1. Shahid Hussain Raja
Independent consultant-public policy
www.sanoconsultants.co.uk
May 27,, 2013

2.  Introduction
 Privatisation : Concept & Need
 Modes of Privatisation
 Privatisation Process
 Functions of Privatisation Commission
 Privatisation in Pakistan
 Prospects & Challenges
 Way Forward
 Q&A
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3.  Privatisation-not a new phenomenon in Pakistan
 1960s-privatised factories built by the state to the private
sector at nominal prices to enhance its role
 1970s-reversal of the policy, wholesale nationalisation
 1980s-denationalisation of the enterprises
 1990s-accelerated privatisation and deregulation
 More than 165 transactions fetched over $ 9 billion proceeds
(Rs. 476,421 million)
 80 to 100% state owned enterprises in the different sectors
have been handed over to private sector.
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4. 4
“…. a transaction by virtue of which any property, right,
interest, concession or management thereof is
transferred to any person (entity) from the Federal
Government or any enterprise owned or controlled,
wholly or partially, directly or indirectly, by the Federal
Government”.
(PC Ordinance 2000)

5. a. To enhance the role of private sector
b. To curtail losses of State Owned Enterprises (SoEs) and
transform them into profitable enterprises with the help of the
private sector
c. To improve efficiency & performance of SoEs
d. To produce & offer better quality products & services at
affordable prices
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6.  Established as a body corporate by the promulgation of
Privatisation Commission Ordinance 2000 by the
President of Pakistan
 The Commission is governed and administered by a nine
(09) member Board with Minister for Privatisation as
Chairman
 The Board is independent, autonomous and is dominated
by the members from Private Sector
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7.  Recommending privatisation policy guidelines to the
Cabinet;
 Preparing comprehensive privatisation programme;
 Planning, managing, implementing and controlling the
privatisation programme approved by the Cabinet;
 Taking operational decisions on matters pertaining to
privatisation, restructuring, deregulation and regulatory
issues.
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8.  Proposing regulatory framework, including the
establishment and strengthening of regulatory
authorities;
 Advising the Federal Government in selection and
appointment of the head and members of a regulatory
authority;
 Advising measures to the Federal Government for
improvement of public sector units till their
privatisation;
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9.  Assisting in the implementation of Federal Government
policies on deregulation and privatization and advise
the Federal Government on deregulation of the
economy;
 Performing any other function that is incidental or
ancillary to carry out the privatisation programme
approved by the Cabinet.
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10.  Outright sale of assets and business through open auction
 Partial sale of shares through public auction or tender
 Public offering of shares through a stock exchange
 Management or employee buyouts
 Award of long term leases
 Management or concession contracts
 Global Depositary Receipts (GDRs): Euro Bonds etc
 Exchangeable / Convertible bonds: Taking loans from international funds
against collateral of shares
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11. 11
 Approval of Council of Common Interest (CCI).
 Cabinet Committee on Privatisation (CCoP) decision to privatise an
entity
 Hiring of a Financial Advisor (FA) or Valuer
 Due diligence by FA and Privatisation Commission
 Finalization of transaction structure

12.  Restructuring and regulatory reforms, if needed
 Invitation of Expressions of Interest (EOI)
 Submission of statement of qualifications
 Prequalification of firms
 Due diligence by potential buyers
 Sharing of Bid Documents/Instructions with pre-qualified
bidders
 Pre-bid conference
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13. 13
 Approval of valuation (reference price) by CCOP
 Bidding process (media invited to observe bidding)
 Approval of bidding results by PC Board and CCOP
 Issuance of Letter of Intent to successful bidder
 Finalization of sale agreement between PC and Buyer
 Handing over of the entity

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Privatisation in Pakistan

15. 1960s First Generation Privatisation
Objective Create / Strengthen Private Sector
Strategy Build factories and Sell them
1990s Second Generation Privatisation
Objective Reduce Government Losses
Strategy Disinvest, Deregulate
2000s Third Generation Privatisation
Objective Improve Efficiency & Profitability
Strategy Seek Strategic Investors
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16.  Most successful privatisation program in South Asia,
Central Asia and the Middle East
 Over $ 9 billion proceeds (Rs. 476,421 million)
 167 fairly transparent transactions
 100% state owned enterprises in the chemical, textile,
nitrogen fertilizer, cement, rice, roti and light engineering
while 98% automobile industry, 96% ghee mills and
100% units of Phosphate fertilizer have been privatised
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17.  Banking industry privatised substantially due to which
80% of the banking sector is under private ownership.
 Convenient availability of better goods and services at
affordable prices to the general public
 Increased tax revenue to the state exchequer in the form
of corporate taxes
 Dividend yields to the public as well as the state which
still holds substantial share holding in these entities
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18.  Emergence of robust private sector
 Induced investment and transfer of technology
 Improved management/productivity by introduction of
international best practices
 Fiscal space for social sectors and infrastructure
development resulting in employment generation and
poverty reduction
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19. Sector No of transactions Proceeds/Billion Rs.
Banking 7 41.02
Capital markets 22 133.12
Energy 14 51.76
Telecoms 4 187.36
Automobiles 7 1.10
Cements 17 16.18
Chemical/fertilizer 23 41.92
Engineering 7 0.18
Ghee mills 24 0.84
Rice and roti plants 23 0.32
Textiles 4 0.37
Newspapers 5 0.27
Tourism 4 1.81
Others 6 0.16
Total 167 476.42
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20. 20
 Coming into power of a private sector friendly regime
 IMF conditionality in case of bailout
 Broad spectrum consensus on need and benefit of privatisation/
deregulation
 Robust private sector to take on big SOEs
 Comprehensive legal framework available
 Experience of 2 decades of successful privatisation
 Support of international organizations
 Strong judiciary, civil society, and media to ensure transparency

21.  Domestic and International financial crisis
 Huge losses of SOEs-how to attract investors
 Share values of many likely transactions at all time low
 Managing public interest in industries with social
repercussions such as power, transportation etc
 Repercussions of 18th
Amendment-seeking of provincial
concurrence in each transaction
 Regulatory dispute resolution framework needs further
improvement
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23.  Strong elite commitment for privaisation at the political and
bureaucratic level in the form of policy formulation
 Translation of this commitment into vision and mission-what ,why,
how and when to privatise i.e. loss reduction and efficiency
improvement as basic objectives of privatisation
 Scientific structuring of the privatisation deals by looking at the
cash-flow statements rather than assets of the concern to be
privatise
 Strategic sale and PPP with management control should be
the main course of action while safeguarding the interest of
employees and the consumers.
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24.  Awareness campaign to inform the public about the entity to
be privatised-why we are doing it
 Sale of certain percentage of shares to the general public to
create ownership
 Corporatisation of the components of the large entities to
generate maximum competition
 Transparency to be the cornerstone of the privatisation
process by strengthening the regulatory framework.

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25. Financial Institution
 Banks
 Insurance
Energy
 Electricity Distribution Companies (DISCOs)
 Electricity Generation Companies (GENCOs)
 Oil & Gas Development Company (OGDCL)
 Pakistan Petroleum Limited (PPL)
 Pakistan State Oil (PSO)
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26. Infrastructure
 Pakistan Railways
 Port Qasim Authority (PQA)
 Karachi Port Trust (KPT)
 Pakistan Steel Mills (PSMC)
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27. Sr. No. Transaction
1 Oil & Gas Development Company Limited
2 Pakistan Petroleum Limited
3 Heavy Electrical Complex
4 National Power Construction Company
5 Peshawar Electric Supply Company (PESCO)
6 Quetta Electric Supply Company (QESCO)
7 Hyderabad Electric Supply Company (HESCO)
8 National Power Construction Corporation (NPCC)
9 Faisalabad Electric supply Company (FESCO)
10 Jamshoro Power Company Limited (JPCL)
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Pakistan Mineral Development Corporation
(PMDC) 27

28. Thanks
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