Volume 01 March 2015

Privatisation CommissionNEWSLETTER

PAGE-5MissionStatement

PAGE-6History ofPrivatisation

PAGE-8Organizational Structure ofPrivatisation Commission

PAGE-19PC News

PAGE-22IFR Asia’s Issuer of the Year

Message from theMinister for Finance, Revenue, Economic

Affairs, Statistics and Privatisation

Pakistan’s privatisation program is focused on attracting private sector capital and managerial expertise through the divestment of identified public sector entities (“PSEs”) in a transparent manner. The program includes the divestment of PSEs in the oil and gas, power, and financial sectors through capital market transactions, and other modes, which will enhance the attractiveness and visibility of Pakistan as a favoured investment destination. In doing so, the Privatisation Commission will deepen the country’s capital markets through foreign and domestic direct and portfolio investment, and will mobilise the savings of Pakistanis by providing an opportunity to take ownership in successful businesses.

The major benefits of the privatisation are to:

• Generate revenue for debt retirement and poverty alleviation;

• Improve the PSE's provision of services to the general public; and

• Provide better facilities to the general public after improvement of PSEsby private sector involvement;

The following benefits will also accrue in the power sector:

• Enhanced capital formation for the domestic power sector outside theGovernment's budget and without sovereign guarantees;

• Improved power sector efficiency through competition, accountability,managerial autonomy, profit incentives, and deregulation.

• Rationalized prices and subsidies while maintaining certain sociallydesirable policies such as rural electrification and low-income lifelinetariff rates.

The Privatisation Commission Newsletter is a valuable addition to the Privatisation Commission's efforts to disseminate useful information to other government departments, and the general public.

Mohammad Ishaq DarMinister

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Message from theChairman,Privatisation Commission

Privatisation is an important policy tool for generating growth and addressing structural imbalances by removing artificial barriers, attracting investment, and opening-up the economy to competition. Pakistan’s privatisation program is part of the Government of Pakistan’s economic reforms agenda, which along with deregulation, restructuring, and good governance, seeks to enhance growth and productivity in the economy by harnessing the private sector’s capital and managerial expertise as an engine of growth. Privatisation will continue to be implemented in a transparent manner, to bring the Government out of running businesses, and to create space for the private sector leading to a sustainable economy and a prosperous Pakistan.

The Government of Pakistan attaches a high priority to private sector development and endeavors to provide a level playing field by encouraging local as well as foreign direct investment. The Government believes that the private sector is the engine of growth and the Government should only be an impartial umpire rather than a market participant. Previously, the privatisation process suffered a setback due to global financial crisis of 2007-2009. However, one of the most important achievements of the Privatisation Commission during the tenure of current Government is the revival of the privatisation program, after a six year gap. So far, three capital market transactions have been successfully concluded, and about a dozen strategic sales are currently being processed.

The Privatisation Commission is seeking to turn loss making PSEs to profitability by equipping them with state-of-the-art technologies, through the introduction of Public Private Partnerships, strategic sales, and capital market transactions, which will lead to provision of improved services to the public in general.

The Privatisation Commission Newsletter, in addition to the Privatisation Commission’s website and periodic announcements, helps to ensure that the general public and all stakeholders are aware of the Privatisation Commission’s activities and accomplishments.

Mohammad ZubairChairman

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The Government of Pakistan is committed to pursuing privatisation as a core element of its economic reform agenda. The privatisation program aims to reduce Pakistan’s fiscal burden, improve service delivery to the people of Pakistan, facilitate more competition in the economy, and strengthen Pakistan’s capital markets.

Pakistan was one of the first countries in the region to initiate the deregulation and liberalization of its economy, and to start privatisation. Between 1991 and 2008, proceeds of PKR 476 billion were raised from 167 privatisation transactions, which included important privatisation successes in the industrial, telecom and financial sectors. The latter two sectors, in particular, have been major contributors to the national exchequer.

The present Government restarted the privatisation program in 2013, after a six year gap. A ‘Program for Early Implementation’ was approved by the Cabinet Committee on Privatisation on 3 October 2013, listing thirty one PSEs for privatisation. Eight further PSEs were added to this list in June 2014.

The focus of the program is to attract private capital investment, benefit from the private sector’s skill-set and experience, and make it the engine of economic growth for Pakistan. In order to achieve this, the current program is modelled around the concept of Public Private Partnerships, wherein management of PSEs is transferred to strategic investors along with a 26% equity stake. The program also includes divestments through strategic sales and capital markets to enhance the attractiveness and visibility of Pakistan as a favoured investment destination.

During the present Government, the Privatisation Commission has successfully completed three capital market offerings, namely United Bank Limited, Pakistan Petroleum Limited and Allied Bank Limited, raising gross proceeds of ~PKR 68 billion including foreign exchange of over USD 350 million. Global debt and equity offerings by the Government of Pakistan have been acknowledged internationally as is evident from the award of ‘Issuer of the Year’ given to Pakistan by IFR Asia. Furthermore, the United Bank Limited transaction also received the “Best Deal Award” for Pakistan by The Asset, one of Asia’s most prestigious corporate ranking journals. These achievements have improved the standing of our domestic capital markets and put Pakistan firmly back on the global equity markets map.

The Privatisation Commission is vigorously pursuing the implementation of the remaining program with work on over 30 PSEs being done concurrently.

However, success of the privatisation program is contingent upon the support of all the stakeholders, including the various Government agencies, departments, organizations, regulatory authorities and, most importantly, the people of Pakistan.

I am confident that all stakeholders will play their part and contribute fully towards ensuring the success of the ongoing privatisation and the fulfilment of the program’s objectives.

Message from theSecretary,Privatisation Commission

Sardar Ahmad Nawaz SukheraSecretary

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Privatisation is an open, fair and transparent process,

for the benefit of the people of Pakistan,

in the right way, to the right people, at the right time.

Mission Statement

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Pakistan's privatisation program is an important economic reform policy tool for generating growth and erasing structural inefficiencies by removing barriers and opening up the economy to competition. The program is part of the economic & structural reforms agenda, and along with deregulation and good governance, seeks to enhance the growth and productivity of Pakistan’s economy by harnessing the private sector as its engine of growth. It takes an integrated approach to enhance the private sector’s role and goes beyond just the sale of public assets to the private sector. Though good governance, sensible regulation, and market competition, the Government of Pakistan ("GOP") will foster conditions that will insentivise the private sector to invest, and provide goods and services efficiently.

Pakistan had initiated a significant program of deregulation and decontrol in 1960s, when such policies were neither fashionable nor common in many emmerging markets. After the announcement of an “Industrial Investment Policy”, the industrial sector was partially deregulated.

After the announcement of Economic Reforms Order 1972, the GOP took over 32 industrial units under ten basic categories i.e.; iron and steel, basic metals, heavy engineering, heavy electrical machinery, assembly and manufacture of motor vehicles, tractor assembly and manufacture, heavy and basic chemicals, petrochemical, cement and public utilities including oil, gas and electricity. In September 1973 another 26 industrial units were nationalized, including vegetable oil, life insurance, shipping and petroleum making companies, followed by cotton and rice export trade. In 1974, banks were nationalized, which later extended to 3000 flour mills, rice husking and cotton grinning industries. However, most of the small rice and cotton units were denationalized and the government only retained large rice mills. Only textile and sugar sector remained untouched. The public sector entities (“PSEs”), eventually exhibited the following characteristics:

Mismanagement and over-staffing

Inappropriate and costly investments

Poor coverage and quality of services

High debt and fiscal losses

Corruption

“The Transfer of Managed Established Order 1978” induced denationalization policy except for sugar and a tractor plant, and the same were transferred to private sector. Two further attempts of denationalization in 1985 and 1989 had little success. Nevertheless, the Government succeed in divesting 10% shares of Pakistan International Airlines (“PIA”) via an initial public offering in 1988.

The GOP is committed to getting itself out of the business of running businesses and creating space for the private sector to play a vital role in the development process and in realizing the dream of a prosperous Pakistan. The Government initiated the privatisation program afresh and offered 108 PSEs out of 128 and in less than 18 months, 66 PSEs were privatised. Thus, in 1991, Pakistan formally institutionalized the privatisation activity by establishing the Privatisation Commission (“PC”).

Many organizational changes took place so that by the end of 1993, there was one Commission to manage the privatisation of industrial units, banks and financial institutions, another Commission for privatisation of the power sector, while separate committees looked after the privatisation of telecommunications, transport and shipping companies. All of these activities were subsequently amalgamated into one Privatisation Commission by the end of 1993.

Later, on 28 September 2000, the Privatisation Commission Ordinance 2000 was promulgated, and the Privatisation Commission was converted into a body corporate, which strengthened its legal authority for implementing the GOP’s Privatisation Policy.

HISTORY OF PRIVATISATION

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ORGANOGRAM OF PRIVATISATION COMMISSION

Secretary

Legal

Officer

Deputy Director(Security)

Officer

Power

Consultants (BESOS)

Consultants

Mkt

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ORGANIZATIONAL STRUCTURE OF PRIVATISATION COMMISSIONThe human resources of the PC is of hybrid nature, comprising of Civil Servants, Consultants and other Staff. The activities of the PC are governed through its Board ("PC Board"), which is headed by the Chairman, who is also Chairman of the PC. The current PC Board, was appointed in December 2013 and extended in March 2014, comprises of twelve (12) Members, who are eminent professionals and prominent personalities of various quarters of life.

Sardar Ahmad Nawaz SukheraSecretary

Mohammad ZubairChairman

Salman BurneyMember

Nasiruddin AhmedMember

Arsallah Khan HotiMember

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Zafar IqbalMember

Aziz NishtarMember

Mr. Khurram SchehzadMember

Mr. Yawar Irfan KhanMember

Nauman K. DarMember

Shahid ShafiqMember

Engr. M. A. JabbarMember

Naseer Ahmad AkhtarMember

Ashfaq Yousuf TolaMember

Zafar Iqbal SobaniMember

Zaffar A. KhanMember

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CAREER SUMMARY• Appointed as Minister of State / Chairman Privatization Commission on 18th December to date.

• Appointed as Chairman, Board of Investment on 12th July, 2013 to 17th December, 2013.

• Part of PML- N Economic, Tax Reforms Media Committees, 2012-2013.

• Worked for Leading American IT Company IBM: 1981 to 2007 including key International Assignments inParis, Rome, Milan and Dubai.

• Chief Financial Officer, IBM Middle East / Africa Region 2004 – 2007.

• Chief Financial Officer, IBM Pakistan – 1998 – 2003.

• Financial Controller & CFO, IBM Middle East based in Dubai – 1995 – 1997.

• Financial Operations Officer, IBM Southern Europe based in Milan, Italy – 1993 – 1995.

• Accounting & Treasury Manager, IBM Pakistan – 1990 – 1992.

• Treasury & Investment Operations Manager IBM Africa based in Paris, France – 1988 – 1990.

AWARDS / RECOGNITIONS• Awarded Administrative Achievement Award for best employee IBM Pakistan – 1981.

• Awarded Presidents Award for best performance in IBM Europe – 1997.

• Attended IBM Convention in Naples, Italy for outstanding performance – 1993.

• Awarded IBM Europe / Middle East / Africa Region Certificate for outstanding performance during 2002.

• Several Other Awards and Recognitions achieved during the course of career with IBM.

EDUCATIONMaster’s in Business Administration (MBA) from the Institute of Business Administration (IBA).

OTHER ACHIEVEMENTS• Elected on the Board of Directors of IBA, Karachi as their Student Representative – 1980.

• Taught Financial Management at the Institute of Business Administration, Karachi in the evening campus –1981 – 1986.

• Remained on board of the American Business Council in financial advisory capacity during the period2004 – 2007.

• Member of the Overseas Investors Chamber of Commerce and Industry 2004 – 2007.

• Regularly contributed articles on business subjects in leading Pakistani papers since 2007.

Mohammad ZubairChairman, Privatisation Commission

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Mohammad ZubairChairman, Privatisation Commission

Naseer A. Akhtar is the President and CEO of InfoTech Group, Pakistan’s leading information and communication technology firm with offices in Pakistan, Singapore, United Kingdom, Ghana, and United Arab Emirates. He has over 30 years of professional experience and is a sought after mentor and speaker on such topics like global trade, policy and market positioning, and has been honoured with numerous industry awards.

Prior to InfoTech, Mr. Akhtar was Managing Director of South Technology & Services (Private) Ltd; Managing Director of South Express (Private) Ltd.; managing director of Avimatics; a Regional Manager of ITC Group Pakistan; and Operations Manager of A.A. Turki Group (Saudi Arabia). Mr. Akhtar was recently the past Chairman of Pakistan’s industry association P@SHA and was also a member of the Board of Investment’s Advisory Committee on ICT; Chairman of Pakistan Software Houses Association; Director of the Pakistan Software Export Board; and Member of the Corporate Advisory Committee of the National University of Science & Technology during his professional career.

Mr. Akhtar has a Bachelor’s degree in Science in Mathematics and Physics from the University of Punjab, Lahore; a foundation in science in pre-engineering from Government College, Lahore; and a certificate for independent directors from the Institute of Chartered Accountants of Pakistan.

Sardar Ahmad Nawaz Sukhera is an officer of the Pakistan Administrative Service and joined the Privatisation Division/ Commission on April 08, 2014.

He joined the Civil Service of Pakistan in 1985 and over the course of his career, has held various Secretariat, Field and Staff assignments. Before joining the Privatisation Division, he was serving as Chief Executive Officer of the Small & Medium Enterprises Development Authority of Pakistan (SMEDA). He has held field assignments of Deputy Commissioner in Faisalabad (1995-96) and Sheikhupura (2000-01) Districts and was District Coordination Officer, Sheikhupura (2001). Staff jobs done by him include Principal Secretary to the Governor Punjab (2008-11), PSO to Chief Minister, Punjab (1994-95) and Faculty Member at the National School of Public Policy (2011-12). In the Secretariat of Government of the Punjab, he has held assignments of Secretary (Implementation & Coordination) (2005-08), Additional Finance Secretary (Budget & Development) (2003-05), Chief, External Capital Assistance (1996-97), besides having been Project Director of the Technical Education Project (1998-99), which was an ADB Funded Project.

He earned his MPA degree from Harvard University (1994), and Master of Arts (Development Economics) from Williams College (1993). He also holds a Bachelor of Science (Hons.) degree in Economics, specialising in Industry & Trade, from the London School of Economics (1983). Earlier, he completed his schooling at the Aitchison College, Lahore.

He has attended executive courses in Investment Appraisal & Management, Infrastructure in Market Economy, and Public-Private Partnership for Infrastructure Development at Harvard University, and Budgeting & Financial Management in Public Sector at Duke University.

He has also taught economics at the undergraduate level at Harvard University (1993-94). His research paper on ‘Kalabagh Dam – contentious issues and ways of reproachment’ was published in the National Institute of Public Administration Papers (2004), and his master thesis at Williams College was on ‘Peace Dividend and Social Sector Spending- a case study of India and Pakistan’.

Sardar Ahmad Nawaz SukheraSecretary, Privatisation Commission

Naseer Ahmad AkhtarMember, Board of Privatisation Commission

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Engr. Memon Abdul Jabbar is Chief Executive of Qaim Automotive Mfg. Pvt. Ltd., and is Chairman of the Karachi Tools & Dies Mold Centre. He has over 30 years of experience across a wide range of industries and sectors including engineering; light, medium and heavy industries; power generation; cement; steel; shipyards; and international trade.

Engr. Jabbar is also a Director of the National Fertilizer Corporation; Director of the Pakistan Standard Quality Control Authority; Director of the Sindh Board of Investment Sindh, Govt. of Sindh; Director of the Public Private Partnership Policy Board Govt. of Sindh and of the Sindh Public Procurement Regulatory Authority Govt. of Sindh Advisory Committee Federal Tax Ombudsman. He was also Chairman of the North Sindh Urban Services Corporation; Vice President Federation of Pakistan Chambers of Commerce and Industry; Chairman WTO Resource Centre and R&D Committees FPCCI; Chairman SITE Association of Industry Karachi; and life time member FPCCI/SAARC CCI.

Engr. Jabbar has a Bachelor’s degree in Engineering (Electrical), and has completed postgraduate studies in power systems. He is a certified safety engineer, and certified director of companies as per SECP Rules 2013.

Engr. M. A. JabbarMember, Board of Privatisation Commission

Mr. Nasiruddin Ahmed has over 40 years of experience, particularly in government, where was recently a member of the National Electric Power Regulatory Authority (“NEPRA”) for a term of four years. He served as Cabinet Secretary, until attaining superannuation, and as Principal Secretary to the Prime Minister. His long and distinguished career in government included work in several ministries / divisions inter alia Production, Interior, Economic Affairs, and the Cement Corporation of Pakistan.

He served in Baluchistan as provincial secretary of various departments including Finance, S&GAD, Agriculture, Environment, Education, Forest and as chairman of the Baluchistan Development Authority. He was also posted to the Federal Government and served as Member Finance in Pakistan Agriculture Research Council (PARC), and as Additional Secretary Ministry of Food Agriculture and Livestock.

Mr. Ahmed has a Master’s in Social Sciences in Project Planning and Monitoring, and Local Government Finances.

Mr. Zafar Iqbal is a Chartered Accountant and a senior partner of a firm of Chartered Accountants with offices at Lahore and Faisalabad. He has over 25 years of professional experience in audit & assurance, taxation and corporate matters, and has experience in project restructuring and evaluation, monitoring and designing of MIS, accounting, and financial systems with a wide-range of clients including the Punjab Government.

Mr. Iqbal is a member of the Accounting & Auditing Standards Committee, a fellow member of the Institute of Chartered Accountants of Pakistan, and a committee member of its Small and Medium Practices Committee and Quality Assurance Board. He is also a fellow member of the Institute of Corporate Secretaries of Pakistan. During his professional career, he was a director of Zarai Taraqiati Bank (ZTBL), and a member of the Northern Regional Committee of Institute of Chartered Accountants of Pakistan. Mr. Iqbal completed his Chartered Accountancy with the Institute of Chartered Accountants of Pakistan.

Nasiruddin AhmedMember, Board of Privatisation Commission

Zaffar IqbalMember, Board of Privatisation Commission

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Mr. Zafar Iqbal Sobani is Managing Director of Habib Metro Pakistan (Pvt.) Limited and Makro–Habib Pakistan Limited, and also manages the House of Habib Group’s new business development initiatives. He has over 30 years of professional experience capital markets, management and cost accounting, and the power sector. Prior to joining the House of Habib Group, Mr. Sobani was Chief Executive of Hub Power Company, and Chief Executive of Liberty Power Tech, which is an independent power producer under the 2002 Power Policy. Before this, he spent 19 years as Director of Finance with Century Paper & Board Mills, and five years with BOC Pakistan Limited (now known as Linde Pakistan). Although he started his career in auditing with A.F. Ferguson, he also worked for Ernst & Young Saudi Arabia.

Mr. Sobani is a director of the Board of Institute of Capital Market Pakistan. He was most recently the chairman of the Quality Control Board of the Institute of Chartered Accountant of Pakistan and was president of the Institute of Chartered Accountants of Pakistan. Prior to joining the PC Board, he was a member of the Privatisation Board from 2006 through 2007. Mr. Sobani is a Chartered Accountant specialising in cost and management accounting.

Zafar Iqbal SobaniMember, Board of Privatisation Commission

Mr. Zaffar A. Khan is an adjunct professor at the Institute of Business Administration where he teaches human resource management, and he also teaches at the Pakistan Institute of Corporate Governance. Mr. Khan has over 35 years of professional experience at Engro (previously Exxon) having worked in Pakistan, Hong Kong, United States and Singapore, where he held numerous posts including that of CEO.

Mr. Khan has also served on a number of boards where he is currently a board member of Shell Pakistan, Unilever Pakistan, International Industries, Askari Bank, Acumen Fund Pakistan, and the Pakistan Centre for Philanthropy. Previously, Mr. Khan served as Chairman of Pakistan Telecommunication Company Limited, the Karachi Stock Exchange, Pakistan International Airlines, United Bank, and the State Bank of Pakistan. Mr. Khan has also served as President of Overseas Chamber of Commerce & Industries & several Government of Pakistan committees such as the Economic Advisory Committee, Pay & Pension Committee, and the National Environment Quality Standard.

Mr. Khan completed the Advanced Management Program from the University of Hawaii and has completed courses from the Harvard Business School and INSEAD. He is a recipient of Sitara-e-Imtiaz.

Zaffar Ahmad KhanMember, Board of Privatisation Commission

Mr. Aziz Nishtar is an advocate and legal consultant at Nishtar & Zafar, and has over 28 years of experience in consulting, corporate law, domestic and international tax planning, public private partnerships, joint venture, and government advisory particularly in policy, legislative, and statuary issues regarding taxation and commercial law.

Mr. Nishtar was tax counsel with Engro Corporation and has advised on transaction, legal structures and tax efficiency. He also worked at Tax Analysts. Inc. as a news editor and staff writer; was Assistant Commissioner at the Federal Board of Revenue; Assistant Director at the Export Promotion Bureau; Corporate Planning Officer at Pakistan International Airlines and was an assistant director at the Agriculture Development Bank. Mr. Nishtar has also worked as an advisor to UNICEF, the Sindh Child Protection Authority; Asian Development Bank; Government of Sindh on public procurement policy; IATA; and assisted Barrister Zafarullah Khan.

Mr. Nishtar is a member of the Islamabad High Court Bar Association; member of the Islamabad District Bar Association; member of the Karachi Tax Bar Association; and was admitted to the practice of law in all High Courts in Pakistan. Mr. Nishtar has an LLM in Taxation and Corporate Law from Harvard Law School.

Aziz NishtarMember, Board of Privatisation Commission

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Mr. Arsallah Khan Hoti is currently the general secretary of PML (N) and a member of the KPK assembly. He has extensive professional experience having served as Managing Director with Shaf Industry and Textile Mill, and as a graduate gemologist with Khyber Exports Ltd. He also has experience in the United Kingdom having worked as a managing director for Savory Healthcare Ltd. He was also a Managing Director of Crescent Ltd.

Mr. Hoti was Director of the Society for Dialogue and Action, and holds memberships and is a committee member of Manifesto Committee PML (N); FATA Reform Committee NDI (National Democrat Institute); and of the Provincial Central Committee KPK. Mr. Hoti has an MBA in marketing from the American University, London.

Arsallah Khan HotiMember, Board of Privatisation Commission

Mr. Salman Burney is the CEO of Glaxo Smith Kline Pakistan, and has regional management responsibility for Iran and Afghanistan. He has extensive experience in chemicals and fibres, agrochemicals and seeds, and in the pharmaceutical industry. Having started his career with ICI and helped develop business lines in chemicals and fibres, he served as Regional Personnel Manager for Africa and Middle East, and as its General Manager for agrochemicals and seeds.

Mr. Burney is former President of the Overseas Investors’ Chamber of Commerce & Industry, and has chaired the Pharma Bureau, and was President of Pakistan Society for Training & Development. Mr. Salman Burney has a degree in economics from Cambridge University, and was a founding trustee of the Oxford & Cambridge Society Educational Trust.

Salman BurneyMember, Board of Privatisation Commission

Shahid Shafiq has extensive senior management experience having served as Chief Executive of Trading Company; country representative of Exxon Mobil Petrochemicals; and as CEO of a textile-spinning mill.

Mr. Shafiq holds memberships in the Board of Governors, IBA, Karachi; Lady Ouffer in Hospital; Executive Committee of Chiniot Islamia School and College; Management Association of Pakistan; Sindh Club; Karachi Boat Club; and Gymkhana. He holds an MBA from the Institute of Business Administration, and is a Gold Medal awardee.

Shahid ShafiqMember, Board of Privatisation Commission

Mr. Nauman K Dar is President and CEO of the Habib Bank Limited, and has extensive experience in the financial services sector. Prior to Habib Bank, Mr. Dar was Vice President at Citibank and Head of Risk Management for East Africa, and was Managing Director at Bank of America. He also holds memberships in the Institute of Directors UK; Institute of Bankers, Pakistan; Pakistan Banks Association; Pakistan Business Council; and the Bretton Woods Committee.

Mr. Dar has an MBA in finance from the University of California, and has taken courses from INSEAD, Harvard Business School, and International Institute of Finance.

Nauman K DarMember, Board of Privatisation Commission

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Mr. Ashfaq Yousaf Tola is the senior partner of Naveed Zafar Ashfaq Jaffery & Co. Chartered Accountants. He has the expertise of tax planning and advisory, assurance and business advisory services, international mergers &acquisitions, corporate finance and investment advisory, due diligence and forensic audits, financial product designing and launching, and public listing and ccorporate aaffairs. He was also a partner with Nasir Javed Maqsood Imran Ashfaq, Chartered Accountants, and Principal Strategic Officer at Stallion Textiles; CEO of Fincon; and Chief Internal Auditor at National Development Leasing Corporation, and was a trainee student at A.F. Ferguson & Co., Chartered Accountants.

Mr. Tola holds professional memberships with the Institute of Chartered Accountants of Pakistan, and the Institute of Cost and Management Accountants of Pakistan.

Ashfaq Yousaf TolaMember, Board of Privatisation Commission

Mr. Khurram Schehzad is CEO of Lakson Investments, and has extensive experience in investment research, corporate finance advisory, funds advisory and portfolio management. Previously he served as Vice President at Arif Habib Group, overseeing equity brokerage as well as group research (domestic &international), extending coverage from equities to commodities, real estate, manufacturing (cements, fertilizers, steel, energy and dairies) in direct coordination with the group chair. He also served as Head of Financial and Economic Research at Invest Capital Markets Limited, where he also managed a discretionary/non-discretionary portfolio of equities and fixed income investments for institutional clients. Mr. Schehzad was also Assistant Portfolio Manager at First Capital Investment Management Limited, and has served as a Financial Advisor and Research Consultant to financial brokerages and local business newspapers, on freelance basis. Mr. Schehzad was ranked as one of the Top Analysts in Pakistan (ranked by CFA Pakistan)

Mr. Schehzad is also an Executive Committee Member at the Federal Board of Investment, and served as one of panel judges to the leading local business schools. He is a guest speaker and frequently quoted in both local and international newspapers on financial sector issues.

Mr. Schehzad is currently pursuing a Ph.D. in financial economics. He is a finalist for the Chartered Financial Analyst (CFA) Program, and has an MBA in Finance (Gold Medal/Summa cum laude), and a Bachelor’s degree in Economics, Banking and Management from the University of Karachi.

Khurram SchehzadMember, Board of Privatisation Commission

Mr. Yawar Irfan Khan is a Director of the Lahore Transport Company, director of Oil and Gas Development Company Limited, and Director of the Benazir Income Support Programme. He has over 25 years of experience in marketing, small industries, industrial development, management, international business and trade, tourism, and social sector. Previously, Mr. Khan served as Chairman of the Punjab Chief Minister’s Task Force for Industrial Development, and as Managing Director of the Punjab Small Industries Corporation. He was also Joint Secretary for the Marketing Association of Pakistan, Lahore Chapter.

Mr. Khan is also active in the social and charitable services in the health and education sectors. He was Chairman of the Asifa Irfan Foundation Trust; board member of the Pakistan School of Fashion Design-Lahore; Member of the Board of Governors of the Government Chuna Mandi College for Women in Lahore; Member Citizen of the Police Liaison Committee for Lahore District, and lifetime member of the SAARC Chamber of Commerce and Industry.

Mr. Khan graduated from Government College, Lahore and has a Master’s in Business Administration.

Muhammad Yawar Irfan KhanMember, Board of Privatisation Commission

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The PC Board, held 22 meetings during 2014-15 and approved the initiation of various strategic sales/ divestments. In doing so, the PC Board approved the appointment of financial advisors, transaction structures, bid prices, offering prices, etc. A glimpse of such decisions are as under:-

Description of Decisions Date of Meeting

Approved initiation of HEC, PIA, NPCC, HBL, UBL, ABL, PPL & OGDCL 8 – 9 January 2014

Approved initiation of FESCO, LESCO & NPGCL (GENCO -III) 20 February 2014

Briefing for PC Board Members & other issues 2 April 2014

Approved appointment of Financial Advisors for OGDCL, PPL & UBL and extended submission of EOIs date for NPCC, FESCO, LESCO, NPGCL & PIA

22 April 2014

Approved transaction structure of UBL and recommended to CCoP 9 May 2014

Approved transaction structure of PPL Offering & Floor Price of UBL Offering and recommended to CCoP

10 June 2014

Approved Strike Price of UBL Offering and recommended to CCoP 11 June 2014

Approved Floor Price of PPL Offering and recommended to CCoP 25 June 2014

Approved Strike Price of PPL Offering and recommended to CCoP 28 June 2014

Approved pre-qualification of Bidders for HEC; approved FAs for NPCC, NPGCL, FESCO, PIA and initiation of HBL Divestment

22 July 2014

Approved Transaction Structure of OGDCL Offering 12 September 2014

Approved Floor Price of OGDCL Offering and recommended to CCoP 5 November 2014

Approved Strike Price of OGDCL Offering and recommended to CCoP 8 November 2014

Approved appointment of FA for ABL divestment 14 November 2014

Approved Transaction Structure for ABL divestment 26 November 2014

Approved Floor Price of ABL Offering and recommended to CCoP; approved to reinitiate HEC strategic sale

9 December 2014

Approved Strike Price of ABL Offering and recommended to CCoP and appointment of FA for HBL divestment.

11 December 2014

Approved appointment of Financial Advisors for FESCO & LESCO; approved Transaction Structure of NPCC Transaction and recommended to CCoP

23 January 2015

Approved pre-qualification of Interested Parties for HEC Transaction; approved Transaction Structure of HBL Transaction and recommended to CCoP

4 February 2015

Approved Reserve Price of HEC strategic sale and recommended to CCoP 9 March 2015

Mandated the Chairman & Secretary, PC to finalize deal with the sole bidder for acquisition of HEC 10 March 2015

Approved Bid Price of HEC strategic sale and recommended to CCoP 24 March 2015

Decisions of the Board of the Privatisation Commission

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CABINET COMMITTEE ON PRIVATISATIONThe Cabinet Committee on Privatisation ("CCOP") was established along with the PC in 1991. It has been functioning continuously except for the brief period from September 1998 to February 2000, when the PC Board headed by the Prime Minister was formulated.

The mandate of the CCOP is to formulate rules for streamlining the functioning of the PC and also serves as a forum for strategic decisions on privatisation and monitoring progress. All major privatisation decisions are placed for approval of the Cabinet through this Committee.

Initially, the CCOP was headed by the Minister for Finance. Then, on 21 September 2004, the Prime Minister reconstituted the CCOP to be chaired by him. However, from 15 November 2008, it was headed by the Advisor to PM on Finance, Revenue, Economic Affairs and Statistics. Currently, it is headed by the Minister for Finance, Revenue, Economic Affairs and Statistics.

CompositionThe following table shows the current composition of the CCOP:

1. Minister for Finance, Economic Affairs, Revenue, Statistics and Privatisation

Chairman

2. Minister for Commerce & Textile Industry

Member

3. Minister for Industries and Production

Member

4. Minister for Law Justice and Human Rights

Member

5. Minister for Planning and Development

Member

6. Minister for Petroleum and Natural Resources

Member

7. Minister for Ports and Shipping Member

8. Minister for Privatisation Member

9. Minister for Water and Power Member

Apart from the above mentioned Members, following can also be invited by Special Invitation.

1. Minister for Planning, Development & Reforms

2. Governor, State Bank of Pakistan

3. Chairman, Privatisation Commission

4. Chairman, Security Exchange Commission of Pakistan

5. Chairman, Board of Investment

6. Secretary, Communications Division

7. Secretary, Finance Division

8. Secretary, Industries and Production

9. Secretary, Petroleum and Natural Resources Division

10. Secretary, Planning & Development Division

11. Secretary, Ports and Shipping Division

12. Secretary, Privatisation Division

13. Secretary, Textile Industry Division

14. Secretary, Water and Power Division

15. Secretary, Board of Investment

* Issued by Cabinet Division vide notification No 5/4/2013-com dated 20.06.2013

Terms of Reference• Formulate the Privatisation Policy for approval of

the Government / Cabinet.

• Approve the PSEs to be privatised on therecommendation of the PC or otherwise.

• Take policy decisions on inter-ministerial issuesrelating to the privatisation process.

• Review and monitor the progress of privatisation.

• Instruct the PC to submit reports/information/data relating to the privatisation process or anymatter relating thereto.

• Take policy decisions on matters pertainingto privatisation, restructuring, deregulation,regulatory bodies and Privatisation Fund Account.

• Approve the reference price in respect of the PSEs being privatised.

• Approve the successful bidders.

• Consider and approve the recommendations ofthe PC on any matter.

• Assign any other task relating to privatisation tothe PC.

* Issued by Cabinet Division vide notification No 5/4/2007-com dated 27.03.2009

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COUNCIL OF COMMON INTERESTSArticle 153 of the Constitution of Islamic Republic of Pakistan provides for a Council of Common Interests ("CCI") comprising the Chief Ministers of the Provinces and an equal number of members from the Federal Government. The CCI, headed by the Prime Minister of Pakistan, is exclusively responsible to the Parliament.

The CCI formulates and regulates policies in relation to matters in Part II of the Federal Legislative List and exercise supervision and control over related institutions.

Decisions of the CCI are expressed in terms of opinion of the majority. The public entities/ interests etc. contemplated to be privatized are brought before CCI for its approval before submission of summary to the Cabinet.

The present (as of February 2014) composition of CCI is as under:

i. The Prime Minister Chairman

ii. Chief Minister, Baluchistan Member

iii. Chief Minister, Punjab Member

iv. Chief Minister, Sindh Member

v. Chief Minister, Khyber Pakhtunkhwa Member

vi. Pir Syed Sadaruddin Shah Rashadi (by name)

Minister for Overseas Pakistanis & Human Resource Development

Member

vii. Lt. General (Rtd.) Abdul Qadir Baloch (by name)

Minister for States and Frontier Regions

Member

viii. Sardar Muhammad Yousaf (by name)

Minister for Religious Affairs and Interfaith Harmony

Member

* Issued by Cabinet Division vide notification No 2(50)/2013-CCI, dated 08.02.2014

Terms of ReferenceCases relating to formulation and regulation of policies in relation to the following matters and supervision and control over the related institutions shall be submitted to the CCI:

a. Railways

b. Mineral oil and natural gas, liquids and substances declared by Federal law to be dangerouslyinflammable.

c. Development of industries, where developmentunder Federal control is declared by Federal lawto be expedient in the public interest; institutions, establishments, bodies and corporationsadministered or managed by the FederalGovernment immediately before the 14th August, 1973, including Water and Power DevelopmentAuthority and the Pakistan IndustrialDevelopment Corporation; all undertaking,projects and schemes of such institutions,establishments, bodies and corporations;industries, projects and undertaking ownedwholly or partially by the Federal Govt. or by acorporation set up by the Federation.

d. Electricity.

e. Major ports, powers of the ports authoritiestherein.

f. All regulatory authorities established underFederal Law.

g. Fees in respect of any of the matters specifiedabove but not including fees taken in any court.

h. Inter provincial matters and co-ordinations.

i. Legal, medical and other professions.

j. Standards in Institutions for higher educationand research, scientific and technical institutions.

k. Offenses against law with respect to any of thematters specified above.

l. Inquiries and statistics for the purposes of any ofthe matters specified above.

m. Matters incidental or ancillary to any of thematters specified above.

n. Complaints as to interference with water supplies (Article 155 of the Constitution).

o. Implementation of the directions given by theparliament for action by the Council (Article154(4) of the Constitution)

Approval of Privatisation ProgramThe CCI in 1997 and 2006 approved a broad-based privatisation program including PSEs in various sectors like banking & finance, oil & gas, power, infrastructure, transport, industries & production etc.

Moreover, post 18th Amendment to the Constitution, the PC in 2011 and 2014, sought approval of the CCI for the privatisation of all GENCOs & DISCOs.

Moreover, only the new cases are submitted to CCI for decision, as the previous decisions of CCI remain valid.

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PRIVATISATION PROGRAMPrivatisation is a high priority area for the present Government as part of its overall economic reforms agenda. The scope of the PC includes PSEs in the power, oil & gas, banking & insurance, infrastructure & transport, telecom, real estate and industrial sectors. The CCI in 1997, 2006, 2011 & 2014 had approved a broad-based privatisation program of the entities falling in the purview of Federal Legislative List, Part-II. Moreover, the CCOP in October 2013 and June 2014approved a broad-based (Appendix-I) as well as priority privatisation program (Appendix-II).

To harness the private sector’s capital and managerial potential the program was modeled around the concept of Public Private Partnerships ("PPP") wherein the management is to be transferred to investors through sale of 26% shares and strategic sales. The program also focused on divestments through the capital markets to enhance the attractiveness and visibility of Pakistan as a favored investment destination.

ACHIEVEMENTS OF PRIVATISATION COMMISSIONSince its inception in 1991, the PC has completed 170 transactions for PKR 544.091 billion (Appendix-III). During this phase, the PC completed many high-valued market transactions (about 35% of total proceeds) apart from asset/ strategic sales (about 65% of total proceeds). Banking, telecommunication and industrial sector privatisations are the hallmarks of the program, as they had contributed about 90% of the total proceeds.

Achievements during the tenure of current GovernmentSubsequent to the approval of the CCoP in October 2013, the PC initiated various strategic sales and divestment of shares of various PSEs. In June 2014, two (02) Capital market transactions were accomplished. The first one was of United Bank Limited, which re-initiated the privatisation program after a lapse of almost eight years, which was followed by divestment of Pakistan Petroleum Limited shares. In December 2014, residual shares of Allied Bank Limited were divested.

Moreover, following strategic sales/ divestments are in pipeline:-

Sr. # Unit Mode of Transaction

Oil & Gas Sector

1 Oil & Gas Development Co. Ltd. ("OGDCL") Local & Int’l Capital Market Transactions

Banking & Finance

2 Habib Bank Limited ("HBL") Capital Market (Secondary Public Offering -SPO)

Power Sector

3 Heavy Electrical Complex ("HEC") Divestment with Management Control

4 National Power Construction Corp. ("NPCC") Divestment with Management Control

5 Faisalabad Electric Supply Co. Ltd ("FESCO") Divestment with Management Control

6Northern Power Generation Co. Ltd. ("NPGCL" – GENCO - III) - Thermal Power Station – (TPS) Muzaffargarh (1350 MW)

Divestment with Management Control

7 Lahore Electric Supply Company Limited ("LESCO") Divestment with Management Control

8Islamabad Electric Supply Company Limited ("IESCO")

Divestment with Management Control

Industries, Transport & Real Estate

9 Pakistan International Airlines Corp ("PIA")Restructuring followed by divestment of 26% GoP equity stakes to strategic partner with Management control

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KEY HIGHLIGHTS OF CAPITAL MARKET TRANSACTIONS

UNITED BANK LTD ("UBL") TRANSACTION

• One of the Largest Capital Market Transactionin Pakistan raising over PKR 38 billion includingForeign Exchange of over USD 310 million for theGovernment of Pakistan (GoP)

• Total demand of over PKR 63 billion (~USD 632million) generated at selling price of PKR 158 pershares i.e. Demand of ~394 million shares againstthe offer size of ~242 million shares

• Generated robust international demand of overUSD 500 million (equivalent of PKR 50 billion) atthe selling price of PKR 158 per share

• Generated domestic demand of over PKR 12billion at the selling price of PKR 158 per share

• Over 30 international equity fund managers/qualified institutional buyers (QIB’s) participatedand successfully allocated ~81% of total offer sizeof ~ 242 million shares

• Over 200 domestic institutional and high networth individuals (HNWIs) participated andsuccessfully allocated ~19% of the total offer sizeof ~ 242 million shares

PAKISTAN PETROLEUM LIMITED ("PPL") TRANSACTION

• One of the largest ever domestic secondarypublic offering: GOP divested approximately 5%GOP shareholding in PPL raising PKR 15.3 billionor USD 155 million.

• Via domestic book building mechanism: PPLtransaction was the largest domestic bookbuilding ever conducted in the history of thecountry.

• First ever GOP offering through book building:PPL’s SPO was the first time the Governmentutilized the domestic book building mechanismto offer shares to the local investors. Historically,the government has used GDRs for internationaltransactions and public offer through balloting for local transactions.

• First transaction where deal price was higherthan market price: The offering price determinedvia book building for PPL was PKR 219 per sharewhich was at a premium of 7% to the floor price,a premium of 2.4% to June 25, 2014 closing price(floor price was set on June 25, 2014) and 0.5%premium to the last day (June 27, 2014) closingprice (PKR 217.94). This was the first instance inthe history of Pakistan’s capital markets whereoffering price was higher than the market price.

• Oversubscribed by 2.04x: Domestic and foreigninvestors bought aggressively which resulted inoversubscription of 2.04 times. Participation ofdomestic investors in PPL was significantly higher than the recently conducted offering of UBL,which signifies the trust domestic investors havein the capital markets and the future progress ofthe country.

• Demand in excess of PKR 30 billion: Bids in excess of PKR 30 billion were received, surpassing thecumulative demand for all the domestic capitalmarket transactions concluded in the last 2-3years.

ALLIED BANK LTD (ABL) TRANSACTION

• Generated a total demand of over ~PKR 21 billion

• Demand from Foreign Investors exceeded ~USD30 million

• Oversubscribed by 1.4 x i.e. generated a demandof ~185 million shares against the offer size of ~131million shares

• Offering price at ~2.5% discount, to the closingprice on that day beating the Asia Region discount benchmarks for precedent transactions

• Over 325 domestic and international investorsparticipanted areas including Peshawar, Multan,Faisalabad, Rawalpindi in addition to theconventional three cities of Islamabad, Lahore &Karachi

• Upbeat demand/ allocation from individualinvestors i.e. ~40% due to lowering minimum bidsize from PKR 1 million to PKR 500,000.

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IFR Asia’sIssuer of the YearIslamic Republic of

Pakistan

M a n y A s i a n

i s s u e r s raised funds

with ease in 2014, but only

one capped a remarkable

turnaround with offerings in both the

debt and equity capital markets. For putting itself

firmly back on the global markets map, the Islamic

Republic of Pakistan is IFR Asia’s Issuer of the Year.

Issuer of the YearThe Islamic Republic of Pakistan

embarked on ambitious capital-raising plans in 2014, presenting investors

throughout the international markets with an optimistic turnaround growth story. This

allowed Pakistan’s new government to do two things, the country of 180 million had not been

able to do in about seven years: price a US dollar bond and sell shares in the capital markets.

In April, the sovereign printed a USD 2 billion offering bonds at tenors of five and 10 years in April and, in June, it

launched a PKR 38 billion (USD 370 million) offer for sale in United Bank and a PKR 15.3 billion (USD 155 million) stake sale

in Pakistan Petroleum.

These transactions were no mere showpieces. They were vital to Pakistan’s future. The proceeds helped increase foreign-exchange

reserves and cut the fiscal deficit, two improvements required under a USD 6.7 billion conditional support package agreed with the International

Monetary Fund in late 2013, just months after pro-business Prime Minister Nawaz Sharif came to office.

Pakistan had been forced to turn to the IMF to avert a balance-of-payments crisis in November 2008, after a run on the PKR, amid the global crisis, left it frozen out

of the international capital markets. However, the IMF ended its support in 2011 after Pakistan showed little sign of economic reform, and the final USD 3.7 billion of a USD

11.3 billion rescue package was never disbursed.

Having regained the IMF’s support 2013, the GOP needed to show real progress in improving its fiscal position. It also needed to convince investors that the reform-minded

prime minister could maintain stability in the face of severe political and economic challenges.

Pakistan tested the waters with a USD 100 million 360-day loan in December 2013, its first syndicated facility in 15 years, and increased the size to USD 172.5 million after six other

lenders joined leads Credit Suisse, Standard Chartered and Pakistan’s United Bank Limited.

A mandate for a US dollar sovereign bond followed in early January 2014, as the GOP set out to take advantage of the global hunt for yield, which had led money managers lower and lower down

the credit spectrum.

Days before the mandate, B1/B+/BB– rated Sri Lanka had priced a successful USD 1 billion five-year bond, hinting at the extent of global demand. Pakistan, however, with its far lower ratings of Caa1/B– and a bigger

target size, needed to work hard to attract a similar response.

When bookrunners Bank of America, Merrill Lynch, Barclays, Citigroup and Deutsche Bank started marketing the USD 2 billion deal around the end of March, they had many data points with which to impress investors. The

IMF had just increased to 3.1% from 2.8% its growth forecast for Pakistan in the 2013–14 fiscal year, and the GOP had just announced an ambitious plan to privatise more than 60 PSEs to help fill a hole in its budget.

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Pakistan’s outstanding dollar bonds were also trading at all-time low yields. The 6.875% June 2017 notes – the country’s last global issue before the crisis – dipped below 7% in February for the first time since they were launched in 2007, quite a recovery from yields of over 15% in early 2012.

The results were striking. The USD 1 billion five-year bond priced to yield 7.25%, and the USD 1 billion 10-year tranche printed at 8.25%.

The rate on the 10-year bonds was particularly low. Just days before Pakistan came to market, B+/B rated Zambia printed a USD 1 billion 10-year offering at 8.625%. Investors clearly valued Pakistan’s prospects, despite the lower rating.

“In broad terms, Pakistan’s credit fundamentals have improved since the new government came into office last year,” said Agost Benard, associate director of sovereign ratings, at Standard & Poor’s. “Given a B– rating, Pakistan’s current conditions are fairly benign, and the improved macroeconomic setting was what enabled the government to launch a bond this year.”

Fund managers in the US, the UK and Europe bought the majority of both tranches, signalling a strong vote of confidence in the country.

PrivatisationIt was only a matter of weeks before Pakistan was back in the international markets, this time with a share offering of Karachi-listed United Bank. In June, the country disposed of its 19.8% stake in the bank, raising PKR 38 billion, the government’s first equity offering since it sold a 7.5% stake in Habib Bank for PKR 12 billion in 2007.

It was a crucial first step towards the government target to raise PKR 198 billion through privatisation in the fiscal year ending 30 June 2015, and the first of 65 PSEs earmarked for partial privatisations over the next five years.

There was a lot riding on this transaction, something Mohammad Zubair, chairman of the privatisation commission, knew well. Before investors could really be convinced of the viability of Pakistan’s privatisation plan, the PC had to convince bankers, advisers, lawyers and accountants that the country was serious. Pakistan had hired equity advisers in the recent past, only to have those planned deals go nowhere.

“I went to New York and London within two months of taking the job (to talk to the financing community),” said Zubair, who was appointed in December 2013. “This was the first indication for them that we were serious about this. If we couldn’t convince them, obviously we couldn’t do this.”

Arif Habib, Credit Suisse and Elixir Securities were eventually named joint lead managers.

Because the bank was already listed, and the government held a minority stake, it was easier to garner political support for the trade.

“Pakistan restarted its privatisation program with the less controversial deals, and it’s a smart move,” said Ali Naqvi, head of equities for Asia Pacific at Credit Suisse. “They sought to sell companies that were already partially privatised – and at smaller stakes.”

In the end, foreign investors bought almost 80% of the 241.9 million shares on offer.

“Investors liked the story a lot because the banking sector is growing and, with more stock from the sale, the name would become more liquid,” Naqvi said.

Additonally, money managers, including Templeton Asset Management, Wellington Management, Everest Asset Management, Lazard, BlackRock and Morgan Stanley, participated despite reports of militant attacks at the country’s main airport days before the deal closed.

“It was actively participated by the major funds,” Zubair said. “When we went around on the roadshows, we were able to sell the Pakistan story – Pakistan as a place to invest. There is interest in our economic momentum.”

Professional teamThe transaction also put the country in good stead for what would come next.

“United Bank’s story is good, and the government delivered on execution like a professional team,” Credit Suisse’s Naqvi said. “Because of that, we were able to generate a well-oversubscribed order book. Then, once it was listed, the stock did well, which was good news for the rest of the privatisation plans.”

United Bank priced at PKR 158 in early June and on August 5 it hit a 2014 high of PKR 202. That was good news because Pakistan had plans to sell takes in Allied Bank and Habib Bank.

The GOP did not waste any time building on the success of the United Bank sale. Weeks afterwards, it sold a 5% stake in Pakistan Petroleum for PKR 15 billion, its second capital markets privatisation of the year and one that was heavily marketed to domestic investors.

“We went around the country to places where the privatisation commission would never have gone (in the past) to drum up interest – even among people who never would have participated,” Zubair said. “We wanted to spread the idea of privatisation around the country to everyone in the country.”

It sold 70.1 million shares at PKR 219 each in a mainly domestic deal that was twice covered, with a handful of foreign investors also taking part.

Not every deal was a success, however. Oil and Gas Development Corp decided to pull its offering of up to PKR 69.8 billion in global depositary receipts, owing a weak response from investors as oil prices tanked globally. Zubair said the country would try to sell the deal again in 2015.

As ever, it is difficult to disentangle the fiscal benefits of privatisation from politics. Indeed, one way the government sought to put Pakistan in a positive light locally was to show citizens how much international investor interest there was for its companies.

“That was another challenge. We had to say to people: ‘Look, Pakistan’s not falling apart. These financial institutions participating in UBL is a great thing for us. This is positive momentum’,” Zubair said.

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Heavy Electrical Complex ("HEC")The Cabinet Committee on Privatisation in its meeting held on 26 March 2015, under the chairmanship of Senator Ishaq Dar, Federal Minister for Finance, approved strategic sale of 97% shares of Heavy Electrical Complex (HEC) to Cargill Holdings Ltd. for PKR 905 million, far in excess of the reserve price set by the Privatization Commission Board and the Cabinet Committee on Privatization. The Government of Pakistan retains 3% of the shares.

Cargill’s offer also assumes liabilities of PKR 435 million, PKR 250 million in cash ‘up front’ and, in addition, another PKR 30 million to cover employee gratuity and provident fund obligations. Finally, Cargill will forego tax benefits associated with five years of losses amounting to PKR 190 million.

Cargill also has stated its intention to market abroad thereby earning, in time, foreign exchange.

“The net to the Government of Pakistan is PKR 905 million,” said Mohammad Zubair, Chairman, Privatization Commission (PC) while briefing the CCOP. Zubair added that in three previous attempts agreement with a qualified investor had not been possible.

In 2006-07, four investors initially expressed interest, two interested parties pre-qualified, but neither put up ‘earnest money.’

In 2011-12, four parties expressed interest, however, none met pre-qualification criteria apart from one which failed to deposit the earnest money after conducting due diligence.

Again, in 2013 three parties pre-qualified, only two conducted due diligence, but neither deposited the earnest money required after conducting the due diligence due to the weak condition of the company.

“The earlier failed attempts to privatize the company is a statement of HEC’s poor condition,” Zubair said. “We are pleased to have a qualified buyer of Cargill’s calibre and have agreed to such favourable terms”, Zubair remarked.

Finance Minister Ishaq Dar on this occasion said that he had always advocated observance of complete transparency in the privatization process and desired that employees interest should be accorded due importance. These principles are to be followed in letter and spirit in all transactions to be carried out by the PC, the Minister added.

Habib Bank Limited ("HBL")The CCOP and the Board of the Privatisation Commission approved the transaction structure for the divestment of the residual GOP shares in the HBL on 4 February 2015.

A team comprising of Chairman, Secretary and Transaction Manager, Privatisation Commission and management team of HBL is currently conducting roadshows at Karachi, Hong Kong, Singapore, London, New York and Dubai. They will have One to One meetings with the potential investors to market the transaction. The transaction is likely to be concluded in April 2015.

Expected Capital Market/ Strategic Sales

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Mst. FAKHIRA BATOOL, Technical Assistant, Privatisation Commission, won two international awards of the Best Poetess from the Government of China and the Government of Albania, in 2013 & 2014, respectively. Both awards are very first time won by any Pakistani Author. She also won many shields, trophies, certificates and prizes in poetry competitions during the school and college life. She was the Editor of Urdu Portion of College Magazine “Chamak” for four continous years, in Viqar-un-Nisa College, Rawalpindi. She was the Secretary of Bazm-e-Urdu of College and participated in many Mushairas of National and International level in Pakistan and other countries e.g. England, Qatar, Dubai etc.

Mst. Fakhira Batool, M.A. (Urdu Language & Literature), from Punjab University, Lahore, is author of 18 poetry books and is only lady writer of Pakistan who wrote book of Satire Humorous literature “SHAR AADATAIN”. Her Book “PALKAIN BHIEGI BHIEGI” is part of Syllabus of M.Sc. (Pak Studies) in Quaid-i-Azam University, Islamabad, as Commentary Book. She is well known columnist and winner of two continuous year (1999-2000) millennium award from Pakistan Broadcasting Corporation, Rawalpindi & Islamabad.

An employee of thePrivatisation Commission won two International Awards

Fakhira BatoolTechnical Assistant

Sports activities of the Privatisation CommissionThe privatisation is in full swing and PC is operating its activities with least possible human resource, by virtue of this, working hours of individuals have increased manifold. To keep the employees’ health intact, PC is promoting sports activities in its premises.

Cricket & Badminton activities are being promoted. However, in the long run other indoor and outdoor, health & sports activities will be introduced.

The activities will ensure that physical fitness of the individuals of the Commission be maintained, which will be advantageous for working in hectic schedules in the PC.

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Articles

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By: Mr. Asad Rasool

Pakistan was one of the first countries in the region to initiate deregulation and liberalization of the economy and start the privatisation process. There have been some important privatisation successes in the industrial, telecommunications and financial sectors, since the start of this process in the early 1990s. As a consequence, the telecom sector contributed ~PKR 245 billion to the national exchequer during FY 2013-14, whereas the 4 large privatized commercial banks, namely Muslim Commerical Bank ("MCB"), Habib Bank Limited ("HBL"), United Bank Limited ("UBL") & Allied Bank Limited ("ABL"), paid ~PKR 36 billion in income tax alone during 2013. The privatisation program has been instrumental in mobilizing both foreign direct investment ("FDI") and local savings. In view of its strategic importance, privatisation is a core element of the economic revival program of the present Government. List of entities included in the program, duly approved by the Council of Common Interests, is placed at Appendix-I.

Key components of the overall framework for privatisation include a transparent process, an enhanced overall socio-economic environment, investment climate, market conditions and improvement in the country’s risk profile and corporate governance. The outcomes envisaged include reduced fiscal burden, improved service delivery and creation of shareholder value. Individual privatisation transactions are considered on an entity specific basis with the objective of increasing competition, protecting employees and consumer interests, and meeting strategic, economic and social needs.

In order to harness the private sector’s capital and managerial potential, the privatisation program is modeled around the concept of Public Private Partnership ("PPP") wherein management will be transferred to investors, preferably through sale of 26% share, subject to various factors including sectoral dynamics, entity’s size & economic status, and investors’ interest. The program also includes divestments through strategic sales and capital market to enhance the attractiveness and visibility of Pakistan

as a favored investment destination. Program for Early Implementation, approved by the Cabinet Committee on Privatisation on October 03, 2013 and amended thereafter, is placed at Appendix-II.

Since the restarting the privatisation program by the present Government in 2013, after a gap of almost six year, the Commission has successfully completed three capital market offerings, namely UBL, PPL and ABL, raising gross proceeds of ~PKR 68 billion including foreign exchange of over USD 350 million, compared to proceeds of PKR 476 billion raised by completion of 167 transactions between 1991 and 2008. Global debt and equity offerings by the GOP have been acknowledged internationally, as is evident from the award of ‘Issuer of the Year’ given to Pakistan by IFR Asia. Furthermore, the UBL transaction also received the “Best Deal Award” for Pakistan by The Asset, one of Asia’s most prestigious corporate ranking journals. This has put Pakistan firmly back on the global markets map besides improving the standing of domestic capital markets.

The PC has completed one of the five planned transactions during FY 2014-15, namely the ABL offering. Details of the FY 2014-15 Plan are as follows:

Privatisation Flows in FY 2014-2015

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Table 1.CAPITAL MARKET

Sr. No. TransactionActual/Expected

ProceedsForeign Exchange

componentStatus

1 Allied Bank Limited ("ABL") PKR 14.4 billion USD 20 million Completed

2 Habib Bank Limited1 ("HBL") ~PKR 136.9 billion ~USD 1 billion Ongoing

3Oil & Gas Development Co. Ltd ("OGDCL")

~USD 730 million - Cancelled due to significant drop in global oil prices

Total (1) PKR 151.3 billion ~USD 1.02 billion

STRATEGIC SALE

4National Power Construction Corp.2 ("NPCC")

~PKR 2 billion USD 20 million Ongoing

5 Heavy Electrical Complex2 ("HEC") ~PKR 1 billion - Ongoing

Total (2) ~PKR 3 billion USD 20 million

Grand Total ~PKR 154.3 billion (equivalent to ~USD 1.53 billion)1 Estimates are based on the trading share price as of close on 7 January 20152 Divestment of 100% GoP shares

The above stated transactions are expected to generate proceeds equivalent to ~USD 1.53 billion in comparison to the budgeted amount for FY 2014-15 worth USD 1.98 billion. The expected shortfall of ~USD 450 million is due to the cancellation of the Oil & Gas Development Co. Ltd. ("OGDCL") transaction, which was expected to generate ~USD 730 million. However, if the market

conditions permit, this transaction may be attempted again in the current Fiscal Year.

In light of the GOP’s commitment to strategic private sector partnership, the commission has also initiated work on the power and aviation sectors, which are expected to be completed during 2015-16. Following is status of the ongoing program:

As has been the hallmark of the present Government, the PC will continue to ensure privatisation in an open, fair and transparent manner, for the benefit of the

people of Pakistan, in the right way, to the right people, at the right price.

Table 2.PSEs Status

National Power Generation Company Ltd ("NPGCL") Due diligence is in progress by the FA*

Faisalabad Electric Supply Company Ltd. ("FESCO") Due diligence is in progress by the FA*

Pakistan International Airlines ("PIA") Due diligence is in progress by the FA*

Pakistan Steel Mills Corporation ("PSMC") EOI** for appointment of FA* is in progress

Islamabad Electric Supply Company Limited ("IESCO") Appointment of FA* is in progress

Lahore Electric Supply Company Limited ("LESCO") Appointment of FA* is in progress

PIA-IL (Roosevelt and Scribe Hotels) Plan to invite EOI** in the current quarter

Convention Centre Plan to invite EOI** in the current quarter

* FA: Financial Advisor

** EOI: Expression of Interest

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By: Dr. Kabir Sidhu

Normative Objectives of Islamic and Conventional EconomicsIslam does not claim to have invented the market based system, however, it took measures to enhance and improve its spirit and its efficiency with its ethical approach. Islamic economic philosophy articulates that markets do not simply provide a platform for exchange. It enables participants to maximise profit subject to promoting falah and collective social welfare in the society. Quran articulates, “Eat not up your property amongst yourselves by vanities: but let there be trade with mutual consent”.

Shariah subscribes to “exchange with mutual consent” as the most basic denominator in any transaction and an equitable form of distribution of wealth in the society. Centuries later, Adam Smith, a major proponent of laissez-faire and the father of modern economics also based his free market philosophy on a similar proposition, which he called “trade by mutual consent to mutual advantage.” Both parties gain and wealth is created. Exchange appears to be the fundamental concept and common denominator both in Islamic economics and conventional economics.

The aggregate or cumulative effect of the exchanges with mutual consents lead to fair price formation mechanism and facilitates resource allocation in the economy. It represents natural equilibrium of forces of demand and supply which distributes wealth equitably in the society. Most legal and regulatory frameworks across the globe aim to facilitate smooth interplay of market forces, uninterrupted natural equilibrium devoid of exploitation in the economy. The society reaps the benefit in the form of optimum competition resulting in better quality products and services to the public in general.

Pakistani Markets and Privatisation Policy It is a sad fact that the presence of the PSEs in almost every segment of Pakistani market distorts the forces of demand and supply disrupting the natural equilibrium. There is no doubt that most of the Pakistani markets are distorted and to some extent manipulated. It undermines the integrity of the markets and investors depart in search of safer heavens.

The PSEs are operating in oil and gas, electricity, aviation, banking and many other fields. The result is poor and despicable quality service to the public. The

Government as the market player as well as the umpire is the root of all problems in free market economy. The PSEs receive preferential services and are not subject to normal forces of demand and supply. They are generally run by the bureaucrats and has no fear of regulatory measures being imposed upon them by their fellow bureaucrats heading the regulators. Government as market players and as regulators undermines all principles of economics in running the country. The PSEs negates the normal forces of demand and supply and undermines the dynamic of the market. These PSEs neither learn from the market nor do they try to innovate to remain profitable and competitive. They know they will be taken care of by the government. Thus they end up creating their own culture which is almost impossible to change.

This calls in question that the entire legal, regulatory and structural framework of various segments of the markets need to completely revamped to bring it in alignment with the free market economy in 21st century. This is the ambitious task that has been entrusted to the PC.

The common theme of critics on privatisation attempt to create a false perception that Pakistan is falling apart with the willy-nilly sale of PSEs in a less then transparent manner. They mercilessly criticise the current privatisation policy of deregulation, liberalisation, public private partnership and revamping of the legal and regulatory framework in the key areas of oil, gas and electricity as a dictation from the US, World Bank and IMF. They often equate it with selling the family silver. The reality is quite the contrary. It’s the need of the time to increase competition in all segments of the market to bring foreign investment and ensure sustainable economic development.

For the last decade or so, terrorism has hampered the foreign investment in the country so much so that the domestic investor is fleeing with their capital to more stable and secure destinations. The first step in the direction to revive the economic stagnation is government and opposition’s recent consensus in terrorism policy which sends out the message to the international investors that “it means business.” The second step is the ongoing privatisation policy. Markets and investors communicate in their own language. In aggregate, the local and international market response cannot be instigated or dictated. This is obvious from the reception of issuances of Sukuk worth USD. 2 billion

1 “Eat not up your property amongst yourselves by vanities: but let there be trade with mutual consent” Al-Quran 4:29.

Economic Objectives and Privatisation in Pakistan

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By: Anjum Nazir

As brief review in context of banks and financial institutions in Pakistan

IntroductionFor any country well-functioning financial sector is necessary for enhancing the efficiency of intermediation, which is achieved by mobilizing domestic savings, channeling them into productive investment by identifying and funding good business opportunities, reducing information, transaction, and monitoring costs and facilitating the diversification of risk. This results in efficient allocation of resources, contributing to a more rapid accumulation of physical and human capital, and faster technological progress, which in turn lead to higher economic growth.

NationalizationPakistan’s financial sector suffered a major setback with nationalization of domestic Banks under the Banks Nationalization Act 1974. The Pakistan Banking Council was formed to supervise the nationalized commercial

banks. By 1990s, the banking sector was suffering from, over-staffing and branches, massive non-performing loans, poor customer services and product ranges, political interference and personnel issues. Pakistan’s banking sector was rooted in a failure of governance and lack of financial discipline owing to undue political interference in the financial intermediation process, especially in the NCBs and DFIs. NCDs and DFIs were the major source of bad loans accounting for the 90% of the bad loans in the entire system and were the main loss makers.

PrivatisationThis led the Government to initiate the privatisation process in the early 1990s as part of economic reforms program and in 1991, the PC was established for disposing PSEs. The mission statement of PC clearly shows the objectives of privatisation. Privatisation process of the financial sector in the country commenced with MCB and ABL in 1991.

Privatisation coupled with the banking reforms were aimed to strengthen the sources of governance and

as well as the domestic offerings of UBL and ABL. The markets response was loud and clear to the surprise of all our critics. Keen investor’s interest and subsequently two international awards for the recent domestic capital market offerings endorse our privatisation policy and establish Pakistan as a favourable place of investment.

One of the objectives of privatisation policy is to ensure sustainable, social economic infrastructure development through public private partnership by divesting strategic management. United Kingdom was one of the first countries to start the private finance initiative across a broad range of sectors (transport, education, health, prisons, defence, leisure, government offices, environment, housing, courts, technology and others). About 80% of the projects were completed on time and within the budget compared with the 30% in the private sectors. Public and private sectors collaborate on the basis of a clearly defined sharing of the tasks and the risks to achieve the benefit of added value and increased efficiency. Project related risks are transferred to the private entity. This enables the government to focus on policy, strategy and monitoring role rather than service delivery. Another example is china who became the world player by privatising the public property. Similarly, China reduced the state owned enterprises from 1.4 million to 468,000 between

1995 – 2001, as part of its structural reforms.

The critics also advocate the sale of PSEs is against the national interest and technically they should be revived by restructuring first and then resold at higher price. It ignores the fact that these institutions almost cost PKR 500 billion to the tax payers annually. The government loses revenue and the potential tax it can collect from privatised PSEs. It also distorts the overall market deterring the potential market players from entry.

Privatising with strategic management and revamping the legal, regulatory and structural framework will attract foreign investment. It will free up the state resources to provide funds in areas and sectors needed for the socio-economic uplifts and stabilisation of less advantaged citizens. The state can thus return to its core business of providing good governance, enhancing knowledge and skills and providing basic needs of the citizen. Privatisation, deregulation and liberalising will separate state role as a policy maker and independent regulator from market player. It will lead to building institutional capacity to nurture and foster markets resulting in increased competition. It will build economic momentum and establish Pakistan as a place to invest.

Privatisation of Banking Sector

34

financial discipline for banking sector, namely bank regulators, markets, the courts and bank owners, by enhancing the authority and ability of the central bank to supervise banks and enforce regulations, promoting market integration and competition, improving the legal and judicial processes for enforcing financial contracts, and initiating corporate governance reforms in the NCBs and DFIs.

Recent history shows that the banking and financial sector in Pakistan has improved in efficiency after privatisation their administration will improve and non-development expenditures will be reduced, converting into profitable ventures.

Liquidity ratios of the banks have improved. Numbers and values of deposits have increased. Profitability of the banks has increased. Non-performing loans are coming under control. However, spread rate is still higher as compared to pre-privatisation period. New products and services have been created to facilitate the customers.

After privatisation and reforms Pakistan’s banking and financial sector has proved itself to be viable place for foreign investment. Foreign bank and financial institution are showing presence and interest in acquisition in nationalized and private banks.

Political pressures on banks and other institutions for employment of political workers and loan facilities has substantially decreased after these enterprises has gone in the hands of private owners.

Private domestic investors and foreign investors has employed and adopted latest technology and know-

how to increase the output and profits. This has led to increase in national output, economy.

Nationalized banks loses and their non-performing loans were a drain on GOP budget. After Privatisation, the GOP need not to resort to deficit financing to support these institutions.

Current StatusThe quarterly banking sector statistics for the quarter ended September, 2014, released by the State Bank of Pakistan, indicate that the capital adequacy ratio (CAR) of the banking system improved to 15.5% in September, 2014 compared to 15.1% a quarter earlier largely on the back of healthy profits. The CAR at its existing level is well above the minimum ratio of 10% set by the State Bank of Pakistan ("SBP"), despite implementation of strict Basel-III capital standard. Encouragingly, the stress test results also show that capital base of the system is strong enough to withstand unusual shocks due to credit, market and liquidity risks.

The indicators of asset quality of the banking sector, with marginal changes, also reflect stability. Non-performing loans ("NPLs") to loan ratio net of provisions at 3.2% in September, 2014 is far below its peak of 6.4% in September 2011. During July-September quarter of 2014. The profit (before tax) reached historically high level of PKR 176 billion as of end September 2014 showing 44% increase over the end September 2013. Similarly, the return on assets (ROA) and return on equity (ROE) inched up to 1.4% and 15.9% respectively up from 1.1% and 12.3% a year earlier.

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Appendices

36

PRIVATISATION PROGRAM OF THE GOVERNMENTSr. No Name of Units

Banking and Finance

1 National Investment Trust Limited (NITL)

2 Small and Medium Enterprise (SME) Bank

3 Allied Bank Limited (ABL)

4 First Women Bank Ltd (FWBL)

5 Habib Bank Limited (HBL)

6 United Bank Limited (UBL)

7 National Bank of Pakistan (NBP)

8 National Insurance Company (NIC)

9 Pakistan Reinsurance Company (PRC)

10 State Life Insurance Corporation (SLIC)

11 House Building Finance Corporation (HBFC)

Oil, Gas & Energy

12 Oil and Gas Development Corporation Ltd. (OGDCL)

13 Pak Arab Refinery Limited (PARL)

14 Pakistan Petroleum Limited (PPL)

15 Pakistan State Oil Company Limited (PSO)

16 Sui Northern Gas Pipelines Limited (SNGPL)

17 Sui Southern Gas Company Limited (SSGC)

18 Mari Petroleum Limited (MPL)

19 Government Holding Private Limited (GHPL)

20 National Power Construction Company (NPCC)

21 Islamabad Electric Supply Company Limited (IESCO)

22 Faisalabad Electric Supply Company Limited (FESCO)

23 Lahore Electric Supply Company Limited (LESCO)

24 Gujranwala Electric Power Company Limited (GEPCO)

25 Multan Electric Power Company Limited (MEPCO)

26 Peshawar Electric Supply Company Limited (PESCO)

27 Hyderabad Electric Supply Company Limited (HESCO)

28 Quetta Electric Supply Company Limited (QESCO)

29 Sukkur Electric Power Company (SEPCO)

30 KotAddu Power Company (KAPCO)

31 Jamshoro Power Generation Company Ltd – JPCL (GENCO- I)

32 Central Power Generation Company Ltd – CPGCL (GENCO – II)

33 Northern Power Generation Company Ltd – NPGCL (GENCO – III)

34 LakhraPower Generation Company Ltd – LPGCL (GENCO – IV)

Fertilizers

35 National Fertilizers Corporation and its units and subsidiaries

Appendix – I

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Engineering

36 State Engineering Corporation and its units and subsidiaries

37 Pakistan Engineering Company (PECO)

38 Pakistan Machine Tool Factory (PMTF)

39 Sindh Engineering Limited (SEL)

40 Heavy Electrical Complex (HEC)

41 National Construction Limited (NCL)

42 Pakistan Steel Mills Corporation & its units

43 Pakistan Steel Fabricating Company Ltd

Minerals and Natural Resources

44 Pakistan Mineral Development Corporation (PMDC)

45 Lakhra Coal Mines (now Lakhra Coal Development Company)

46 Sandak Development Corporation (SDC)

Automobiles

47 Morafco Industries (Machinery as in where is basis)

48 Republic Motors Limited (RML)

Infrastructure

49 Civil Aviation Authority (CAA)

50 Port Qasim Authority (PQA)

51 Karachi Port Trust (KPT)

52 National Highway Authority (NHA)

Transport

53 Pakistan International Airlines Corporation (PIAC)

54 Pakistan National Shipping Corporation (PNSC)

55 Pakistan Railways & its allied facilities, factories, workshops etc.

Tourism

56 Services International Hotel, Lahore

57 PIA-IL (Roosevelt Hotel, NY & Scribe Hotel, Paris)

Telecom

58 Telephone Industries of Pakistan, Haripur (TIP)

Others

59 Printing Corporation of Pakistan (PCP)

60 National Book Foundation (NBF)

Corporations & other

61 Pakistan Industrial Development Corporation and its units (PIDC)

62 Utility Store Corporation and stores (USC)

63 Trading Corporation of Pakistan (TCP)

64 Cotton Export Corporation of Pakistan

65 Rice Export Corporation of Pakistan

66 Export Processing Zone Authority

67 Pakistan Industrial and Technical Training Centre

68 Convention Centre, Islamabad

69 Shalimar Recording Company

38

PRIVATISATION PROGRAM FOR EARLY IMPLEMENTATION APPROVED BY THE CCOP

Sr. No Entities GOP Share** Divestment Strategy

Oil & Gas (upstream and mid-stream)

1Oil and Gas Development Co. Ltd (OGDCL)

~ 85%Capital Market (preferably International)

2 Pakistan Petroleum Ltd (PPL) ~ 78% Capital Market (International & Domestic)

3 Mari Petroleum Ltd. ~ 20% Capital Market (SPO) or Block Sale to JV partner

4Government Holding Private Ltd (GHPL)

~ 100%Capital Market (IPO) or Divestment of Working Interest of specific Block

5Pak Arab Refinery Ltd (PARCO)

~ 60%Capital Market (IPO) subject to consent of JV partner

Oil & Gas (downstream)

6Pakistan State Oil Co Ltd (PSO)

~ 25%Segregation of business segments followed by divesting the suitable business segment

7Sui Southern Gas Co Ltd (SSGC)

~ 60%Segregation of various operations followed by privatisation, where possible

8Sui Northern Gas Pipelines Ltd (SNGPL)

~ 36%Segregation of various operations followed by privatisation, where possible

Banking & Finance

9 Habib Bank Limited (HBL) ~ 42% Capital Market (Secondary Public Offering -SPO)

10 United Bank Limited(UBL) ~ 20% Capital Market (Secondary Public Offering -SPO)

11 Allied Bank Limited (ABL) ~ 10% Capital Market (Secondary Public Offering -SPO)

12National Bank Limited (NBP)

~ 76%Divestment with Mgmt Control (preferably) or Block Sale to qualified investors

13 State Life Insurance Corp. (SLIC) ~ 100% Capital Market (Initial Public Offering – IPO)

14National Insurance Co. Ltd. (NICL)

~ 100%Divestment with Mgmt Control followed by Initial Public Offering (IPO)

15National Investment Trust Ltd. (NITL) *

~ 100% MRDivestment of Mgmt rights of individual fund(s)

16Small & Medium Enterprise (SME) Bank *

~ 94%Divestment with Mgmt Control or Merger with Tier II / III Bank

17Pakistan Reinsurance Co Ltd. (PRCL)

~ 51%Divestment with Mgmt Control

Power

18 Heavy Electrical Complex (HEC) * ~ 100% Divestment with Mgmt Control

19Islamabad Electric Supply Co. Ltd (IESCO)

~ 100%Divestment with Mgmt Control

20Faisalabad Electric Supply Co. Ltd (FESCO)

~ 100%Divestment with Mgmt Control

21Hyderabad Electric Supply Co. Ltd (HESCO)

~ 100%Divestment with Mgmt Control

22Jamshoro Power Generation Co. Ltd (JPCL)

~ 100%Divestment with Mgmt Control

Appendix – II

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23Northern Power Generation Co. Ltd - Thermal Power Station – Muzaffargarh

~ 100%Divestment with Mgmt Control

24National Power Construction Co. (NPCC) *

~ 100%Divestment with Mgmt Control

25Kot Addu Power Company Ltd. (KAPCO)

~ 46%Capital Mkts (International & Domestic)

26Lahore Electric Supply Company Limited (LESCO)

~ 100%Divestment with Mgmt Control

27Gujranwala Electric Power Company Limited (GEPCO)

~ 100%Divestment with Mgmt Control

28Multan Electric Power Company Limited (MEPCO)

~ 100%Divestment with Mgmt Control

29Peshawar Electric Supply Company Limited (PESCO)

~ 100%Divestment with Mgmt Control

30Quetta Electric Supply Company (QESCO)

~ 100%Divestment with Mgmt Control

31Sukkur Electric Power Company Limited (SEPCO)

~ 100%Divestment with Mgmt Control

32Central Power Generation Company Ltd (CPGCL) / GENCO-II

~ 100%Divestment with Mgmt Control

33Lakhra Power Generation Company Ltd (LPGCL) / GENCO - IV

~ 100%Divestment with Mgmt Control

Industries, Transport & Real Estate

34 Pakistan Steel Mills Corp (PSMC) ~ 100% Divestment with Mgmt Control

35Pakistan Engineering Co Ltd (PECO) *

~ 25%Retirement of GOP liabilities initially followed by transfer of Mgmt to private partners

36Pakistan International Airlines Corp (PIAC)

~ 100%Restructuring followed by divestment of 26% GoP equity stakes to strategic partner with Mgmt control

37Pakistan National Shipping Corp (PNSC)

~ 90%Divestment with Mgmt Control

38 Convention Centre, Islamabad. * ~ 100% Sale of Asset

39PIA Investment Ltd –Roosevelt Hotel NY & Scribe Hotel – Paris *

~ 100%Sale of Asset

* Keeping in view the PSEs size and sectoral dynamics,100% GoP interest would be divested

** Where applicable, Shareholding includes BESOS shares as well.

40

COMPLETED TRANSACTIONS1991 TO DECEMBER, 2014

Sr. # Unit NameSale Price

Date of Transfer

Buyer Name

Banking and Finance

Bank

1 Allied Bank Limited (51%) 971.6 Feb-91 EMG

2 Muslim Commercial Bank (75%) 2,420.0 Apr-91 National Group

3 Bankers Equity Ltd. (51%) 618.7 Jun-96 LTV Group

4 Habib Credit & Exchange 70 % (52,500,000)1,633.9 Jul-97

Sh. Nahyan bin Mubarik Al-Nahyan

5 United Bank Ltd. 51% (264,180,000 shares)12,350.0 Oct-02

Consortium of Bestway & Abu Dhabi Group

6 Bank Alfalah 30% (22,500,000 shares) 620.0 Dec-02 Abu Dhabi Group

7 Habib Bank Ltd. 51% (351,900,000 shares)22,409.0 Dec-03

Agha Khan Fund for Economic Development

Total 41,023.2

Capital Market Transaction

8 Muslim Commercial Bank (6.8%)563.2 Jan-01

MCB Employees-PF & Pension-F

9 Muslim Commercial Bank (4.4%)364.0 Nov-01

MCB Employees-PF & Pension-F

10 NBP 10% shares IPO (37,300,000) 373.0 Feb-02

General Public Thru Stock Exchange

11 Muslim Commercial Bank-CDC (24,024,560 shares)

664.0 Oct-02Sale thru CDC

12 Pakistan Oil Fields Limited -CDC (28,546,810 shares)

5,138.0 Oct-02Sale thru CDC

13 Attock Refinery Limited -CDC (10,206,000 shares) 1,039.0 Jan-03 Sale thru CDC

14 ICP Lot – A 175.0 Sep-02 ABAMCO

15 ICP Lot – B 303.0 Oct-02 PICIC

16 ICP – SEMF 787.0 Apr-03 PICIC

17 NBP 10% SPO (37,303,932 shares) 782.0 Nov-02 Sale thru CDC

18 DG Khan Cement -CDC (3,601,126 shares)63.0 Dec-02

General Public Thru Stock Exchange

19 NBP 3.52% 3rd offer (13,131,000 shares)604.0 Nov-03

General Public Thru Stock Exchange

20 OGDCL 5% IPO (215,046,420 shares)6,851.0 Nov-03

General Public Thru Stock Exchange

21 SSGC10% -SPO (67,117,000 shares)1,734.0 Feb-04

General Public Thru Stock Exchange

22 PIA 5.8% shares SPO 1,215.1 Jul-04

General Public Thru Stock Exchange

Appendix – III

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23 PPL15% IPO (102,875,000 shares)5,632.6 Jul-04

General Public Thru Stock Exchange

24 KAPCO 20% IPO (160,798,500 shares)4,814.8 Apr-05

General Public Thru Stock Exchange

25 UBL 4.2% IPO (21,867,400 shares)1,087.2 Aug-05

General Public Thru Stock Exchange

26 OGDCL 9.1% GDR (390,588,000 shares)44,893.0 Dec-06

GDR offering to intl. institutions

OGDCL 0.4% GDR (18,000,000 shares)2,070.0 Dec-06

GDR offering to domestic institutions

27 OGDCL 0.5% SPO (21,505,000 shares)2,359.6 Apr-07

General Public Thru Stock Exchange

28 UBL 25.0% GDR (202,343,752 shares)39,449.7 Jun-07

GDR offering to international & domestic institutions

29 HBL IPO 7.5 % (51,750,000 shares)12,161.0 Oct-07

General Public Thru Stock Exchange

30 UBL ~20.0% SPO (241,921,931 shares)37,889.0 Jun-14

Institutional & HNWI Offer Thru Stock Exchange

31 PPL Offering (~70.05 million shares)15,342.0 Jun-14

Institutional & HNWI Offer Thru Stock Exchange

32 ABL Offering (~131.3 million shares)14,440.0 Dec-14

Institutional & HNWI Offer Thru Stock Exchange

Total 200,794.2

Total Banking & Finance: 241,817.4

Energy Sector

33 Mari Gas (20%) 102.4 Apr-94 Mari Gas Company Ltd.

34 Kot Addu Power Company (26%) 7,105.0 Jun-96 National Power

35 Kot Addu Power Company (10%) 3,046.0 Nov-96 National Power

36 Kot Addu (Escrow A/c) 900.7 Apr-02 National Power

37 SSGC LPG business 369.0 Aug-00 Caltex Oil Pak.(Pvt) Ltd.

38 SNGPL LPG business 142.0 Oct-01 Shell Gas LPG Pakistan

39 Badin II (Revised)503.2 Jun-02

BP Pakistan & Occidental Pakistan

40 Adhi 618.9 May-02 Pakistan Oil Field

41 Dhurnal 161.0 May-02 Western Acquisition

42 Ratana 24.6 May-02 Western Acquisition

43 Badin I 6,433.0 Jun-02

BP Pakistan & Occidental Pakistan

44 Turkwal 75.6 Jun-02 Attock Oil Company

45 NRL (51% shares)16,415.0 May-05

Consortium of Attock Refinery Ltd.

46 KESC (73% GOP shares) 15,859.7 Nov-05 Hassan Associates

Total 51,756.1

42

Telecommunications

47 PTCL (2%)3,032.5 Aug-94

General Public Thru Stock Exchange

48 PTCL (10%) 27,499.0 Sep-94 Through DR form

49 26% (1.326 billion) B class shares of PTCL 156,328.4 Jul-05 Etiselat UAE

50 Carrier Telephone Industries500.0 Oct-05

Siemens Pakistan Engineering Co. Ltd.

Total 187,359.9

Industrial Units

Automobile

51 Al-Ghazi Tractors Ltd.105.6 Nov-91

Al-Futain Industries (Pvt) Ltd. UAE

52 National Motors Ltd. 150.4 Jan-92 Biboo Jee Services

53 Millat Tractors Ltd. 306.0 Jan-92 EMG

54 Baluchistan Wheels Ltd.276.4 May-92

Abdul Qadir & Saleem I. Kapoorwala

55 Pak Suzuki Co. Ltd. 172.0 Sep-92 Suzuki Motors Co. Japan

56 Naya Daur Motors Ltd.22.3 Jan-93

Farid Tawakkal & Saleem I. Kapoorwala

57 Bolan Castings 69.2 Jun-93 EMG

Total 1,101.9

Cement

58 Maple Leaf Cement 485.7 Jan-92 Nishat Mills Ltd.

59 Pak Cement 188.9 Jan-92 Mian Jehingir Ellahi & Ass

60 White Cement137.5 Jan-92

Mian Jehingir Ellahi & Associates

61 D.G Khan Cement 1,960.8 May-92 Tariq Sehgal & Associates

62 Dandot Cement 636.7 May-92 EMG

63 Garibwal Cement 836.3 Sep-92 Haji Saifullah & Group

64 Zeal Pak Cement 239.9 Oct-92 Sardar M. Ashraf D. Baluch

65 Kohat Cement 527.9 Oct-92 Palace Enterprises

66 Dandot Works - National Cement 110.0 Jan-95 EMG

67 General Refractories Limited 18.9 Feb-96 Shah Rukh Engineering

68 Wah Cement 2,415.8 Feb-96 EMG

69 Associated Cement Rohri 255.0 Nov-03 National Transport Khi

70 Thatta Cement 793.7 Jan-04 Al Abbass Group

71 10% additional shares – Dandot Cement 8.3 Oct-04 EMG

72 10% additional shares – Kohat Cement 40.7 Oct-04 EMG

73 Mustehkam Cement Limited 3,204.9 Nov-05 Bestway Cement Limited

74 Javedan Cement Company Limited 4,315.9 Aug-06 Haji Ghani Usman & Group

Total 16,176.9

Chemical

75 National Fibres Ltd 756.6 Feb-92 Schon Group

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76 Kurram Chemicals 33.8 Feb-92 Upjohn Company USA

77 Pak PVC Ltd 63.6 Jun-92 Riaz Shaffi Reysheem

78 Sind Alkalis Ltd 152.3 Oct-92 EMG

79 Antibiotics (Pvt) Ltd 24.0 Oct-92 Tesco Pvt) Ltd.

80 Swat Elutriation 16.7 Dec-94 Sahib Sultan Enterprises

81 Nowshera PVC Co. Limited 20.9 Feb-95 Al_syed Enterprises

82 Swat Ceramics (Pvt) Limited 38.6 May-95 Empeiral Group

83 Ittehad Chemicals 399.5 Jul-95 Chemi Group

84 Pak Hye Oils 53.6 Jul-95 Tariq Siddique Associates

85 Ravi Engineering Limited 5.4 Jan-96 Petrosin Products Pte

86 Nowshera Chemicals 21.2 Apr-96 Mehboob Ali Manjee

87 National Petrocarbon 21.9 Jul-96 Happy Trading

88 National Petrocarbon (add’l 10% shares) 2.3 Mar-02 Happy Trading

89 Khuram Chemicals (additional 10%) 6.0 Oct-03 Pfizer Pakistan

90 10% additional shares – Ittehad Chemicals 26.1 Oct-04 EMG

Total 1,642.5

Engineering

91 Karachi Pipe Mills 18.9 Jan-92 Jamal Pipe Industries

92 Pioneer Steel 4.4 Feb-92 M. Usman

93 Metropolitan Steel Mills Limited 66.7 May-92 Sardar M. Ashraf D. Baluch

94 Pakistan Switchgear 8.9 Jun-92 EMG

95 Quality Steel 13.2 Apr-93 Marketing Enterprises

96 Textile Machinery Co 27.9 Oct-95 Mehran Industries

97 Indus Steel Pipe 42.5 Jul-97 Hussien Industries

Total 182.5

Fertilizer

98 Pak China Fertilizers Company Limited 435.4 May-92 Schon Group

99 Pak Saudi Fertilizers Ltd. (90%)7,335.9

May & Sep-02

Fauji Fertilizers

100 Pak Saudi Fertilizers Ltd. (10%) 815.0 Sep-02 Fauji Fertilizers Ltd.

101 Pak Arab Fertilizers (Pvt) Ltd. (94.8%)14,125.6 May-05

Export Reliance- Consortium

102 Pak Amercian Fertilizers (100%) 15,949.0 Jul-06 Azgard 9

103 Lyallpur Chemical & Fertilizers280.2 Feb-07

Al Hamd Chemical (Pvt) Limited

104 Hazara Phosphate Fertilizers Limited 1,340.0 Nov-08 Pak American Fertilizers

Total 40,281.1

Ghee

105 Fazal Vegetable Ghee 21.2 Sep-91 Mian Mohammad Shah

106 Associated Industries 152.0 Feb-92 Mehmoob Abu-er-Rub

107 Sh Fazal Rehman 64.3 Apr-92 Rose Ghee Mills

108 Sh Fazal Rehman (additional 10% shares) 2.3 May-05 Rose Ghee Mills

44

109 Kakakhel Industries 55.3 May-92 Mehmoob Abu-er-Rub

110 United Industries 15.5 May-92 A. Akbar Muggo

111 Haripur Vegetable Oil 30.1 Jul-92 Malik Naseer & Assoc.

112 Bara Ghee Mills 27.8 Jul-92 Dawood Khan

113 Hydari Industries - Aug-92 EMG

114 Chiltan Ghee Mills 42.5 Sep-92 Baluchistan Trading Co.

115 Wazir Ali Industries 31.9 Dec-92 Treat Corporation

116 Asaf Industries (Pvt) Limited 11.4 Jan-93 Muzafar Ali Isani

117 Khyber Vegetable 8.0 Jan-93 Haji A. Majid & Co.

118 Suraj Vegetable Ghee Industries 10.8 Jan-93 Trade Lines

119 Crescent Factories Vegetable Ghee Mills 46.0 Jan-93 S. J. Industries

120 Bengal Vegetable 19.1 Mar-93 EMG

121 A & B Oil Industries Limited 28.5 Mar-93 Al-Hashmi Brothers

122 Dargai Vegetable Ghee Industries 26.2 Nov-97 Gul Cooking Oil Industries

123 Punjab Veg. Ghee 18.7 May-99 Canal Associates

124 Burma Oil 20.1 Jan-00 Home Products Intl

125 E&M Oil Mills 94.0 Jul-02 Star Cotton Corp. Ltd.

126 Maqbool Oil Company Ltd. 27.6 Jul-02 Madina Enterprises

127 Kohinoor Oil Mills 80.7 May-04 Iqbal Khan

128 United Industries Limited 7.7 Sep-05 A. Akbar Muggo

Total 841.7

Mineral

129 Makerwal Collieries 6.1 Jul-95 Ghani Group of Industries

Rice

130 Sheikhupura 28.0 May-92 Contrast Pvt Ld.

131 Faizabad 21.2 May-92 Packages Ltd.

132 Siranwali 16.2 Jul-92 Enkay Enterprises

133 Hafizabad 20.0 Sep-92 Pak Pearl Rice Mills

134 Eminabad 24.1 Nov-92 Pak Arab Food Industries

135 Dhaunkel 79.2 Jun-93 Dhonda Pakistan Pvt Ltd.

136 Mabarikpur 14.4 Nov-93 Maktex Pvt) Ltd.

137 Shikarpur 32.5 Mar-96 Afzaal Ahmad

Total 235.6

Roti Plants

138 Gulberg, Lahore 8.7 Jan-92 Packages Ltd.

139 Peshawar 2.6 Jan-92 Saleem Group of Ind

140 Head Office, Lahore 10.2 Jan-92 Hajra Textile Mills

141 Hyderabad 2.6 Jan-92 Utility Stores Corp.

142 Faisalabad 11.5 Jan-92 Azad Ahmad

143 Bahawalpur 1.6 Feb-92 Utility Stores Corp.

144 Multan 2.5 Feb-92 Utility Stores Corp.

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145 Quetta 4.8 Feb-92 Utility Stores Corp.

146 Islamabad 3.6 Mar-92 Utility Stores Corp.

147 Taimuria, Karachi 9.2 Jun-92 Spot Light Printers

148 SITE, Karachi 5.1 Sep-92 Specialty Printers

149 Multan Road, Lahore 3.5 Dec-92 Utility Stores Corp.

150 Korangi, Karachi 4.6 Apr-93 Utility Stores Corp.

151 Mughalpura, Lahore - Jun-96 Pakistan Railways

152 Gulshan-e-Iqbal, Karachi 20.2 Mar-98 Ambreen Industries

Total 90.7

Textile

153 Quaidabad Woollen Mills 85.5 Jan-93 Jehangir Awan Associates

154 Cotton Ginning Factory 1.2 Jun-95 Hamid Mirza

155 Bolan Textile Mills 128.0 Oct-05 Sadaf Enterprises

156 Lasbella Textile Mills 156.0 Nov-06 Raees Ahmed

Total 370.7

Total (all Industrial Units) 60,929.7

Miscellaneous

157 National Tubewell Const Corpn 18.6 Sep-99 Through Auction

158 Duty Free Shops 12.5 Sep-99 Weitnaur Holding Ltd.

159 Republic Motors (Plot) 6.3 Nov-99 Muhammad Mushtaq

160 Al Haroon Building Karachi 110.0 Sep-02 LG Group

161 International Advertising (Pvt) Ltd. 5.0 Apr-05 EMG

Total 152.4

Newspapers

162 N.P.T Building 185.0 Oct-93 Army Welfare Trust

163 Mashriq – Peshawar 26.6 Jun-95 Syed Tajmir Shah

164 Mashriq – Quetta 6.2 Jan-96 EMG

165 Progressive Papers Ltd. 46.1 May-96 Mian Saifu-ur-Rahman

166 Mashriq – Karachi 6.7 Aug-96 EMG

Total 270.6

Tourism

167 Cecil's Hotel 190.9 Jun-98 Imperial Builders

168 Federal Lodges - 1- 4 39.2 Jan-99 Hussain Global Assoc.

169 Dean's Hotel 364.0 Dec-99 Shahid Gul & Partners

170 Falleti's Hotel Lahore 1,211.0 Jul-04 4B Marketing

Total 1,805.1

Total (Misc.) 2,228.1

170 Grand Total 544,091.2

46

Mohammad Zubair, an IBA Karachi alumnus (1981) remained associated with the IBM throughout his corporate career. He left the global IT giant in 2007 when he was serving as the CFO of IBM Middle East and Africa region in Dubai. Zubair then started his own media marketing company in Karachi.

In 2012, he joined the PML-N and soon became a key member of the Party’s economic think-tank. The Prime Minister appointed him the Chairman of the Privatisation Commission ("PC") in December 2013. Since then, Zubair has been serving as the Chairman of the Privatisation Commission (PC). Below are selected excerpts from BR Research’s recent sit-down with the PC Chairman in Islamabad couple of weeks ago:

BR Research ("BRR"): Why is the government’s focus more on privatisation than restructuring?

Mohammad Zubair ("MZ"): First, let me stress that restructuring cannot happen without pumping in money or changing the mix of employees in any troubled entity. The Khazana model of Malaysia--which a lot of people refer to in this debate--only succeeded because the Malaysian government was able to inject money as well as rationalise the excess workforce in its PSEs. Unfortunately, in Pakistan, the government has very limited financial capacity for restructuring-related injections. Nor is it supported by the politicians and public in lay off excess workforce.

Restructuring is part and parcel of PC’s mandate. And we are recommending PSE restructuring in cases where it is relevant and where we have time to do it.

BRR: What is the progress on the privatisation front?

MZ: To me, privatisation is a long-term agenda and it is core part of the PML-N’s economic revival plan. The progress could have been better from our side and the process should have been fast-tracked. After our first board meeting in January, we could not publish the advertisements for financial advisors, because of the government-press impasse on outstanding dues. Due to that, we lost seven crucial weeks, which impacted the timeline of some transactions that we wanted done within June.

BRR: So is there a new timeline now?

MZ: Despite the time lapse, we are keeping the target of three capital market transactions--UBL, PPL and OGDCL--for end June. This is an extremely tight deadline. But,

we are going to do our best. (Financial advisors have now been appointed for all three transactions.)

However, as we go about these three transactions in full steam, the ongoing work on rest of the privatisation agenda may slow down. Recall that we had approved eleven entities for the first privatisation phase in the January board meetings. These include the PIA, Fesco, National Power Construction Company, and Heavy Electrical Complex. This process will somehow not be as focused till June.

BRR: How much do you think can be raised through these three capital market transactions?

MZ: We have a target of Rs 137 billion, which includes Rs 85 billion ($850 million) from the OGDCL GDR proceeds.

BRR: How do you plan to proceed with the PIA strategic stake sale?

MZ: We realise that PIA is the most complex among all entities. Currently, the PIA holding company has all the businesses on its balance sheet including core business, hotels, poultry, and ground handling operations. Our plan is to create a subsidiary which will get the core business of PIA--the planes, routes, landing rights, etc--along with its related assets and relevant employees. In one go, we will get a clean balance sheet and an attractive employee-to-aircraft ratio. Non-core operations and liabilities will be transferred to the other subsidiary.

In the first phase, this new, core entity will be offered for a minimum 26 percent strategic investment. In the second phase, we will focus on the non-core subsidiary to spin off and sell the kitchen, poultry and ground handling business.

BRR: When will be the financial advisor for PIA appointed?

MZ: The financial advisor for the PIA transaction would be appointed around mid-May. The advisor will do the necessary due diligence and later also campaign in finding possible clients. The advisor will initially do the study and revert to the commission with the proposals and the timeline for the above-mentioned plan. We need to understand that the main objective behind this plan is to improve the quality of service. Second objective is to cut down the losses. Third is then obviously maximisation of government revenues.

BRR: How high on the PC’s list is the Discos’ privatisation?

‘Closing down PSM is not an option,’ Chairman, Privatisation Commission

Courtesy: Business Recorder April 25, 2014

PC NEWSLETTER

PC NEWSLETTER

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MZ: The PC board has approved privatisation of two DISCOs’, FESCO and LESCO, and one generation company, Muzaffargarh. FESCO will be the first one to be privatised. FESCO will be a difficult one because it has been on the list since 1994 and it can become a political issue. LESCO and HESCO would follow after FESCO privatisation under this program. The ads for hiring of the financial advisers for these entities’ privatisation have already been published. FESCO’s privatisation may take till the end of the year.

BRR: Is there any restructuring plans for the Pakistan Steel Mills?

MZ: The time for straightaway privatisation for PSM is gone. Politically, it will be a nightmare, as employees are not getting their dues on time and the mill is not functioning normally. Beware that closing down PSM is not an option either--we need at least PKR. 65-66 billion to just close it down.

I am recommending a two-phase plan for PSM restructuring. First thing to do is to bring back the PSM’s operational capacity utilisation to a respectable level of around 30% from the current low of 2-3%. Once 30% capacity utilisation level is reached, we can then start the process of privatisation. The idea is to get the required funding, increase capacity utilisation, get cash flows moving, boost employee morale and pay them on time. I will try to convince the next ECC meeting about this plan, which is based on milestone-oriented working capital injections.

BRR: How do you plan to convince those opposing the privatisation process?

MZ: Our position is simple: Pakistanis deserve better service. The opposition (the PPP) also had the intent to privatise in their last term. One of their senior party leaders headed the PC which reflected their commitment to privatisation. Their argument, as I understand, is not against the concept of privatisation but how the process is conducted. We are committed to improving the process and transparency. But, when the moment of truth comes--for example, when the planes are grounded in the case of PIA--we would need strong political leadership.

BRR: Why are the PSEs boards still vacant?

MZ: Restructuring starts with the board of directors’ appointment. We have now been able to complete the

boards of the major entities. With regard to the CEOs’ appointment, we have been slow, though not because of our failing. We were ready and prepared for fresh appointments at key posts before we even formed the government. Recall that the first week after the Prime Minister was sworn into office, recruitment ads were published in the newspapers. But then the court intervened and directed a Selection Board to conduct the recruitment process.

When the Selection Board was finally in place after considerable time, vetting the applications became an issue. We then appointed Ferguson, which did the screening work. However, the quality of applications received against the top advertised positions was really below par. Then the selection board got dissolved as one of the three members had to leave. The process has been in limbo for one reason or the other, which is very unfortunate.

Throughout this process, I have been very disappointed by the discourse on our TV channels. Their criticism has been out of context. I have said this on a TV talk show that media anchors cannot ‘define’ what ‘good governance’ is--it’s not their forte. Just because you appoint someone in a short time at some key position does not mean it is bad governance. We need to understand that prominent corporate high-ups anywhere in the world do not apply for top government positions against ads. Such individuals have to be convinced and incentivised to take up the public jobs. If Pakistan has to move forward, we have got to trust others and not question their integrity in haste.

BRR: How are you dealing with the PC’s human resource capacity issue after years of inaction?

MZ: Over the past five to six years, many people had left the commission. Those who remained haven’t received a lot of exposure. We need to continuously work on increasing the commission’s capacity. The land title mess from Pakistan Telecommunication Limited ("PTCL") privatisation is also a manifestation of poor staff homework. That can only be avoided in the future through proper homework by a competent staff. We have received human resource support from the World Bank and the Asian Development Bank ("ADB"). There are a few other individuals who are being interviewed. The PM has approved our request to hire a few more people in the PC. That will be helpful in improving the commission’s capacity.

Chairman Privatisation Commission’s Exclusive Interview by Nasir Jamal-Dawn Islamabad 8 March 2014.

When Prime Minister Nawaz Sharif offered the job of privatising public corporations to Mohammad Zubair at a dinner in Bangkok last November, he warned the former IBM executive against expecting to come out of the exercise as a hero. “You’ll be my hero, though,” the prime minister told him.

The Sharif government looks at successful transaction of public corporations as a ‘game changer’ for the collapsing economy that will help it cut fiscal deficit and shore up dangerously low foreign exchange reserves. “It’s a challenge; we’ve got to do it if we want to grow the economy,” Privatisation Commission of Pakistan chairman Zubair tells Dawn during an interview.

The job of privatising public companies is one of the toughest in the country. The ambitious but controversial privatisation project, the largest-ever sale of public assets initiated anywhere in the world, is under the scanner. Zubair is planning to give the 68 public firms, mostly loss-making, in private hands through auction, strategic partnership and management change.

The process, he says, may take three years. While multilateral lenders want him to follow the deadlines agreed with the IMF to cut the budget deficit and stabilise the economy, investors are waiting for him to put the oil and gas companies, PIA, banks and power distribution firms on the bloc to see if they have an opportunity there to expand their business interests by buying them.

Political parties and other groups of civil society are concerned over the social costs of privatisation and labour organisations are fearing job losses resulting from ‘the grand sale of the century’. Thus, a major part of Zubair’s job is to neutralise political opposition to privatisation, address the fears of workers and ensure transparency in the process with an eye on the deadlines set by the IMF as part of its USD 6.6 billion bailout package. He has been reaching out to the critics of the program and has met the leadership of political parties like PPP, PTI and JI and several labour organisations that have pledged to resist the sell-off. He has invited political parties to sit on the committee that will scrutinize bids to satisfy their concerns over transparency of the process.

“None has so far advanced any proposal to make the process of privatisation effective and transparent. All I have got is misplaced criticism,” he says.

He says a PPP leader had told him that his party would oppose privatisation if (Mian Mohammad) Mansha was allowed to be part of it. “I cannot encourage foreign investors and discourage our own investors. This is not fair,” Zubair says. “Foreign investors will also not come if they find us restraining our own businessmen.” PPP co-chairperson Bilawal Bhutto-Zardari has opposed the privatisation program and alleged it is being initiated to benefit people close to

the prime minister.

He has also demanded restructuring of the public corporations without selling them to the private investors. PTI’s Asad Umar is also against sale of the government stakes in profitable companies like OGDCL and PPL, saying the government must revive the PSEs in which it still has majority stakes and management control. But where the control has already been transferred to private buyers or companies suffering from massive losses and cannot be restructured should be got rid of.

“There’s a broad consensus that (most) public companies are suffering from huge financial losses and are a burden on the government,” Zubair tells Dawn.

“The opinion is divided on solutions. Economics is not an exact science after all.” The privatisation commission boss, however, rubbishes criticism against privatisation of profitable firms and the advice of turning around the loss-making companies without selling them off to private investors. “If these corporations could be fixed without giving them to the private sector, why didn’t the PPP turn them around during the last five years? I’ve never seen a faster decline of a company than of the Pakistan Steel Mills,” he contends.

“The government neither has the cash to turn around the loss-making state-owned businesses nor the professional expertise to run commercial organisations. This is a fact that bureaucrats and ministers who are supposed to run these businesses are not qualified to take such decisions,” he argues. “The idea that only loss-making corporations should be sold and the profitable ones retained is a stupid argument. These organisations are not working to their full potential. They cannot achieve their maximum potential and improve service delivery unless they are given in private hands.”

Zubair also remains undeterred by the ‘threats’ of active resistance from its critics. “Nothing is going to happen. There’ll be no resistance that has the potential to jeopardise the program or delay it,” he asserts. “The success of the privatisation program hinges on transparency. This is the way of countering criticism. If the process is transparent the question who the buyer is will become irrelevant.”

Zubair says no plan is without risks. “We will make errors and mistakes. The process will enrich some people and its benefits will not immediately trickle down to all segments of society. But it will unleash the full economic potential of these corporations and push growth. Once the economic growth climbs to 7-8%, new jobs will be created and society as a whole will benefit. Today, the critics are worried about the few thousands of workers who have jobs in these organisations. They are not worried about millions of those who are entering the market every year but cannot find a job because of low growth. It’s time to also think of those on the other side of the wall,” he argues.

Chairman Privatisation Commission’sExclusive Interview by Dawn

Courtesy: Daily Dawn March 09 2014

Privatisation Commission5-A Constitution Avenue, EDB Building Islamabad, Pakistan Ph: +92-51-9205146, 47, 49, 52, 53, 56, 58, 9208525-7Fax: +92-51-9203076 – 9211692Web: http://www.privatisation.gov.pkEmail: info@privatisation.gov.pk