Pakistan’s government is bracing for criticism when it sells a planned record amount of state assets as Mian Mohammad Mansha, a tycoon linked by the opposition to the ruling party, warns he may be a bidder.
Mansha, 66, hails from Prime Minister Nawaz Sharif’s home province, expanded his Nishat Group through state asset purchases during Sharif’s first term in office, and opposition party leader Bilawal Bhutto Zardari has repeatedly claimed he has benefited from government policies. Ensuring a transparent asset-sale process is crucial to overcoming criticism, said Mohammad Zubair, Pakistan’s privatization chief.
“Both ways there will be criticism,” Zubair said in an interview in his Islamabad office on Feb. 7. “If Mr. Mansha is there and he’s the highest bidder and he gets it, they say ‘There you go.’ If he’s not there, they say ‘It’s one of the smartest things they’ve done: keep him out for the first time and then every other time he’ll be in.’”
Successful auctions would help shore up the nation’s finances and help Sharif meet conditions for an International Monetary Fund loan to avert a currency crisis. He is counting on the sales to raise $1.5 billion by June and stem losses costing taxpayers about $5 billion a year.
“The country cannot afford anymore having these rotten public sector institutions, which are bleeding and have become a burden on the national exchequer,” said Ashfaque Hasan Khan, an Islamabad-based former Finance Ministry adviser. “However, the process has to be very transparent and non-controversial. If even one transaction becomes controversial, the entire privatization process will be just finished.”
Zardari, who heads the opposition Pakistan Peoples Party, has criticized Sharif’s economic policies in speeches and Twitter postings, saying they are “of Mansha, for Mansha and by Mansha.” Zardari’s grandfather, Zulfikar Ali Bhutto, had nationalized MCB Bank in the 1970s along with a slew of other companies.
“Mansha has become the trademark of bad privatization,” Saeed Ghani, a senator with the PPP, said by phone from Islamabad, adding that the party would oppose the sales in parliament. “Whether its Mansha or they give to anybody else, we will protest.”
Mansha defended his company, which boosted MCB Bank Ltd.’s deposits 15-fold and turned it into the nation’s biggest bank by market value since acquiring it in 1991, and called the criticisms “ridiculous.” He said “it is quite possible that we bid for couple of things, definitely,” speaking in a Feb. 12 telephone interview when asked about his plans to bid for more state enterprises.
Mansha said the company is responsible to its shareholders for enhancing value. MCB Bank’s shares, up 40 percent over the past year, fell 0.3 percent as of 11:10 a.m. in Karachi.
“I am not going to be cowed down with this,” Mansha said. “If there is any criticism, they should raise all the objections at the time of the bidding, if they think we are getting a sweet deal.”
The government will sell stakes in three companies -- Oil & Gas Development Co., Pakistan Petroleum Ltd. and an unidentified bank -- before the end of the financial year in June, Zubair said. The OGDC stake will be sold on the London Stock Exchange, with the other two offered domestically. The shares of OGDC, Pakistan’s biggest energy explorer, should fetch $1 billion, he added, with the others fetching $500 million in total.
The government will also start the process to sell shares in two more banks, four power-sector companies and two industrial firms by year’s end, Zubair said. He said he’s assessing how much revenue the government would earn, adding that the goal is to “prevent further hemorrhaging” in companies that are losing 500 billion rupees ($4.8 billion) a year -- about a quarter of total government income.
Past efforts to privatize Pakistan’s banking system laid the foundation for lenders to become profitable, and similar gains are possible for Pakistan International Airlines and Pakistan Steel Mills, according to Agost Benard, a Singapore-based credit analyst at Standard & Poor’s. Opponents want to gain support with unions and employees of state-run firms, he said.
“The bottom-line is it will be good for the economy,” Benard said by phone. “It will be good for Pakistan’s fiscal position, which is one of the biggest rating constraints, and it would be good for the customers of those companies as well.”
‘No. 1 Businessman’
The government plans to separate the core business of PIA, the national carrier, while placing activities such as ground-handling and kitchen business into a holding company for a future sale. It will sell a minimum of 26 percent of the PIA’s core business, Zubair said.
Sharif needs funds from asset-sale to shore up reserves in the $225 billion economy, which has been hindered by energy shortages and a Taliban insurgency. The IMF said Feb. 9 the government “remains broadly on track” to meeting targets set for a $6.7 billion loan that is now being disbursed in tranches.
Corruption allegations have previously caused governments in Pakistan to fall. Sharif’s first government was dismissed in 1993 on charges of corruption and nepotism, while slain Premier Benazir Bhutto was twice removed from power on similar allegations. Her widower and former president Asif Ali Zardari is still facing court cases over her time in office.
Zubair, while acknowledging concerns over past privatizations, called Mansha “Pakistan’s No. 1 businessman by far” and vowed the process would be transparent. He has invited critics of the process to sit on committees that will scrutinize bids to ensure they are satisfied with the outcome.
“It cannot be that the foreign investors are being encouraged while you actually discourage the domestic investors,” Zubair said, adding that he’d lose his “strongest argument” for overseas institutions to put money in Pakistan if leading local businesspeople are sidelined. “That’s not fair.”