Pakistan prefers GDRs to privatise state enterprises

The higher authorities are believed to have agreed to seek GDRs as they bring foreign exchange in bulk instead of receiving much smaller amount through Initial Public Offerings (IPOs).

Now when the present assemblies are completing their terms by November 20 this year, the officials of the Privatisation Commission (PC) have reportedly been directed to avoid disinvesting any bigger unit during 2007-08.

Privatisation

The process of privatisation remained sluggish during the last many months but it received a severe blow when the Supreme Court declared steel mills transaction as invalid. The fear of accountability, as had been case previously, is said to have forced the authorities to hold back for some time the disinvestment process.

According to insiders, Pakistani investors have no financial strength to take part in GDRs that are meant for foreign investors. "Our local investors are more interested in IPOs and this is the capacity of the foreign investors to go for GDRs and that is why we have decided to pursue GDRs", a source in the Privatisation Commission said. He said GDRs involve bigger companies, investment groups and banks which suit the government of Pakistan. For GDRs, he said Lead Mangers are appointed while the services of Financial Advisers are sought for IPOs.

The government he said, is in the process of finalising the names of some lead mangers out of 19 potential such managers. To a question, he said the Citigroup which was the Financial Adviser of Steel Mills would no longer be consulted as the Mills' GDR was being planned for which a lead manager would soon be appointed to carry out forward the transaction. The lead manger would also firm up the reference price for the steel mills. The matter he said would soon be referred to the ministry of

production and industries which is the parent organisation of the steel mills. "Its terms of reference will be ready within this month", he said adding that Mills's transaction would attract foreign investors who were reluctant to take part in any big privatisation deal especially after the decision of the apex court.

Strategy

However, when contacted Minister for Privatisation and Investment Zahid Hamid said that there was no shift in the strategy to privatise the state sector entities. It was a

decision taken last year to pursue GDRs and that the government did not decide it all of sadden as many believe in the country, he added.

"We are pursing an approved privatisation programme of the government of Pakistan for the financial year 2007-08 and beyond", he said. Responding to a question, he said that the government plans to collect Rs75 billion in 2007-08 through its privatisation programme. Last year it was the same amount but the Privatisation Commission over performed, he said adding that the government would most likely achieve its Rs75 billion target and this target was agreed keeping in view various budgetary proposals.

To a question, he said that a number of transactions were expected to be completed during the next few months to be started with GDR of Habib Bank Limited. The HBL's IPO will commence in July to be followed by GDR of Kot Addu Power Company (KAPCO).

Similarly, he said that strategic sale of Jam Shoro Power Company, Pakistan Machine Tool Factory (PMTF), Heavy Electrical Complex (HEC), Hazara Phosphate Fertilizer, National Power Company, Small and Medium Enterprise (SME) Bank, National Investment Trust (NIT), Cold and Salt Mines and 26 Hotels and Motels of Pakistan Tourism Development Corporation (PTDC) will be privatised during 2007-08.

Disinvestment

Asked about the disinvestment of Pakistan Petroleum Limited (PPL), Sui Northern Gas Pipeline Limited (SNGPL) and Sui Southern Gas Company (SSGC) Mr Zahid Hamid said that their financial advisers were working out some remaining issues after which they will be put up for privatisation. In reply to a question, he said that PC was not facing any opposition by the ministry of petroleum and natural resources to disinvest oil and gas entities. "In fact we are receiving all their cooperation to privatise these important power sector entities quickly", the minister for privatisation and investment said.