With 21 major transactions lined up and proceeds targeted at over $3bn, 2015 seems to be a year of divestiture of govt. businesses.
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.
But a 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.
Mohd. Zubair, the minister of privatization said that 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.
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.
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.
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.
