Explains the history of privatisation in pakistan,the befits accrued,the challenges it faces,present sate of privatisation and the challenges

1. Privatisation in Pakistan
Prospects and Challenges
Shahid Hussain Raja
July 26, 2012

2. Sequence of Presentation
 Privatisation : Concept & Need
 Modes of Privatisation
 Privatisation Process
 Functions of Privatisation Commission
 Privatisation in Pakistan
 Prospects & Challenges
 Way Forward
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3. Privatisation Defined
“…. 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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4. Need for Privatisation
a) Enhancing the role of private sector in the economy
b) Reducing the budgetary deficit by selling the loss making
State Owned Enterprises (SOEs) to the private sector
c) Improving efficiency of SOEs by selling their at least 26 %
shares with management control to the private sector
d) Producing better quality products & services at affordable
prices for the public through Public Private Partnership
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5. Privatisation Commission
 Established as a body corporate by the promulgation of
Privatisation Commission Ordinance 2000

 The Commission is governed and administered by a nine
(09) member Board with Minister for Privatisation as
Chairman
 The Board is independent, autonomous and is dominated
by the members from Private Sector
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6. Functions of Privatisation
Commission
 Recommending privatisation policy guidelines to
the Cabinet;
 Preparing comprehensive privatisation programme;
 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. 6

7. Functions of Privatisation
Commission (contd)
 Proposing regulatory framework, including the
establishment and strengthening of regulatory
authorities;
 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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8. Functions of Privatisation
Commission (contd)
 Assisting in the implementation of Federal
Government policies on deregulation and
privatization and advise the Federal Government on
deregulation of the economy;
 Performing any other function that is incidental or
ancillary to carry out the privatisation programme
approved by the Cabinet.
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9. Modes of Privatisation
 Outright Sale of assets and business through open auction
 Sale of shares through public auction or tender
 Public offering of shares through a stock exchange
 Management or employee buyouts
 Award of long term leases
 Management or concession contracts
 Global Depositary Receipts (GDRs): Euro Bonds etc
 Exchangeable / Convertible bonds: Taking loans from
international funds against collateral of shares
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10. Privatisation Process
 Approval of Council of Common Interest (CCI).
 Cabinet Committee on Privatisation (CCoP) decision
to privatise an entity
 Hiring of a Financial Advisor (FA) or Valuer
 Due diligence by FA and Privatisation Commission
 Finalization of transaction structure
 Restructuring and regulatory reforms, if needed
 Invitation of Expressions of Interest (EOI)
 Submission of statement of qualifications
 Prequalification of firms
 Due diligence by potential buyers
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11. Privatisation Process (contd)
 Sharing of Bid Documents/Instructions with pre-
qualified bidders
 Pre-bid conference
 Approval of valuation (reference price) by CCOP
 Bidding process (media invited to observe bidding)
 Approval of bidding results by PC Board and CCOP
 Issuance of Letter of Intent to successful bidder
 Finalization of sale agreement between PC and Buyer
 Handing over of the entity
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12. Privatisation in Pakistan
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13. Privatisation Phases
1960s First Generation Privatisation
Objective Create / Strengthen Private Sector
Strategy Build factories and Sell them
1990s Second Generation Privatisation
Objective Reduce Government Losses
Strategy Disinvest, Deregulate
2000s Third Generation Privatisation
Objective Improve Efficiency & Profitability
Strategy Seek Strategic Investors
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14. Achievements
 Most successful privatisation program in South Asia,
Central Asia and the Middle East
 Over $ 9 billion proceeds (Rs. 476,421 million)
 167 transactions completed so far
 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
 Banking industry privatised substantially due to
which 80% of the banking sector is under private
ownership.
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15. Sector Wise Transactions
Since its inception in 1991, the Privatisation Commission have conducted
167 transactions with over Rs. 476 billion. Details are as follows:
Sector No of transactions Proceeds (Rs M)
Banking 7 41,023
Capital market 22 133,124
Energy 14 51,756
Telecom 4 187,360
Automobile 7 1,102
Cement 17 16,178
Chemical and Fertilizer 23 41,922
Engineering 7 183
Ghee Mills 24 843
Rice and Roti Plants 23 324
Textile 4 371
Newspapers 5 271
Tourism 4 1,805
Others 6 159 15
Total 167 476,421

16. Benefits of Privatisation
 Increased private sector share in GDP
 Induced investment and transfer of technology
 Improved management via introduction of international
best practices and quality improvement
 increased productivity and competitiveness
 Employment generation leading to poverty alleviation
 Creation of fiscal space for allocation of funds to social
sectors and infrastructure development
 Better services, products, higher profits leading to
increased dividends and tax revenues
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17. Prospects
 Broad national consensus on need and benefits of
privatisation/ deregulation in the country
 Robust private sector to take on even loss making state
owned enterprises( SOEs)
 Comprehensive legal framework available
 Experience of 2 decades of successful privatisation
 Support of international organizations
 Strong judiciary, civil society and media to ensure
transparency 17

18. Challenges
 Domestic and International financial crisis
 Huge losses of State Owned Enterprises
 Share values of many likely transactions at all time low
 Managing public interest in industries with social
repercussions i.e. power, transportation etc
 18th Constitutional Amendment has increased the role of
provinces in privatisation decision making process
 Regulatory/ dispute resolution framework needs changes
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19. Way Forward
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20. Privatisation Strategy
1. Loss reduction and efficiency improvement will remain as
basic objectives of privatisation in Pakistan
2. Corporatization and Restructuring of State Owned
Enterprises before their privatisation.
3. Transparency as a cornerstone of entire process.
4. Safeguarding the interest of employees and consumers.
5. Strengthening of regulatory framework.
6. Strategic sale and Private Public Partnership with
management control continues to be the main strategy
7. Sectors chosen for privatisation on priority are
infrastructure, energy and financial institutions
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21. Upcoming Transactions
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)
11 Pakistan Mineral Development Corporation (PMDC)
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22. Thanks
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