Pakistani billionaire Mian Mohammad Mansha said the government elected next month will have to apply austerity measures to secure an international bailout and sell state-run companies to rescue the economy from ruin.
Mansha, 66, whose Nishat Group spans finance, textiles and cement-making, said in an interview at his home in the eastern city of Lahore that rival politicians will need to unite following May 11 voting to address the country’s economic crisis.
“After the elections, it will be very, very tough for people,” Mansha, who oversees MCB Bank Ltd. (MCB), the nation’s largest lender by market value, and is one of the country’s richest men, said April 25. “You will have to go through a severe International Monetary Fund program with severe restructuring.”
The government that emerges once ballots are counted will face a set of daunting challenges as power blackouts lasting 18 hours a day curb growth and the budget deficit touches a two- decade high. Security is also worsening with a Taliban insurgency raging on the Afghan border and extremist groups targeting religious minorities.
“An IMF bailout will involve power sector reform and taxation reform which would mean higher electricity tariffs and measures to increase the tax base,” said Naveed Vakil, director of research at AKD Securities Ltd. in Karachi.
State-owned companies -- especially power generation and transmission firms -- are “bleeding” cash and will need private managers to turn them around, Mansha said. The government took over 391 billion rupees ($3.97 billion) of debt from the books of public sector enterprises in the year ended June 30, according to the State Bank of Pakistan.
“They have got so bad now that we need a Maggie Thatcher type of solution,” Mansha said, referring to the 1980s push to sell-off loss-making government companies led by the late British prime minister. “We need to privatize some of these companies.”
Pakistan International Airlines Corp. (PIAA), said April 26, its net loss widened to 32.4 billion rupees in the year ended Dec. 31. Pakistan Railways recorded an operating loss of 30.4 billion rupees in the year ended June 30.
Caretaker Prime Minister Mir Hazar Khan Khoso formed a committee on April 12 to prepare a plan for the revival of Pakistan Steel Mills Ltd., which has received four bailout packages by the government, state-run Associated Press of Pakistan reported.
Battling for Votes
Creating a viable coalition with a strong majority in parliament will be important to put an economic reform plan in place, Mansha said.
A March survey by opinion pollster Gallup pointed to defeat for President Asif Ali Zardari’s Pakistan Peoples Party whose coalition last month became the first civilian administration to complete a full five-year term. The parties of Zardari’s chief rival, former Premier Nawaz Sharif, and ex-cricket superstar Imran Khan are battling for votes nationwide.
In a campaign interview with Bloomberg April 23 in Punjab province, Khan was adamant he wouldn’t join an alliance, predicting his party would upset pundits and win the election. Working with partners responsible for what Khan called Pakistan’s history of corrupt, feudal rule would stall initiatives to clean up politics, he said.
Mansha, dressed in a lounge suit and tie, said that whichever party is sworn in will have to move fast. “A lot of subsidies must be eliminated,” he said. The country couldn’t afford to continue selling fuels and electricity at prices way below market rates.
“We need to go out and fix it now. We can’t wait anymore. That message is clear to the people of Pakistan now.”
The government spent 556.2 billion rupees on subsidies in the year ended June 12, more than treble the budgeted allocation of 166.4 billion rupees, according to the central bank.
Asked about likely domestic appetite for investing in companies put up for sale, Mansha dismissed any concerns. “If you privatize something in Waziristan, I will get you an investor,” he said, making his point by picking out a remote mountainous region of the country where Taliban guerrillas battle Pakistani troops.
Foreign direct investment in Pakistan rose 4 percent to $622 million in the nine months ended March 30, according to the central bank.
At the heart of Pakistan’s economic woes lies the power crisis, which has shuttered factories, sparked street protests and forces companies to invest in private generation.
Utilities, besieged by unpaid bills and price controls, have delayed payments to fuel suppliers, which in turn owe oil refiners. The dues are known as circular debt--amounting to 450 billion rupees according to Global Securities Ltd. in Karachi-- and have crippled power supplies.
Mansha is expanding Nishat Group interests, with construction started on what he says will be the country’s biggest shopping mall a short distance from his home in the Lahore suburb of Gulberg. As Pakistan battles its worst economic crisis in a decade amid extremist-inspired violence, he said designers interested in collaborating in his textiles business have stayed away. Still, he plans to increase his network of textile stores to 200 from 60 given Pakistan’s “consumer class which is much bigger than most people imagined.”
Mansha praised Sharif’s Pakistan Muslim League-Nawaz for its governance of Punjab over the last five years. “There has been a huge investment in infrastructure,” the industrialist said. “Lahore looks like a different city.”
New flyovers and construction projects dot Pakistan’s cultural capital, a half-hour car journey from the country’s border with nuclear-armed rival India. A dedicated bus lane was built in just 11 months.
With a young population, a rich seam of entrepreneurs and the prospect of greater trade ties with India, Mansha said he remained confident of Pakistan’s future.
“This country’s problems are very fixable providing we have the politicians with the will to do it,” he said.
To contact the editor responsible for this story: Peter Hirschberg at email@example.com