The government is unlikely to achieve the target of privatisation of public sector entities as per commitment with the International Monetary Fund (IMF) due to current spread of coronavirus and subsequent restrictions on travel.
The federal government set a target of Rs 150 billion from privatization proceeds in 2019-20 through divestment of shares of six entities i.e. Mari Petroleum, SME Bank, Guddu Power Plant, Services International Hotel, Lahore, and 27 government properties which are unrealized.
Recently PC shared update on 11 PSEs in the active privatization program and is aiming to complete the initial phase within a period of 12 to 18 months. These PSEs include: (i) RLNG-based power plants of National Power Management Co Ltd; (ii) Nandipur Power Plant; (iii) PPL (up to 10 per cent divestment); (iv) SME Bank Limited; (v) divestment of government of Pakistan's residual shares in Mari Petroleum Company Limited (MPCL); (vi) First Women Bank Limited; (vii) HBC; (viii) Pak Reinsurance Co. Ltd (20 per cent divestment); (ix) State Life Insurance Corporation (up to 20 per cent divestment);(x) revival of PSM; and (xi) sale of 27 properties.
Background interviews with the officials of different ministries reveal that the government has come to the conclusion that subsequent to Covid-19 these targets are no longer achievable. However, Privatization Commission's spokesperson said that "we cannot say the process of privatization is derailed as the government is making all out efforts to achieve the targets. We are taking things ahead with the help of video conferences and other mode of electronic communications but there are issues relating to inability to physically inspect sites of the entities which is a mandatory requirement of due diligence process," she added.
Different countries placed restrictions on travel prior to Pakistan's decision to suspend flights operations, she continued citing the example of RLNG plants which the government had made operational but one investor team hailing from Malaysia which had shown an interest in the plants, was not able to travel to Pakistan because Malaysia imposed travel restrictions on its citizens. However, keeping in view the situation, Minister for Privatization directed the official to start interaction with investors through video conferences for due diligence. The management of National Power Parks Management Company (Pvt) Limited (NPPMCL) which owns RLNG power plants remained in contact with all the interested investors through video conferences. However, there are delays because whatever activity had been planned for the last week of March did not go ahead as per the plan but no transaction is halted due to the current scenario.
"Whatever situation unfolds due to Coronavirus, we will continue to adjust. We have actually stretched our privatization schedule through video conference. We cannot predict things but are taking things ahead with all possible effort," she maintained. On March 24, 2020, the Privatization Commission did pre-bid conferences for 747 MW Guddu Thermal Power Station and Jinnah Convention Centre through video link. However, inter-ministerial consultation is almost nil due to Coronavirus epidemic. Financial Advisors of different transactions are also home restricted.
She further stated that transactions like OGDCL whose shares are to be offloaded in the capital market have been affected because of current volatility as this raises several questions for further line of action. "Our schedule of each transaction has been impacted due to Coronavirus syndrome which is a fact and we cannot deny it. We will also bring all aspects to the notice of the Cabinet Committee on Privatization (CCoP)," she said, adding that as the situation normalizes, PC will again proceed as fast as possible.
Updating on revival of Pakistan Steel Mills (PSM) on PPP mode, sources said a team of M/s Sinosteel China was already in Pakistan. The team was in Karachi to visit the site and gather data but it returned to Islamabad as the situation worsened in Sindh due to Coronavirus spread.
However, the team again visited Karachi to get some technical information about the plant and jetty. The PSM team and Sinosteel held discussions on Monday through video link and also submitted a preliminary report to the PC. All the technical aspect of PSM will be discussed in the next meeting to be presided over by the Prime Minister's Advisor on Finance and Revenue, Dr Abdul Hafeez Shaikh. PSM has also been asked to complete spadework on human resource, legal and financial issues which the management is doing.
In reply to another question, she said that a Korean company, M/s Comrador, has also shown an interest in PSM and a decision has been taken to further meet up with the company working level. On February 25, 2020, CCoP had expressed its concern over the slow progress on the privatization program and observed that a lot of time is being wasted unnecessarily on petty issues. The CCoP further observed that with current pace, desired result from privatization program cannot be achieved. There is a dire need to resolve all issues related to privatization program expeditiously in order to make it a success. The CCoP has directed Privatization Division to expedite due privatization process of entities on the active privatization list, for ensuring their privatization within given timeframe.