ISLAMABAD, June 15: The privatization of public sector enterprises cannot be construed as an investment activity because it involves only the transfer of existing units without any impact on poverty or increase in business activity capable of generating employment and enhancing affordability of public services.

This view was expressed by Dr A.R. Kemal, director Pakistan Institute of Development Economics, at a seminar held at the World Bank here on Tuesday to mark the launching of the Global Development Finance Report 2004, which had reported the inflow into Pakistan of $1 billion as FDI (foreign direct investment) in 2003.

The experience in Pakistan, he said, was that privatization did not necessarily improve the performance of public sector enterprises whether in the form of lower cost of their products or efficiency.

He cited the example of IPPs, to whom the government had given the guarantee of minimum price of electricity which was being earlier produced by Wapda at a much lower cost.

He recalled that Pakistan had adopted the structural adjustment programmes of the World Bank during the 1990s, reduced deficit financing and achieved current account surplus. But the figure of $600 million denoting FDI inflow was the same now as in 1990s.

Some economists, he added, were wondering whether we should continue with these policies. Dr Agha Ghazanfar Ali, who was secretary Privatization Commission before taking up his current assignment as secretary Statistics Division, said the $1 billion received by Pakistan in 2003 was in connection with the privatization of public sector enterprises. Such money could not be considered as FDI, he added.

He said Pakistan had the experience of three forms of capital inflow and all these involved contracts for services that were paid for by the government. The three were: construction of motorway, pre-inspection agreement with a Swiss firm and the IPPs.

There was no risk involved in such deals - an essential element of a business per se. Earlier, Mansoor Dailami, lead economist of the World Bank, presented the salient features of the GDF with the theme of "harnessing cyclical gains for development".