The PML-N government has given final touches to the mode of divestment of public sector entities and assets identified for the first phase of privatisation.

Documents from the privatisation commission reveal that the government has updated the list of upcoming transactions with management control, along with the 32 assets and state enterprises that are to be sold off.

The list approved by the cabinet’s committee on privatisation includes 10 enterprises whose shares will be offloaded in either the domestic or international capital market.

The government will preferably sell its shares in the Oil and Gas Development Company (85 per cent government share) in the international capital market. Shares in Pakistan Petroleum Limited (78 per cent government stake) will be offloaded both in the international and domestic markets.

Shares in Mari Petroleum (20 per cent government stake) will be sold through a secondary public offering (SPO) or offered as block sale to joint venture partners. Similarly, 100 per cent state-owned Holdings Private Limited will either be listed on the stock market or the working interests in its specific blocks will be sold off.

Pak-Arab Refinery Company’s shares (60 per cent owned by the government) will be offered in the stock market, subject to the consent of the joint venture partner.

In the oil and gas sector, it was decided to segregate business segments. The suitable business segment of Pakistan State Oil (25 per cent government stake) will then be divested.

Similarly, in the case of Sui Northern Gas Pipelines and Sui Southern Gas Company, the government will first segregate various operations of these companies and then offer some of them for privatisation, where possible.

Shares in Habib Bank Limited (42 per cent government share), United Bank Limited (20 per cent government share) and Allied Bank Limited (10 per cent government share) will be offloaded in the stock market through secondary public offerings.

In the case of the National Bank of Pakistan (76 per cent shareholding), the government will preferably reduce its share with management control, or offer the bank as a block sale to qualified investors. But there may be strong resistance, because the bank also managed to post profits in the past few years despite the huge manpower inducted into it by the previous government.

State Life Insurance Corporation (100 per cent state-owned) will be listed on the stock market, while shares in the National Insurance Company Limited (100 per cent state unit) will be divested along with management control. Government shareholding (51 per cent) in the Pakistan Reinsurance Company will be reduced, and its management control will also be given away.

Heavy Electrical Complex (100 per cent state-owned) and the National Investment Trust (also 100 per cent state-owned) will be privatised as well, while Small and Medium Enterprise Bank (94 per cent government share) will either be privatised or offered for merger with a second or third-tier bank.

In the power sector, the enterprises to be privatised through bidding with management controls include the Islamabad Electric Supply Company, Faisalabad Electric Supply Company, Hyderabad Electric Supply Company, Jamshoro Power Generation Company, Northern Power Generation Company, Lakhra Power Generation Company and National Power Construction Company.

However, in case of Kot Addu Power Company (46 per cent government share), further shares will be offloaded in both domestic and international capital markets.

Interestingly, the list does not include loss-making power supply companies of Peshawar, tribal areas and Gujranwala etc. Meanwhile, the Islamabad Electric Supply Company, which has been rated as one of the most efficient companies in the power sector, has still been placed on the list of state entities to be privatised.

The government has decided to reduce its shareholding in the Pakistan Steel Mills and approved giving it under the control of the private sector. In the case of the Pakistan International Airlines, restructuring of the carrier will be carried out before 26 per cent of its stakes are sold off to a strategic partner, along with management control.

In the case of the Pakistan Engineering Company, the government’s liabilities will initially be retired. This will be followed by the transfer of management to the private sector. The Pakistan National Shipping Corporation will be offered for privatisation with management control as well.

In the real estate sector, the government has approved the sale of Roosevelt Hotel New York, Scribe Hotel Paris and the Islamabad Convention Centre. In the case of the convention centre, which is at a very prime location, some business tycoons are reported to be interested in building a multi-story hotel.

However, the government needs to consider five factors in the current phase of privatisation. It should not be motivated by fiscal considerations, but a carefully conceived industrial policy. The privatisation policy needs to be designed to spur industrialisation.

The new policy should also be free from the influence of powerful business tycoons, who were major beneficiaries of previous privatisation programmes. Privatisation should be transparent and not result in rent-seeking. Nor should it lead to distress sales.

The government should award the management contracts for the operation of state enterprises for specific time periods and under well-defined performance criteria.

Lastly, the privatisation policy should ensure that fresh investment is not fully diverted to the buying of state-owned enterprises, and is used to do away with imbalances in the industrial economy and the building of physical infrastructure.