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Senate committee seeks IMF briefing

03 December, 2013

ISLAMABAD: Dissatisfied with government's explanation of its privatisation programme, a parliamentary committee called on Monday for a briefing by a team of the International Monetary Fund on its recent agreement with Pakistan.

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ISLAMABAD: Dissatisfied with government's explanation of its privatisation programme, a parliamentary committee called on Monday for a briefing by a team of the International Monetary Fund on its recent agreement with Pakistan.

Earlier, Privatisation Secretary Amjad Ali Khan had made a presentation at a meeting of the Senate's Standing Committee on Finance, Revenue and Privatisation and claimed that the privatisation programme was a home-grown agenda and not dictated by the IMF.

He said the Pakistan Steel Mills, the country's largest industrial unit, was currently down to 1.5 per cent of its production capacity and its equity was substantially in the negative. The board of directors of the PSM and the ministry of industries and production were examining three options – a complete closure of the mills, a bailout package of Rs36 billion and restructuring to make it stand on its own feet before partial privatisation.

The privatisation secretary informed the committee that six entities – the Pakistan International Airlines, Pakistan Steel Mills, Allied Bank Limited, United Bank Limited, Habib Bank Limited and Pakistan Petroleum Limited – had been prioritised for immediate sale through local and international stock exchanges.

He said the government owned 42pc shares in HBL, 20pc in UBL and 10pc in ABL.

The other public sector entities (PSEs) on the active privatisation list of 31 had been causing a loss of over Rs500 billion a year, he added.

He gave an undertaking that major communication infrastructure like ports and airports would not be considered for outright asset sale but through management sale.

The committee directed the government through the ministry of finance and privatisation to arrange a briefing by an IMF team. "When our ministers and prime ministers brief the IMF and US house committees during their visits to the United States, there should not be a problem for their teams of experts to brief our parliamentary committees," suggested a senator.

Other senators supported the proposal and the committee's chairperson Nasreen Jaleel of the MQM directed the government to coordinate with the IMF mission to brief the committee on the $6.68bn extended fund facility (EFF) agreement signed in June this year and present their point of view on the agreement.

Fatah Mohammad Hassani of the PPP said everything in Pakistan was being sold on IMF's directives and he feared that some day even the parliament house building might be put on the sale counter.

But the privatisation secretary insisted that the privatisation had been in progress for more than 20 years now and the sale of PSEs was not being pursued to meet IMF conditions. "The IMF did not prepare the privatisation list. We prepared it ourselves. We, not the IMF, identified 31 entities," he said.

He, however, confirmed that it had been agreed with the IMF to reform or privatise PSEs to limit their poor performance and improve public sector resource allocation and the two sides developed a plan to sequence the capital market and pre-privatisation restructuring for the firms where necessary.

Under the agreement, the government has to hire two financial advisers by the end of March next year. An adviser has already been appointed for the PPL. By June 30, the government will hire another two advisers so that minority shares of five companies could be sold in domestic and international market by the end of next year. Likewise, the agreement requires sale of the National Power Construction by June 30 and hire financial advisers by March for the sale of PIA's non-strategic assets in New York and Paris. The agreement also requires restructuring of PIA, PSM and Pakistan Railways.

Responding to a question, the privatisation secretary said it would be a great achievement if the government was able to complete privatisation of 5-6 entities this year. He said the government would also service the guaranteed past loans of PIA, apply voluntary handshake scheme and liquidate it by June 30 and then sell 26pc strategic stakes in the national carrier by Dec 31 next year.

He said the PIA would continue to lease efficient planes and rationalise routes and might shift its non-flight activities to a new subsidiary. He said the core business of the national airline – operating flights – was still profitable but catering and other services were running into losses and have to be addressed for its smooth functioning and successful privatisation.

Answering a question, he said PSM's industrial unit spread over an area of 4,000 acres while another 10,000 acres of land was also under its control for other purposes which could not be sold for any other purpose except for industrial use. The privatisation of Pakistan Steel without restructuring would be of no use, he claimed, adding that it was incurring Rs36bn annual loss at the rate of Rs3bn per month.

Responding to another question, he said about $800m proceeds on account of PTCL's privatisation were held up because of a problematic clause in the sale and purchase agreement and disclosed that the then secretary of the privatisation commission had refused to sign that clause.

He said three major properties which could not be transferred to the PTCL because of litigation had been valued at $360m.


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