LAHORE - The business community as well as financial experts have endorsed the demand of the International Monetary Fund to privatise state-owned companies, as the Fund has also linked $5.3-$7.3 billion bailout package for Pakistan with PSEs privatisation, because country has been losing around Rs500 billion due to losses incurred by state owned companies.
“The inefficiency of state-owned enterprises has damaged the previous government’s credibility, scaring foreign investors away from investment in Pakistan. As a result, the investment to GDP ratio dropped from 23pc of GDP in 2007 to 13pc in 2013, leading to the loss of around $21 billion during the last five years,” they observed.
LCCI President Farooq Iftikhar said that telecom, banking, cement and automobile sectors have performed tremendously and attracted substantial investment both from foreign and domestic investors after privatisation.
He argued that scale of subsidies, financing, losses underwritten, bank borrowing guaranteed by the government, foreign loans for all the state-owned enterprises and corporations managed by the governments have never been computed but these liabilities would run into several billion dollars.
The former finance minister Dr Salman Shah said that privatisation of PSEs to improve their performance and save the national exchequer from further drain is the best option available, as government is constantly approving billions bailout for the public enterprise. He said that running public sector enterprises is not the government’s job, and that sensible change in management with ownership can turn these loss-making enterprises into profitable ventures.
It is not the government’s job to do business, however, it can change some companies’ boards of directors to improve performance. He said that evaluation process is underway to separate those companies that will be privatised from those the government will restructure to make more profitable.
The former chairman of Lahore Stock Exchange and South Asia Federation of Exchanges Syed Asim Zafar suggested the government to privatise PSEs through stock exchange by enlisting these enterprises on the KSE to ensure transparency.
PIA is already enlisted company while the Pakistan Railways can be privatised in phases after enlisting it on the equity market, so that no one could be blamed for favouritism, he said. He stressed the need for a mechanism to ensure in letter and spirit implementation of economic policy decisions in the larger interests of the stakeholders.
Syed Asim Zafar, who is presently vice president of the APBF Punjab chapter, said that committee has been formed to reduce the size of the government but the list has not yet been finalised for privatisation though it is confirmed that that power generation and distribution companies, Pakistan Steel Mills and Pakistan State Oil will also be privatised. In the power sector alone, as many as 19 state owned companies are operating at both provincial and federal levels. Hence, the size of the government is too strong to be shared.
Noted economist and former SBP governor Dr Ishrat Hussain maintained that HBL and UBL were given a capital injection of Rs41 billion to compensate for their losses under government ownership. Since 2005, after they were privatised both banks are paying dividends, corporate tax to the government and the residual value of government shares has risen several fold.
He observed that if PSEs were providing satisfactory services or catering to the needs of public this burden being borne by the taxpayers could have been defended but their service standards are so depressing that they have become a source of pain to the ordinary citizen and a disturbing force in our economic progress.
Experts said that with improved investor’s confidence on Pak Eurobonds, which is top gainer and shown a rally of more than 10 per cent, it is an ideal time for the new government to go to international market to raise budgeted $500 million from sovereign bonds.
, issue Global Depository Receipts (GDRs) of state-owned companies and launch aggressive privatization drive, as Pak Eurobonds are top gainers, showing a rally of more than 10 per cent.