This document provides an overview of privatization in Pakistan. It discusses three generations of privatization that have occurred since the 1960s, with the objectives of strengthening the private sector, improving state-owned enterprise efficiency, and reducing subsidies. More than 165 transactions have generated over $9 billion in proceeds. The Privatization Commission oversees the process of evaluating, restructuring and selling state assets to private investors. Several sectors have been fully or partially privatized, including banking, fertilizers, cement and automobiles. Challenges remain around regulatory frameworks, financial crises, and managing public interests for certain industries. The document recommends maintaining transparency and public awareness to help further privatization efforts.

1. Shahid Hussain Raja
Independent consultant-public policy
www.sanoconsultants.co.uk
www.shahidhussainraja.com

2. 
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Introduction
Privatisation : Concept & Need
Modes of Privatisation
Privatisation Process
Functions of Privatisation Commission
Privatisation in Pakistan
Prospects & Challenges
Way Forward
Q&A
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3. 
Privatisation-not a new phenomenon in Pakistan
1960s-privatised factories built by the state to the private sector at nominal prices to
enhance its role
1970s-reversal of the policy, wholesale nationalisation
1980s-denationalisation of the enterprises
1990s-privatisation and deregulation to reap efficiency gains
2000s-privatisation to reduce state losses on subsidies
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More than 165 transactions fetched over $ 9 billion proceeds
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80 to 100% state owned enterprises in the different sectors have been
handed over to private sector
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4. “…. a transaction by virtue of which any property, right,
interest, concession or management thereof is
transferred to any person (entity) from the Federal
Government or any enterprise owned or controlled,
wholly or partially, directly or indirectly, by the Federal
Government”.
(PC Ordinance 2000)
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5. Generally the state has one or more of the following objectives of
privatisation ;
1.Strengthening of private sector. This was the motive behind the first
generation of privatisation carried out in Pakistan in 1960s when the state
built factories in strategic sectors and handed them over, at very nominal
rates, to the businessmen who were reluctant to invest in these sectors due
to paucity of requisite resources at their disposal and high risks involved.
2. Improving the efficiency and service delivery of the SOEs, whether
profitable or not, by bringing in the incentive and reward mechanism of the
private sector who would inject capital, technology and better management
practices. Pakistan privatised bulk of its SOEs in the second generation
privatisation carried out in the 1980s and 1990s.
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6. 3.Eliminating/reducing the huge state subsidies being given to those SOEs
which are continuously incurring losses but they cannot be closed because
of social welfare considerations or their strategic nature even though better
alternatives are now available in the private sector.
This is the philosophy behind the third generation of privatisation in Pakistan
in 2000s and it is still being done under Public, Private Partnership
(PPP).Here at least 26 % of the shares with management control of an SOE
are given to a strategic investor who injects capital and improves the
management
4.Raising funds in the local and global capital market by divesting shares of
the profitable SOEs. This is resorted to when the state needs cash and starts
selling shares of its blue chip SOEs in the global market or locally.
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7. 
Established as a body corporate by the promulgation of
Privatisation Commission Ordinance 2000 by the
President of Pakistan
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The Commission is governed and administered by a nine
(09) member Board with Minister for Privatisation as
Chairman
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The Board is independent, autonomous and is dominated
by the members from Private Sector
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8. 
Recommending
Cabinet;
privatisation
policy
guidelines
to
the
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Preparing comprehensive privatisation programme;
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Planning, managing, implementing and controlling the
privatisation programme approved by the Cabinet;

Taking operational decisions on matters pertaining to
privatisation, restructuring, deregulation and regulatory
issues.
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9. 
Proposing regulatory framework,
establishment and strengthening
authorities;
including the
of regulatory

Advising the Federal Government in selection and
appointment of the head and members of a regulatory
authority;

Advising measures to the Federal Government for
improvement
of public sector
units till their
privatisation;
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10. 
Assisting in the implementation of Federal Government
policies on deregulation and privatization and advise
the Federal Government on deregulation of the
economy;
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Performing any other function that is incidental or
ancillary to carry out the privatisation programme
approved by the Cabinet.
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11. 
Outright sale of assets and business through open auction
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Partial sale of shares through public auction or tender
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Public offering of shares through a stock exchange
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Management or employee buyouts
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12. 
Award of long term leases
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Management or concession contracts
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Global Depositary Receipts (GDRs): Euro Bonds etc
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Exchangeable / Convertible bonds: Taking loans from
international funds against collateral of shares
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13. 
Approval of Council of Common Interest (CCI).
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Cabinet Committee on Privatisation (CCoP) decision to
privatise an entity
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Hiring of a Financial Advisor (FA) or Valuer
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Due diligence by FA and Privatisation Commission
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Finalization of transaction structure
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14. 
Restructuring and regulatory reforms, if needed
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Invitation of Expressions of Interest (EOI)
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Submission of statement of qualifications
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Prequalification of firms
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Due diligence by potential buyers
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Sharing of Bid Documents/Instructions with pre-qualified
bidders and pre-bid conference
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15. 
Approval of valuation (reference price) by CCOP
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Bidding process (media invited to observe bidding)
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Approval of bidding results by PC Board and CCOP
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Issuance of Letter of Intent to successful bidder
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Finalization of sale agreement between PC and Buyer
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Handing over of the entity
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16. Privatisation in Pakistan
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17. 1960s
First Generation Privatisation
Objective Create / Strengthen Private Sector
Strategy
1990s
Build factories and Sell them
Second Generation Privatisation
Objective Reduce Government Losses
Strategy
2000s
Objective
Disinvest, Deregulate
Third Generation Privatisation
Improve Efficiency & Profitability
Strategy Seek Strategic Investors
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18. 
Most successful privatisation program in South Asia, Central Asia
and the Middle East
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Over $ 9 billion proceeds (Rs. 476,421 million)
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167 fairly transparent transactions
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100% state owned enterprises in the chemical, textile, nitrogen
fertilizer, cement, rice, roti and light engineering while 98%
automobile industry, 96% ghee mills and
100% units of
Phosphate fertilizer have been privatised
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19. 
Banking industry privatised substantially due to which 80% of
the banking sector is under private ownership.
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Convenient availability of better goods and services at
affordable prices to the general public
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Increased tax revenue to the state exchequer in the form of
corporate taxes
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Dividend yields to the public as well as the state which still
holds substantial share holding in these entities
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20. 
Emergence of robust private sector
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Induced investment and transfer of technology
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Improved management/productivity by introduction of
international best practices
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Fiscal space for social sectors and infrastructure
development resulting in employment generation and
poverty reduction
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21. Sector
No of transactions
Proceeds/Billion Rs.
Banking
7
41.02
Capital markets
22
133.12
Energy
14
51.76
Telecoms
4
187.36
Automobiles
7
1.10
Cements
17
16.18
Chemical/fertilizer
23
41.92
Engineering
7
0.18
Ghee mills
24
0.84
Rice and roti plants
23
0.32
Textiles
4
0.37
Newspapers
5
0.27
Tourism
4
1.81
Others
6
0.16
Total
167
476.42
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22. 
Coming into power of a private sector friendly regime
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IMF conditionality in case of bailout
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Broad spectrum consensus on need and benefit of privatisation/
deregulation
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Robust private sector to take on big SOEs
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Comprehensive legal framework available
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Experience of 2 decades of successful privatisation
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Support of international organizations
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Strong judiciary, civil society, and media to ensure transparenc y
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23. 
Domestic and International financial crisis
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Huge losses of SOEs-how to attract investors
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Share values of many likely transactions at all time low
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Managing public interest in industries with social
repercussions such as power, transportation etc
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Repercussions of 18th Amendment-seeking of provincial
concurrence in each transaction
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Regulatory dispute resolution framework needs further
improvement
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24. 24

25. 
Strong elite commitment for privaisation at the political and
bureaucratic level in the form of policy formulation
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Translation of this commitment into vision and mission-what, why,
how and when to privatise i.e. loss reduction and efficiency
improvement as basic objectives of privatisation
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Scientific structuring of the privatisation deals by looking at the
cash-flow statements rather than assets of the concern
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Strategic sale and PPP with management control should be the
main course of action while safeguarding the interest of
employees and the consumers
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26. 
Awareness campaign to inform the public about the
entity to be privatised-why we are doing it
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Sale of certain percentage of shares to the general
public to create ownership
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Corporatisation of the components of the large entities to
generate maximum competition
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Transparency to be the cornerstone of the privatisation
process by strengthening the regulatory framework.
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27. Financial Institutions- Banks, Insurance companies
Energy-Electricity Distribution Companies (DISCOs),
Electricity Generation Companies (GENCOs), Oil & Gas
Development Company (OGDCL), Pakistan Petroleum
Limited (PPL), Pakistan State Oil (PSO)
Infrastructure-Pakistan Railways, Port Qasim Authority
(PQA),Karachi Port Trust (KPT),Pakistan Steel Mills
(PSMC)
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28. Sr. No. Transaction
1
Oil & Gas Development Company Limited
2
Pakistan Petroleum Limited
3
Heavy Electrical Complex
4
National Power Construction Company
5
Peshawar Electric Supply Company (PESCO)
6
Quetta Electric Supply Company (QESCO)
7
Hyderabad Electric Supply Company (HESCO)
8
National Power Construction Corporation (NPCC)
9
Faisalabad Electric supply Company (FESCO)
10
Jamshoro Power Company Limited (JPCL)
Pakistan Mineral Development Corporation
11
(PMDC)
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29. 
Thank you for viewing the presentation

Its article version with updated information is available
at my website
www.shahidhussainraja.com

I will also be writing a series of posts on this issue in
my blog
pakistanperespectives.blogspot.com

Kindly do leave your comments there
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30. Thanks
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