EDITORIAL: The International Monetary Fund’s (IMF’s) first staff-level report uploaded on its website this Saturday projected zero revenue from privatisation from 2019-20 till 2030 (projections did not go beyond 2030) while it underscored the government’s commitment to prioritising privatisation of commercial profitable state-owned entities (SOEs) supported by completion of the SoE privatisation classification.
The privatisation classification remains incomplete, defined as distinguishing between those SOEs that are to be defined as strategic and essential (not earmarked for privatisation) and those that are not. A year ago, May 2024, the Ishaq Dar-led Cabinet Committee on Privatisation (CCoP) recommended 40 SOEs be categorised as strategic and essential, considered 84 SOEs for privatisation in light of the SOE Act and Policy, and sought the reason why 18 were not included in the privatisation programme.
The CCoP further directed that the 40 categorised as Strategic and Essential be placed before the relevant ministry for confirmation of their categorisation. Once this process is complete the relevant ministry was tasked to take up the matter with the Cabinet Committee on State-Owned Enterprises (CCoSOE), chaired by the Minister for Finance, which would then revert back to CCoP which then would finalise the privatisation programme.
A report on the Ministry of Information website indicates that the CCoSOE met on 11 February 2025, there is no previous record of a meeting, under the chairmanship of Muhammad Aurangzeb and directed relevant authorities to expedite the privatisation process for loss-making entities to improve financial sustainability; and signed a financial Advisory Services Agreement with a consortium led by M/S Alvarez and Marsal Middle East for privatisation of three distribution companies; notably, Faisalabad, Gujranwala, and Islamabad Electric Supply Corporations.
Additionally, the meeting considered the implementation of the Cabinet decision on categorisation of four Railway companies (including Railways Freight Transmission Company) and submission of their business plans and transition plans.
While the pace of work within ministerial/bureaucratic context is traditionally very slow, yet this delay is a source of serious concern, given that administration after administration has pledged that privatisation proceeds would be used to retire government debt and instead nearly a trillion rupees has to be budgeted each year, at the taxpayers’ expense, to meet the liquidity needs of the SOEs.
There are also concerns at the capacity of the Privatisation Commission (PC) to undertake this task. Last year, the attempt at the sell-off of Pakistan International Airlines (PIA) was a source of great embarrassment for all those concerned, with the then Chairman, Aleem Khan, placing the blame on his predecessor, the interim Minister for Privatisation Fawad Hassan Fawad.
Recent reports suggest that the PC has recommended to the CCoP the transaction structure for PIA privatisation with transfer and acquisition of equity set out in bid documents to be finalised during the bidding process.
The proposal was to proceed forward with bidding in October this year, but the Prime Minister has brought it forward to June. This information was no doubt shared with the Fund, which prompted it to note significant progress on several strategic transactions, particularly PIA; however, not enough for the Fund to indicate any privatisation inflows.
Delays due to ministers wearing multiple hats maybe one reason for the delay as is the lack of experience and qualifications for the challenging job at hand; however, in all fairness, it must also be borne in mind that Pakistan has yet to emerge as an investment-friendly country and with the rating agencies never placing us in the lowest investment grade category, luring investors to engage in the privatisation process is a formidable challenge.
Copyright Business Recorder, 2025
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