With 21 major transactions lined up and proceeds targeted at over $3bn, 2015 seems to be a year of privatisation, if privatisation minister Mohammad Zubair’s plan and calendar is an indication.

Political opposition and the wave of renewed militancy-related law and order problem, however, remain the major challenges.

A majority of these deals would be strategic sales involving transfer of management control to the private sector. That means the real pace of privatisation — almost two transactions per month — would begin this year after a gap of about seven years, notwithstanding the three easier disinvestments of minority government stakes in UBL, ABL and PPL during the outgoing calendar year.

‘A provincial airline from China — Hainan Airline — wants to make Pakistan its base to access Africa and Australia by securing a strategic stake in PIA’, according to market intelligence.

“Militancy and energy shortage are two major threats to economic growth,” Mr Zubair told Dawn. If the government is able to demonstrate tangible progress in controlling these challenges, it will create confidence that the entire economic machinery can work with full speed and start showing significant results, he said.

Having already delivered $685m from the UBL, ABL and PPL transactions to break the seven-year impasse and achieved ‘Deal of the Year’ award on one sale and the ‘Issue of the Year’ on another by international agencies, he said international lending agencies believe Pakistan could achieve 8-10pc GDP growth in 5-10 years if the energy crisis alone is completely addressed.

But another major challenge is the institutional shortcomings that result in low efficiencies and outputs of service delivery. It needs to be improved through divestment of government assets rather than aiming for higher revenues.

Zubair said Prime Minister Nawaz Sharif had ordered him to complete the privatisation of all nine electricity distribution companies and two out of four generation companies (Muzaffargarh and Jamshoro) during 2015 through strategic sales.

But it would be decided on the basis of the advice of the financial advisors whether 26pc, 51pc or 100pc stakes would be sold.

“This is a big challenge to achieve, given the fact that the energy sector is the biggest challenge for the government and the country,” he said, because it is resulting in circular debt and poor quality of service.

In the prevailing hostile environment towards privatisation, it is comparatively easier to offload 26pc shares (instead of outright sale), along with management control, to convince political parties and labour unions that the public sector still retained major shareholding.

Despite their pro-privatisation election manifestoes, Jamaat-e-Islami and the PPP are currently strongly opposing major divestments and raising questions over transparency, while the Pakistan Tehrik-e-Insaf is divided in two camps over the process.

A group comprising Shafqat Mahmood and Arif Alvi support the privatisation agenda, while the Asad Omar-led group wants to follow the Malaysian model to set up a special restructuring body to improve the financial health of state enterprises to maximise capital gains. It is difficult for the government to follow this route, given the limited financial space.

The IMF has stated in its latest report that the government has promised to sell 100pc stakes in five power companies — Fesco, Iesco, Lesco, National Power Construction Company and National Power Generation Company — during 2015.

Mr Zubair disputed this statement, saying the IMF was perhaps confused, and that he would ensure that the proper correction was made by the lender. The size of the sale has not been decided yet, and it will be based on the political and financial implications of the advisors’ report and market intelligence.

What is clear is that a strategic partner with financial muscle and top class management experience has to be engaged to improve service delivery, cut down losses and build finances.

The government also plans to divest its shares in both the PIA and Pakistan Steel Mills by the last quarter of 2015, and market intelligence surveys have already been set in motion. It is in this respect that a provincial airline from China — Hainan Airline — which is emerging as a global airliner, wants to make Pakistan its base to access Africa and Australia by securing a strategic stake in the PIA.

Simultaneously, the market intelligence process has also been initiated in the Middle East (Etihad, Emirates etc.) and China. The PIA’s advisor and management, and the privatisation commission appear to be on the same page with regards to ongoing restructuring through the leasing of new planes and subsequent sale of shares.

The National Power Construction Corporation, Heavy Electrical Complex and two PIA hotels in Paris and New York are also planned to be sold out completely during 2015.

On the capital market side, the government’s 42pc shareholding in HBL would be divested through global depository receipts in a two-phased transaction to raise over $1.2bn. While financial advisers are working, there is a possibility that the first half of the transaction would be execute in March if at least two international institutional investors like the IFC each chip in with $150m. The second phase would then occur in June.

The divestment of the government’s shares in Kapco, Mari Petroleum and Pak Arab Refinery would also be made through a combination of international and capital market transactions, followed by initial public offering of State Life Insurance Corporation in the domestic market.

Published in Dawn, Economic & Business, December 29th, 2014