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Pakistan has a wealth of experience in the privatisation field.
Privatisation transactions over the years have ranged from simple
denationalizations whereby nationalized entities were returned to their former
owners to highly complex sale transactions extending over several years. Mr.
Zahid Hamid Federal Minister for Privatisation & Investment stated this in his
inaugural address at the 1st meeting of the High Level Experts Group (HLEG) of
Economic Cooperation Organisation (ECO) on Privatisation and Private Sector
Development and 2nd meeting of the ECO Heads of Privatisation Administration
here today.
He said Pakistan was proud of its successful privatisation record, and would
be only too willing to share its experience and expertise with member States
in line with the principal objectives of ECO, which included fostering of
economic development of member states, removing trade barriers, promoting
intra-regional trade and stimulating economic liberalization, privatisation
and the gradual integration of the region into the global economy. Realization
of these objectives of course required increased cooperation amongst member
states in the industrial, investment and privatisation fields, he observed.
The Minister hoped that the Experts Group and Heads of Privatisation
Administration could prove to be an effective tool for sharing knowledge of
policies and procedures and to benefit from each others experiences, which
would play a significant role in promoting such cooperation and hence in
realizing our objectives.
He further stated that the policies of Privatisation, deregulation and
liberalization were the cornerstones of the highly successful Economic Reforms
introduced by the government of President General Pervez Musharraf through
then Finance Minister, now Prime Minister, Mr. Shaukat Aziz. Due in large part
to these Economic Reforms, accompanied as they have been by continuity and
consistency of policies and good governance, the economy of Pakistan continues
to register rapid growth, averaging more than 7% during the last four years.
Giving the details of the achievements Mr. Zahid Hamid stated that during the
last seven years from 1999 to 2006 after Gen. Pervez Musharraf assumed office,
the Privatisation Commission carried out 61 transactions for a total amount of
Rs 363 billion or $ 6 billion, which is 86% of the total amount ($ 7 billion)
realized from privatisation since the Privatisation Commission was established
15 years ago. This is indicative not only of the high priority attached to the
privatisation policy, but the very successful manner in which it has been
implemented by the present government, he added.
Elucidating the salient features of the Privatisation policy the Minister
informed that Pakistan’s privatisation policy and programme, acknowledged to
be among the most successful in the region, have made a significant
contribution to building foreign investor confidence in the reform process and
in investment opportunities in the country.
The government has also put in place a very liberal and attractive investment
policy, which provided level playing field for domestic and foreign investors
i.e. equal investment opportunities for both in all economic sectors for
foreign as well as local investors with foreign equity up to 100% without
government permissions or sanctions while remittances of capital, profits,
dividends and royalties, technical and franchise fees are freely allowed with
attractive tax and tariff incentives are available. Foreign investment has
statutory protection. Also, Pakistan has bilateral investment protection
agreements with 47 countries and agreements for avoidance of double taxation
with 52 countries.
Pakistan’s privatisation strategy for stimulating investment and promoting
economic growth is two-pronged, which firstly seeks to reduce government’s
direct role in commercial and industrial activities based on the well-known
maxim that “the government has no business to do business”. Exceptions are
strategic industries or industries which the private sector is unable or
unwilling to own or manage.
The concept is that government, while not abdicating its responsibility,
should confine its role to policy making and providing good governance,
establishing a sound and effective regulatory framework to ensure social
equity and economic justice (preventing monopolies, cartels and unfair trade
practices and protecting interest of consumers), providing an enabling
environment for private sector investment, including physical and
technological infrastructure and requisite social services.
He further said that secondly the strategy is to promote the private sector as
the “engine of growth” and encourage it to play a leading role in economic
development, so as to bring about substantial increases in investment,
employment opportunities and income levels, and consequent reduction in
poverty.
Mr. Zahid Hamid stated that increased competition in different sectors of the
economy regulated by independent institutions would improve efficiency, reduce
waste, increase production and enhance quality, while maintaining down-ward
pressure on prices, thereby benefiting consumers, investors, tax payers and
the government.
He informed that Pakistan was presently implementing a very comprehensive and
broad-based privatisation programme which includes different type of
transactions for a wide range of public entities, among them strategic sales
of oil and gas exploration and production and distribution companies, initial
and secondary public offerings of shares of banks and an oil refinery, Global
Depository Receipts (GDR) listing in London of three banks and a power
generation company, and sale of coal and salt mines and small tourist motels
and restaurants.
In all privatisation transactions we follow a very open, fair and transparent
procedure, starting from the initial public notice inviting expressions of
interests, through pre-qualifications, due diligence and open bidding, till
actual signing of the sale purchase agreement and publication of summary
details of the completed transactions in the official Gazette, he stated.
The procedure is laid down in our governing law, the Privatisation Commission
Ordinance 2000 and rules and regulations prescribed there-under. Under this
law, 90 % of total privatisation proceeds are required to be utilized for
retirement of government debt and 10 % for poverty alleviation programme.
The combined result of the privatisation and investment policies has been a
dramatic ten-fold increase in Foreign Direct Investment (FDI) in 5 years, from
only $ 322 million in 2000-2001 to $ 3.521 billion in 2005-2006! With
portfolio investment of $ 351 million, total foreign investment during 2005-06
was $ 3.87 billion.
He said that this upward momentum was continuing into the current financial
year. FDI from July 2006 to February 2007 was $ 4.6 billion, which is almost
2-1/2 times more than the amount during the same period last year. FDI in this
period was $ 3.0 billion, nearly twice the amount last year. Net portfolio
investment in this period was $ 1.6 billion, nearly five times more than last
year. Clearly foreign investment will be setting new records this year, the
highest in our history.
In his opening remarks Mr. Mustafa Demirezen Deputy Secretary General ECO
Secretariat said that ECO was focused on the cooperation of member states in
the field of privatisation and private sector development as one of the
priority sub-sectors in industrial activities.
Later, the heads of delegations Mr. Hafizullah Wal Rahimi Director General of
Private Sector Development of Islamic Republic of Afghanistan, Mr. Azer
Bashirov Head of Department of Attracting Investment & Privatisation of
Republic of Azerbaijan, Mr. Nozimov Mahmadsharif Deputy head of State
Committee on Investment & Property Control of Tajikistan, Mr. Ali Guner Tekin
Head of Department of Republic of Turkey, Mr. Heydari Korde Zanganeh Deputy
Minister & Head of Board of Governors of Privatisation Organisation of Islamic
Republic of Iran, Mr. Khalymbredi 2nd Secretary of Islamic Republic of
Turkmenistan, Mr. Bakhitbek Shabarbayev Ambassador of the Republic of
Kazakhstan and Mr. Oybek Arif Usmanov Ambassodor of Republic of Uzbekistan
made country presentations, which were followed by Q & A session.
The meeting decided to hold next ECO moot at Baku, Azerbaijan in June this
year. On April 11, 2007 (tomorrow) the presentation by Islamic Republic of
Pakistan will include papers on Role of the Government and Legal & Regulatory
Framework of the Privatisation Commission by Pir Saad Ahsanuddin, Member PC
Board, paper by Mr. Abdul Ahad Effendi, Consultant (Banking) on Role of
Financial Advisors in Privatisation Process and paper on Workers Welfare
Measures by Mr. Muhammad Asghar, Senior Financial Consultant