The government’s move to convert the State Life Insurance Corporation into a public limited company has hit snags for want of parliamentary approval.
It intends to divest 25pc of the corporation’s shares at the stock exchange while retaining management control.
An ordinance on the State Life Insurance Corporation’s (SLIC) re-organisation and conversion was promulgated in April 2016, and cleared by the National Assembly in May 2016. But, the Senate sent it back to the lower house with certain amendments.
Several meetings have been held over the last 11 months but the government and opposition parties have failed to narrow down differences
The amended bill was referred to the National Assembly standing committee on commerce for scrutiny. Several meetings have been held over the last 11 months but the government and opposition parties have failed to narrow down differences.
Pakistan has applied for a $500m loan from the World Bank for development policy credit and conversion of SLIC from a corporation into a company — the lender’s prior condition for extending the loan.
While the SLIC is the leading player in life insurance market, an official in the finance ministry said the World Bank will not extend the loan until the corporation was turned into a company.
The government has also committed to the IMF for making an initial public offer (IPO) of up to 15pc of SLIC’s stakes.
While in many countries, the insurance sector falls under the control of the ministry of finance, while production and commerce are clubbed together, Pakistan’s State Life Corporation is an attached department of the ministry of commerce.
The SLIC is a profitable organisation but is facing various risks such there being no appointed chairman while other top slots also remain vacant.
Commerce Secretary, Saleem Ranjha, said the proposed move to convert SLIC into a company was to prevent stagnation and redundancy and to promote institutional reforms. The Bill aims to involve the private sector to improve management, accountability, and transparency. In addition, changes need to be made to bring the legislation in line with SECP rules.
Official minutes of the standing committee meetings on SLIC show that opposition members completely opposed the government’s move and questioned the need for a new bill, as SLIC was a profitable institution and offered affordable insurance policies.
The committee members agreed that there was room for improvement and that expenses could be curtailed. However, they felt that changes should not come at the cost of jeopardising the livelihood of the employees, the savings of policyholders — which include widows and pensioners — and the state guarantee related to SLIC policies.
The Senate committee introduced several amendments. It removed the privatisation clause from the bill, introduced shareholding and management control in the company and federal government guarantee of the policies. But Commerce Minister Eng. Khurram Dastgir Khan did not agree with the proposed amendments.
According to Mr Dastgir, the proposed amendments by the committee would change the purpose of the Bill.
Analysts believe a corporation with minority private investor shares was a positive step and would not only improve SLIC’s performance but would also promote transparency and accountability.
Nonetheless, according to an official in the finance ministry, this simple conversion was not acceptable to the World Bank. The Bank wants an ultimate privatisation of the corporation after becoming a company. This can only be achieved when the privatisation clause is included in the bill.
Published in Dawn, Business & Finance weekly, March 27th, 2017