Dr Hafeez Sheikh was dismissed on 29 March 2021, ten and a half weeks before completing the six month tenure as the country’s non-elected finance minister which began on 11 December 2020 and nearly twenty three months after he was appointed as Advisor to the Prime Minister on Finance on 20 April 2019.
Sheikh entered the Pakistani political arena during the dictatorship of Pervez Musharraf. From 2000 to 2002, he was Sindh’s Finance Minister. In 2003 he won a PML-Q Senate seat, referred to as the ‘king’s party’, and was promptly appointed as Minister for Privatization which he left in 2006 amidst considerable accolades as the country witnessed the largest-ever privatisation in its history during this period. It was speculated at the time that his departure was due to serious differences with the then prime minister Shaukat Aziz who privately expressed his reservations at Sheikh’s ambition to replace him as the country’s finance minister – the only portfolio that General Musharraf reportedly allowed Aziz to lord over.
The Privatisation Commission (created on 22 January 1991) provided the following figures on its website of transactions carried out between April 2003 when Sheikh was appointed and December 2006: (i) Banks – 51 percent of Habib Bank shares sold for 22,409 million rupees to Agha Khan Fund for Economic Development in December 2003; (ii) 9 capital market transactions through stock exchange to the general public including third offer of NBP (604 million rupees) in November 2003, OGDCL 5 percent share sale netting 6851 million rupees in November 2003 with two more transactions in December 2006 (the first netting 44,893 million rupees with the GDR offering to international institutions and 0.5 percent share sale of OGDCL with GDR offering to domestic institutions netting 2070 million rupees); 10 percent of SSGC shares in February 2004 for 1734 million rupees, 5.8 percent PIA shares for 1215 million rupees, PPL 15 percent shares in July 2004 netting 5633 million rupees, UBL 4.2 percent shares netting the government 1087 million share, and KAPCO 20 percent shares for 4815 million rupees, on April 2005; (iii) energy sector 51 percent shares in NRL sold to Attock Refinery and 73 percent shares to Hassan Associates in May and November 2005 netting a total of 32,275 million rupees; (iv) telecommunications - 26 percent shares of PTCL to Etisalat in July 05 at 155,992 million rupees and carrier telephone industries to Siemens Pakistan Engineering on October 2005 for 500 million rupees; (v) three cement plants – Dandot and Kohat Cement (10 percent additional shares from what was sold in 1992) to EMG, Mustekham Cement netted 3205 million rupees sold to Bestway cement and Javedan cement company limited sold to Haji Ghani Usman group in August 2006 at 4316 million rupees; (vi) chemicals - Khurram chemicals additional 10 percent sold to Pfizer Pakistan for 6 million in October 2003 and Ittehad chemicals 10 percent additional shares sold to EMG for 26 million rupees October 2004; (vii) Pak Arab fertilizer 94.8 percent shares sold to Export Reliance consortium for 14,126 million rupees on May 2005 and Pak American fertilizers sold for 280 million rupees to Azgard 9 in July 2006; (viii) Ghee - Kohinoor mills sold for 81 million rupees to Iqbal Khan in May 2004 and United Industries Limited sold to Akbar Magoo for 8 million rupees in September 2005; (ix) industrial units - Bolan Textiles sold to Sadaf Enterprises for 128 million rupees October 2005 and Lasbella Textile Mills sold to Raees Ahmed for 156 million rupees in November 2006; and (x) international advertising sold to EMG in April 2005 for 5 million rupees and Falettis hotel sold for 1211 million rupees to 4 B Marketing.
Five observations are in order which may compel one to conclude that the privatization policy during Hafeez Sheikh’s tenure as Privatization Minister was perhaps not an unqualified success. First, Shaukat Aziz, not a qualified economist, took full credit for the privatization policy during Musharraf’s entire tenure however one would be hard pressed to agree with his claims.
Second, balance sheets of the privatized companies at the time are no longer available to determine whether they were running into losses or profits at the time (though the consensus is that most if not all were profitable) and if so whether the Privatization Commission bothered to undertake a cost benefit analysis with the cost inclusive of foregone government profits for the next five years.
Third, if one takes the Etisalat transaction out of the equation (155,992 million rupees) then total privatization proceeds during Hafeez Sheikh’s tenure as the country’s Privatization Minister amounted to 100,674 million rupees i.e. if December 2006 transactions when he had already resigned are not taken into account.
Fourth, the names of some strategic investors/buyers crop up more than once with allegations against Sheikh that he favoured some over others where strategic investors were preferred and that he continued his support during his more recent stint as finance minister though without any investigation the allegations, like those hurled against some members of the opposition remain unsubstantiated.
And finally, there has been no evaluation as to the success or otherwise of the privatised companies though Etisalat has yet to clear 800 million dollars and the sale of K-Electric is widely regarded as a failure due to its appallingly poor delivery and the continuation of government subsidies.
In March 2010, after Shaukat Tarin’s resignation the Zardari-led Pakistan People’s Party, with a dearth of economists within its ranks, chose Hafeez Sheikh as the finance minister in 2010, a position he held till 2013. His tenure began with a failure to honour the pledges made by his predecessor to the International Monetary Fund (IMF) on tax and power sector reforms leading to the suspension of the Fund programme with two tranches remaining. Sheikh’s resignation was prompted reportedly by President Zardari’s offer to nominate him as the country’s caretaker prime minister which was unmet; after he left the country he laid the blame for placing the country on the path to yet another IMF programme by end 2012 on President Zardari.
Imran Khan’s selection of Hafeez Sheikh and a dismissal of his own long time loyalist Asad Umar from the finance portfolio was seen by his critics as indicative of establishment support, though in all probability Khan was stumped on who to appoint after he had reportedly reached the conclusion (which he admitted more than a year later) that his biggest mistake was in not going on a Fund programme soon after he took oath as the country’s prime minister – a volte face from what he and Asad Umar had maintained before taking oath.
During Sheikh’s two stints as the country’s de facto finance minister - March 2010 to February 2013 and 20 April 2019 to 29 March 2021 - he took the country back to the policies from before especially with respect to the eighteenth constitutional amendment and the National Finance Commission award which led the Fund to state in its press release dated 12 May 2019 that “to improve fiscal management the authorities will engage provincial governments on exploring options to rebalance current arrangements in the context of the forthcoming National Financial Commission”. What was more disturbing was Sheikh’s denial during his media interactions and to parliament that he had reached an agreement with the Fund on the matter. If Shaukat Tarin becomes the de facto finance minister it bears reminding that as the architect of the last NFC award he is unlikely to make the same mistake as he has remained focused on a steady rise in revenue as per the NFC award – one percent rise as a percentage of GDP every year to meet the centre’s financial needs.
Sheikh’s economics if not entirely shaped by international donor agencies (domestic debt rose from 16.5 trillion in August 2018 to 23.7 trillion rupees in September 2020) were certainly influenced by them and together with monetary policy decisions taken by the State Bank of Pakistan are responsible for the containment of the growth rate to 1.5 percent last year (pre-Covid-19). In addition, his failure to understand that the influence peddlers in the country would resist the Fund sponsored tax and power sector reforms making it impossible to achieve his unrealistic revenue targets within one year, is inexplicable as he faced somewhat a similar situation in 2010. Timing and phasing of the Fund programme was simply not appropriate, as stated by Shaukat Train in a recent interview.
Tarin has always maintained that he resigned in 2010 because of personal reasons yet many of his close associates maintain that he resigned because the Zardari government refused to implement the necessary tax and power sector reforms. Imran Khan should be reminded that Shaukat Tarin took on the entire PPP cabinet during his previous tenure by insisting on third party audit of rental power projects – a decision that stood the country in good stead.
To conclude, one would hope that the country’s power centres – political and non-political – understand that degrees from a good university abroad and/or experience in international donor agencies do not guarantee an individual’s ability to think out of the box or a capacity to compel his cabinet colleagues to deliver on reforms. One can only hope that this is a final farewell to Hafeez Sheikh.
Copyright Business Recorder, 2021