KARACHI: The federal government has projected over Rs 70 billion inflows of privatisation proceeds from external sources during the fiscal year 2011-12.
Sources in ministry of finance told Business Recorder on Saturday that the federal government is keen to restart privatisation process, suspended from last few years, to meet its financial needs, and healthy inflows have also been projected under the head of privatisation for the next fiscal year.
"The last few years have been a lean period for privatisation due to global financial crisei and adverse domestic situation. Therefore, the government did not conduct privatisation", they said, adding that now the government is planning to resume the privatisation process.
The federal government is already facing fiscal problems and a public offering and privatisation of public enterprises could help provide the much-needed funds for development and other important needs. In addition, the government believes that these initiatives could invigorate the country's equity markets and spark interests of the international investors in Pakistan.
According to strategic plan of ministry of privatisation, currently the focus of privatisation transaction has been diverted from public private partnership mode (PPP Mode) to capital market transactions. In this regard, a roadmap has been approved by the Cabinet Committee on Privatisation (CCoP), whereby capital market transactions will be conducted in power and oil & gas sector.
At the same time, ministry of privatisation has set several priorities including ensuring timely privatisation of corporations approved by the Cabinet and transparency in the process.
In the next year's budget, ministry of finance has projected Rs 414 billion from external resources in fiscal year 2011-12 which is about 7 percent higher than budget estimates 2010-11. The receipts would also include a healthy share of privatisation proceeds.
The ministry of finance is expecting Rs 70.4 billion inflows under the head of privatisation from external resources in the next fiscal year. The amount was zero for the current fiscal year.
The federal government has also allocated Rs 75 million for the Privatisation Division for the next fiscal year. The allocated amount is about Rs 2 million higher than current fiscal year.
However, according to privatisation division, successful privatisation would depend on many factors like market conditions, investors' appetite, and probability of maximum proceeds.
The most alarming signs of growing economic imbalances were very sharp increases in the current account deficit of the balance of payments and fiscal deficit and unprecedented pickup in inflation and instability of the currency. Unless the situation is not settled privation division will not be able to attract investors to participate in government's privatisation programme, it added.
Sources said that under the restructuring efforts for the public sector entities, the Cabinet Committee on Privatisation has also identified several public sector enterprises listing on stock market and privatisation in the public-private partnership (PPP) mode.
Experts believe that the improving global economic situation will help to resume the privatisation process. However, they said that any setback on local or international front can also hurt the efforts of privatisation.
The government believes that public sector enterprises (PSEs) reforms and selected privatisation will not only improve public sector productivity but will also provide more space for private sector investment.
The finance minister, Abdul Hafeez Sheikh, in budget speech, has also highlighted the privatisation issue and given government's aim to privatise and list entities such as State Life Corporation, National Insurance, Pakistan Steel Mills Corporation, PIA, Pakistan State Oil (PSO), Pakistan Petroleum (PPL) and Oil and Gas Development Corporation.
During 2009-10, the ministry of privatisation formulated a new Privatisation Policy i.e. Public Private Partnership Mode (PPP Mode). The Policy was approved by the Cabinet Committee on Privatisation (CCoP) on February 17, 2009 and was subsequently ratified by the Cabinet in January, 2010.
Some 80 entities have been identified for Benazir Employees Stock Option Scheme (BESOS) by offering 12 percent stock options from the 80 public sector organisations to the employees of these organisations. So far, it has been implemented in 60 state owned entities (SOEs) whereby 304,412 employees are being benefited.
In two decades, the Privatisation Commission has successfully managed to complete 167 privatisation transactions, generating revenue of $9 billion, equivalent to Rs 476. 421 billion.