Economy of Pakistan, topic Privatization

1. Economy of Pakistan
Topic: Privatization
Syed Ali Roshaan Raza
BBA - 5

2. Privatization
 The transfer of public assets, operations, or
activities to private enterprise
 Also referred to as “denationalization”

3. Privatization (cont.)
 It is a policy tool for generating growth and
opening up the economy to competition
 A public firm maximizes social welfare,
while a private firm maximizes profits

4. Characteristics of
Privatization
 Individual’s or company’s ownership
 No control of Govt.
 Good alternative

5. Methods
 Selling shares on the stock market
 Selling entire org. to a strategic investor
by auction
 Distributing ownership to all for free or
at lower cost

6. Why privatization?
 To increase efficiency
 To reduce govt. involvement in
commercially viable activities
 Competition in market
 Lower price, greater choice for consumers

7. History
 The privatization program was launched on Jan 22,1991
by Prime Minister Nawaz Sharif
 To improve GDP growth & attract foreign investment
 In 2004, a more intensified privatization program was
launched under the presiding leadership of Prime
Minister Shaukat Aziz
 Program ended effectively at the end of 2007 when 80%
to 90% of the industries were put under the management
of private ownership

8. Success stories
 First bank to be privatized in 1991, with the issuance
of 26% shares to National Group at a price of Rs. 56
per share
 Compared to 1991, bank deposits had increased by
184% in 1995
 Took new initiatives & marketed new products &
services to cater the varying requirements of its
diverse customer

9. Privatization of
 PTCL is a mega corporation and a
leading telecommunication services
provider in Pakistan
 UAE based co. purchased 26% of shares
with management rights in 2006
 Remaining 12% to the public, and 62%
under govt. management still

10.  PTCL’s fortunes have declined
 Profits after tax grew from about 18 billion to over 27
billion rupees, a rate equivalent to 11% per annum, prior
to privatization
 After privatization, earnings fell to almost Rs. 11 billion
(negative growth of 21% per annum)
 Similarly, the profit margin declined from an average of
71% over the four years prior to privatization to 50% over
the four years since and continues to fall.

11.  Impact on performance
-10.00%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
2004 2005 2006 2007 2008 2009
Operating Profit Margin
Net Margin
Return on Equity

12. Mean 0.4767
Median 0.48
Mode 0.48
Standard Deviation 0.0501
0.48
0.56
0.42 0.43
0.48 0.49
0
0.1
0.2
0.3
0.4
0.5
0.6
2006 2007 2008 2009 2010 2011
Asset turnover ratio
PTCL

13. 26,606
20,777
15,639
-2,825
9,151 9,294
7,428
-5,000
0
5,000
10,000
15,000
20,000
25,000
30,000
2005 2006 2007 2008 2009 2010 2011
Profit for the year (PTCL)

14. Comparison with India
118.5
218
200.8
161.2
112.4
221.9
0
50
100
150
200
250
2000 2001 2002 2003 2004 2005
TATA communications (profit for the year)

15. Comparison with India
 Asset turnover ratio
0.48
0.56
0.42 0.43
0.48 0.49
0.64 0.64
0.47 0.46
0.34
0.39
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
2006 2007 2008 2009 2010 2011
PTCL
TATA

16. Recommendations
 The govt. should buy the 26% shares of PTCL from Etisalat
 It should again be nationalized. Government-run systems
should be public and democratic, otherwise they will only
deteriorate
 PTCL should improve its service and introduce new
technology, as people are getting more into cellular phones
and PTCL is going towards obsoletion.
 Sales are decreasing and ultimately the net profit, so
nationalizing the company just might save it from becoming
a total loss-making entity in future

17. THE END
Thank You!