KARACHI, May 3: The Investment Corporation of Pakistan (ICP) has offered to repay the principal sum to the State Bank/government against the liabilities of about Rs1.6 billion.

Helped by a buoyant capital market and supported by policy makers, an outcome-focused ICP management has now enough cash to negotiate repayment. It is experiencing a financial turn-around. During 1998-2000, the state-run corporation was on the verge of collapse as a result of plummeting stock prices. For nine months ending March 2003, it has recorded a total income of Rs1,415 million as compared to Rs373 million in the corresponding of last year, says an ICP official.

The ICP is seeking a write-off of interest, which according to its book of accounts, is about Rs300 million.

All the restructuring, right-sizing and financial improvements have been achieved by ICP on the basis of self- financing unlike commercial banks where about Rs50 billion was injected for a turn-around in just two institutions. In commercial banks, the redundancies have been financed by the World Bank. And to quote a retired central banker, money was borrowed to create unemployment and not to fund development or generate jobs.

Tariq Iqbal Khan, ICP managing director told Dawn on Saturday that the government/central bank were mulling over his proposal to repay debts and the initial response is positive. But for these loans, the ICP has almost no liability and the contingencies have been provided for. In pursuance of official policy, the management of mutual funds has been privatized.

Under the second phase of compulsory severance scheme, the ICP staff has been reduced from 268 to 68 from ICP’s own resources amounting to Rs600million with the consensus of the staff. The Investment Account Scheme has also been liquidated. On June 13, 2001, the federal cabinet decided to transfer the management rights of mutual funds and wind down the reminder of ICP.

The ICP now possesses assets worth Rs1.3 billion in the stock exchange and Rs1 billion performing and non-performing equity/loans given to the corporates as bridge-financing, says Tariq Iqbal Khan who manages both NIT and ICP. Established in February 1966 to encourage broadbasing of investment base and to develop capital market, ICP has underwritten public issues, participated in equity of projects and maintained its own, investors’ and mutual fund’s portfolios. NIT, an open end mutual fund, is on the privatization agenda.

The future of ICP now lies in the hands of the policy makers. A number of proposals are under consideration of the government on how to manage transfer of these assets. One of the options could be to sell off these assets through the Privatization Commission. Or alternatively, ICP could be merged with some other institution as in the case of Prudential Bank or NDFC. Yet another option could be to privatize it with the current assets and the existing staff.

With its present status and financial performance, ICP can attract buyers. In the first three-quarters of the current fiscal, ICP got rid of ill-quid shares and cleaned its investment portfolio at a loss of Rs77 million.

On its investment under the Profit and Loss Sharing Scheme, the corporation booked losses to the tune of Rs29.6 million. Yet, during the period under review, it’s net profits before provision amounted to Rs1238 million and the net profit stood at Rs660 million. The improvement in the financial performance was achieved by reducing expenditure from Rs243 million to Rs74 million. Financial charges were cut from Rs161 million to Rs87 million.

The ICP’s experience can perhaps be emulated by many financial institutions, to do things on the basis of self- reliance and not lean on borrowed ideas and money to achieve a turnaround.