LAHORE
Dismal capacity and lack of experience with Privatisation Commission, besides overambitious agenda of privatisation for opening up fiscal space to expand social spending, kept on derailing strategy implementation required by the government since it took over in 2013, donors’ documents available with Pakistan Today revealed.
The donors identical in showing their serious concerns on Privatisation Commission’s capacity constraints perceive that all their efforts exceeded the Privatisation Commission’s absorptive capacity, and considerable support was, therefore, less effective than it might have been otherwise.
The donors, including the United States Agency for International Development (USAID), World Bank (WB), Asian Development Bank (ADB), International Development Association (IDA), IFC and Department for International Development (DFID), made significant technical assistance and advisory support available to the commission. However, they are of the view that capacity challenges contributed to delays in the privatisation process, underlying to the intensification of public opposition to the privatisation program.
Moreover, the ambitious targets for privatisation transactions meant that the commission’s management was not able to give adequate attention to training and capacity building. ‘The focus on transactions was not surprising, given that privatisation transactions figured prominently in the conditionality of the IMF, World Bank and Asian Development Bank,’ all the donors’ mention.
World Bank went further with the views, “Ambition of privatisation objectives could have been better calibrated to the capacity of Privatisation Commission.”
The government, after taking over in 2013, identified 31 priority projects to be privatised in a “phased manner.” Privatisation was intended to reduce the fiscal costs to the government in the manner of opening up fiscal space to expand social spending. However, it could only complete one SOE strategic sale and three capital market SOE equity transactions. At least five entities came to strategic equity sale by June 2016 – UBL 19.6 per cent in June-2014; PPL 5 per cent June-2014; ABL 11.5 per cent in December-2014; and HBL 42.5 per cent in April-2015.
The donors are of the view that, to the extent to which a key constraint to privatisation was political rather than technical, suggests that future efforts need to emphasise communication engagement, rather than more analysis or technical capability.
Ideally, they mention, the ambition of the GOP’s privatisation agenda should have been better calibrated to implementation capacity and the ability to achieve sector reform preconditions. An overambitious agenda set the GOP up for failure and may have undermined support for privatisation over the longer term.
Citing an interesting incidence, the WB added that the HEC privatisation could not be completed because the check provided by the buyer was not honoured. “But the documentation submitted to their board for approval said that the HEC privatisation had been completed, as informed by the government.”
In the face of government enthusiasm for an aggressive privatisation agenda, combined with limited administrative capacity, rather than focusing on the number of privatisation transactions, they should take a more holistic approach, with strategic selection of privatisation taken in the context of sector-wide reforms, the donors remarked.
Privatisation Commission’s biggest problem is the credibility it commands within the investment banking community in Pakistan. All international capital markets transactions seem to be designed in a way to favor their favorite advisor, i.e. Credit Suisse and Arif Habib. Further, in all capital market based deals Elixir Securities seems to come into the favorable books. Hence advisors tend to shy away from the process. To add to this, Privatisation Commission has bad track record in making payments to the advisors. They either do not pay at all or pay only a partial payment when the delays are not at the hands of the advisors but from PC or the SOEs, which are under the adminstrative control of the PC. To make matters worst, there is extreme lack of experience at PC and not a single investment banker is working there. However can simple MBA freshers take on the responsibility.
Privatization and the privatization commission is another sad story in the Pakistan perspective, that what they earn through privatization process is spent of keeping such a large white elephant like many others in the GOP. There is a large bazillion of bureaucrats / technocrats and their support staff, going some routine office work. When comes evaluation / appraisal of some project for privatization, they engage consultants on hefty consultancy fees. In the light of their performance in the last decade, it is advisable to disband this institution and keep only some desk in the Ministry of Finance. The financing / borrowing they get from IMF /WB in this context is of little use and just burden on economy of Pakistan.