KARACHI, Oct 20: The Investment Corporation of Pakistan has justified the distribution and auction of its investment portfolio shares among its shareholders on October 10 and maintained that “in a company the beneficiaries are always the shareholders and it is the supreme body in this respect”.
“The shareholders can take an extreme decision of liquidating a company or corporation if they deem necessary, beneficial of expedient,” the ICP clarified in an unsigned statement issued in response to a news items published in Dawn business section on October 17.
The statement gives a detailed history of the ICP since its establishment in 1966. The ICP floated a series of closed-end mutual funds, instituted Investors’ Scheme and provided financial assistance to industrial projects by way of under-writing assistance, bridge, debenture loans, short and long term finance certificates and LMM financing. Like all other financial institutions and banks, the bad loans portfolio afflicted the ICP, which was also impacted by the stock exchange plunge.
The cabinet decided to privatise ICP following which the long series of mutual funds and Investors’ Scheme were divested. However, the privatisation of ICP could not be carried out for which the press release does not offer any reasons.
It was, therefore, decided by the government and the State Bank that assets of the corporation be realised and distributed in the shape of dividends for the benefit of shareholders and the remaining shell company be merged with Industrial Development Bank of Pakistan for which the board took a decision on August 26 that was approved by the annual general meeting on September 23.
On investment portfolio, the ICP press release says majority of shares consisted of illiquid shares. “It was rather impossible to dispose of these illiquid shares in the market and yet a majority of the portfolio could have remained unsold.”
“Whatever the cost in the book and whatever the market value on the basis of stock market quotation of this illiquid portfolio, the realisable value of such illiquid shares is generally very low and reference to cost or market value is farcical,” the ICP statement stresses.
Sabihuddin Ghausi adds: Ten big banks and three big insurance companies share the stakes in ICP. After 1974 an overwhelming majority of these banks were with the government and two big insurance companies are still in government control. These banks and insurance companies were national assets. The ICP too got afflicted with bad loans as were experienced by these banks. The government pumped Rs22 billion taxpayers’ money in United Bank and Habib Bank. Almost 100,000 employees from the banking sector were retrenched at a further cost of about Rs25 billion against a World Bank loan in the last decade to privatise these banks.
How prudent it is to put to death a financial institution -- ICP -- after further pauperising it by divesting its investment portfolio for distribution among the banks that are now under the private control? Its 26 open-ended mutual funds were divested to two different financial groups also at a throwaway price when the stock exchanges were under impact of 9/11.