ISLAMABAD: After pause of seven years, Pakistan has entered into domestic as well as international capital market to offload its remaining shares in United Bank Limited (UBL) that fetched $387 million for the national kitty.
The PPP led regime had made efforts in its five year rule to launch Global Depository Receipts as well as move ahead with other privatization proceeds but they had failed to accomplish single transaction.
After assuming reins of power, PML-N led regime has struck a deal with IMF by making a commitment to pursue a vigorous privatization plan over the next three years under $6.67 billion Extended Fund Facility. The Council of Common Interest had already approved 68 public sector enterprises where different modes of privatization would be applied in accordance with the guidelines finalized by financial advisors.
By accomplishing the first transaction on privatization front, the present government has set the stage to privatize more state owned institution by off loading their shares in months ahead. First in this regard, the government will offer shares of PPL within this ongoing month.
The Cabinet Committee on Privatization under Chairmanship of Finance Minister Ishaq Dar had approved the strike price of Rs158 per share to off-load the government’s remaining 19.8 per cent or 241million shares in UBL. The UBL was profit making bank which was providing dividend of Rs28 million yearly to its shareholders.
The government had set floor price at Rs155 and gave 9% discount over the previous day trading as India provides discount of 10.5 per cent on its transaction so 9 per cent discount was reasonable level in accordance with the assessment of Chairman Privatization Commission Muhammad Zubair, who is basically responsible to market privatization of different entities in transparent manner.
Out of $387 million, the foreign equity funds bought 81 per cent shares for $311 million. It was the biggest capital market transaction after 2003 HBL capital market deal when the government raised Rs12.4 billion.
The foreign buyers including Morgan Stanley, Wellington, Templeton and others bought the shares.
The government will be privatizing more public sector entities in order to fetch over $2 billion in the upcoming fiscal year, starting from July 1, 2014. The government will privatize shares of Oil and Gas Development Company Limited (OGDCL), Habib Bank Limited (HBL), Allied Bank Limited and Pakistan Petroleum Limited (PPL).
Under the privatization law, 90 per cent of the privatization proceeds have to be utilized for retiring public debt while the remaining amount should be used for poverty alleviation.
According to government’s plan, it will launch Global Depository Receipt of HBL’s transaction by December and was expected to yield $1.2 billion. The OGDCL transaction is expected to be completed in September that will fetch about $850 million.
But in case of loss-making public sector enterprises like Pakistan Steel Mills and Pakistan International Airlines there were serious political, labour, employees’ rights and post-privatization challenges.
The government would have to ensure transparency in the privatization proceeds and in this regard all regulators need to be strengthened. There is dire need to strengthen Competition Commission of Pakistan by filling its all the vacant posts as well as in Security and Exchange Commission of Pakistan and other regulators of energy sector.
There is need to grant complete autonomy to regulatory institutions in order to give confidence of accomplishing this process in open and transparent manner and dealt with iron hand in case of any fishy deal found in this process.
In the case of UBL shares off loading, the CCP had granted more than 30 exemptions. Now there is need to inform the public that what kinds of exemptions CCP had provided in this deal. If this practice is adopted by the government then it will ensure transparency in this process.
