(MENAFN- Khaleej Times) Pakistan's Privatisation Ministry has lined up 21 transactions hoping to bring in proceeds in excess of $3 billion this year. There are major challenges in terms of law and order and political opposition to achieve this goal after the three easier disinvestments of government shareholding in PPL, ABL and UBL. Mohammad Zubair, Minister of Privatisation, spoke to Khaleej Times in an exclusive interview about his plans for 2015.
Below are excerpts from the interview.
I believe that the Privatisation Commission has been given two awards for UBL transaction. Please tell us why this transaction was special?
UBL was the first transaction under the privatisation commission since 2007. All these years, not a single transaction had been concluded ... capital market or strategic sale. Therefore it was a major challenge to re-launch the privatisation process. The first task was to get major investment banks interested in the financial advisory role since most were not interested to work with GoP considering the bitter past.
This was our first marketing test and we were delighted when all major banks such as BofA/Merryl Lynch, Citi, Credit Suisse, DB, DIB, etc participated in the process for selection of financial advisor.
Our second major challenge was to complete the transaction within June 2014 in view of fiscal year considerations and finally the most important - globally marketing the transaction through the road shows, which were conducted in all major financial centres across the globe.
Our marketing campaign produced outstanding results since more than 30 of the major equity funds participated including such names as Morgan Stanley, Templeton, Wellington, etc. It was also heavily participated in by all major domestic investors. It also has to be seen in the context of prevailing political environment.
Just two days before the transaction, Karachi airport was attacked by militants and it was splashed around the world including newspapers such as the Wall Street Journal. It made our task more difficult and we had to make last minute efforts to reach out to potential buyers and renew their interest.
It has been recognised by two major publications - The Asset and IFR Asia and we are truly take pride in this.
Please tell us about your privatisation plans for 2015.
We have very aggressive plans for 2015. On the strategic sale side, we have already begun work on such institutions like PIA, Pakistan Steel, FESCO, IESCO, LESCO, NPCC, HEC, NPGCL, etc. The financial advisors have already been appointed and they are doing their due diligence.
Considering the regulatory requirements and to ensure transparency, it takes about 15-24 months to complete strategic sale transaction. We are quite hopeful, we will complete the privatisation process of the above named entities plus a few more.
On the capital market side, the major transaction that we hope to complete is the sale of 42 per cent government shares in HBL.
This will be the biggest capital market transaction in our history and is expected to raise $1.2 billion, most of it foreign exchange. The financial advisors are already appointed and we are working with full speed to ensure its completion. We have several other capital transactions including State Life IPO that will be undertaken in 2015.
After the Peshawar tragedy it seems the government is addressing extremism and terrorism. How much of an immediate positive impact do you foresee in attracting investors for SOEs?
The government's decision to address the issue of terrorism has received a positive response from the investors - both domestic and foreign. We believe that over the years, terrorism along with the energy crisis has been the major hurdle towards high economic growth rates, and therefore unless the government is able to resolve the terrorism issue, Pakistan will not be able to see the kind of economic growth so essential for Pakistan's long term economic sustainability.
That is recognised by the investor community. Hopefully as things on the terrorism front improve, we will continue to see investors interest growing.
Divesting listed entities like ABL and PPL was successfully transacted recently; what is your strategy to sell loss making state owned enterprises?
I have already mentioned our plans to sell loss-making enterprises such as PIA, Pakistan Steel, etc. A number of Discos and Gencos which are also loss making are going to be privatised over the next 12 to 24 months.
Please tell us how the funds are being utilised from the sale of these assets. Is it for budgetary deficits or retiring long-term debt? Wouldn't it give the government more credibility if it transparently released how the funds were utilised from each transaction?
The rules for privatisation proceeds are very clearly defined. As per the approval of Council of Common Interests, 90 per cent of the proceeds are to be utilised for debt retirement, while the remaining 10 per cent are for poverty alleviation. That's exactly what our government is doing.
Analysts say the hugely loss-making airline PIA is bankrupt but kept afloat with tax payers money. Is privatising PIA a real possibility?
PIA's privatisation is a major challenge in view of its political, economic and social implications. We have already covered a lot of area in this regard. We have accepted this challenge and whatever is required to be done in this regard will be done including taking all stakeholders on board. We hope for the sake of the people of Pakistan, we are successful in this project.
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