Hiring of privatisation advisers: government fails to meet performance benchmark

The government has failed to meet the performance benchmark for hiring of financial advisors for privatisation by end-March, according to the staff report of the International Monetary Fund (IMF). The staff report prepared by the Fund staff level mission at the conclusion of the third review under the Extended Fund Facility states that the benchmark on hiring privatisation advisers was not met, as advisers were hired for only three firms rather than six.
The government has agreed on a new benchmark to push forward the privatisation process with completed share offers for two firms by end-June 2014. The advertisements for the transaction advisors for the six public sector enterprises (PSEs) were issued in March 2014, which delayed the original timeline for capital market transactions.
The authorities hired three financial advisors for United Bank Limited (UBL), Pakistan Petroleum Limited (PPL), and Oil and Gas Development Company Limited (OGDCL) in May 2014. The hiring of the remaining three financial advisors has been committed by end-June 2014. Going forward, the privatisation programme is aimed at offering and/or marketing at least one transaction in each quarter during the upcoming year. Contingent on investor sentiment, the government is committed to offering minority shares in the UBL and PPL to domestic and international investors by end-June 2014 under new structural benchmark.
The government submitted the timeline of the privatisation of PSEs to the IMF that the privatisation of the UBL and PPL would be undertaken by end-June 2014 and OGDCL by end-September 2014. The National Power Construction Company (NPCC) would be privatised by end-December 2014 and Allied Bank Limited (ABL), Habib Bank Limited (HBL) by end-March 2015.
According to the staff report, Pakistan Steel Mills (PSM), Pakistan International Airlines (PIA), and Pakistan Railways (PR) are the major budgetary drains among the PSEs. The government has committed to the IMF that a professional board to the PSM was appointed and approved a comprehensive restructuring plan in April 2014 to prepare for a potential strategic private sector participation in the company. The government further stated that Pakistan Railways has improved revenues in the first nine months of the year through rationalisation of tariffs and expenditures and improved occupancy rates. The authorities are also finalising the renewal of the PR Board end-July 2014.