, the government now finds itself in the embarrassing position of acknowledging that there is limited international interest in its planned divestment of shares in the profitable OGDCL.

Part of this lack of interest has to do with circumstances in global markets that are jittery due to an announcement by the Federal Reserve that the era of low interest rates is about to end. Investors have become more sensitive to vulnerabilities in their portfolios, and Pakistan hardly presents a picture of solidity as an investment destination, particularly given the squabbling that has broken out around the divestment.

It is fair to expect that the government should ensure a fair price for the sale of state assets, but the opposition misled the public in characterising the divestment as privatisation at a throwaway price, even before a price had been announced. The lack of investor interest would suggest that the government did not price the shares too low.

For its part, the government also failed to get its message out clearly. By the time it clarified that the transaction was not a part of the privatisation process, it was too late.

It also failed to explain why the transaction was necessary in the first place. Was its purpose simply to raise money? A divestment of shares does not bring any strategic benefit because management control does not change. Was it simply to satisfy the IMF?

In which case, why was the Fund so insistent in the first place? It is worth noting that the decision to postpone the deal was announced while talks with the Fund on the fourth and fifth review were under way in Dubai. Clearly, the postponement did not serve as a sticking point in those negotiations, suggesting that the Fund is perhaps not as insistent as implied by some. Given the uncertainties that have arisen around the deal, though, it is probably a wise decision to postpone the transaction for now.

Published in Dawn, November 10th, 2014