The concession by Shehryar Chishty of control of Karachi Electric to Prince Mansoor bin Muhammad bin Saad Al-Saud has probably settled the tortured history of the privatization of the country’s only vertically integrated utility, but has thrown up new questions about the way the Special Investment Facilitation Council is being operated. The latest development in the K-Electric saga was dissected by this newspaper’s sister publication, Profit, and it comes at an interesting time. It has happened just months before the government tries to privatize three DISCOs, so it sends a clear signal that any privatizations made will stick. Though the botched privatization of PIA last year sent an opposite signal, and while the government’s renegotiation of terms with Independent Power Producers spoiled the atmosphere for foreign investment, the current development should improve it. More important, K-Electric will gain the corporate governance that it has been lacking as Mr Chishti and Prince Mansoor battled for control. The problem was because the Prince was the minority shareholder in the company which had bought Abraaj Group’s stake in K-Electric. The Abraaj Group had sold to Chishty because its chief, Arif Naqvi, had gone bust and was arrested.
Shanghai Electric had also gotten involved, agreeing to buy from Naqvi when he had gone bust, and occasionally insisting on the performance of the agreement. When Shanghai Electric finally admitted defeat and declared it was withdrawing its application to buy, the decks were cleared for Chishty to sell his share to the minority shareholder. The first entity to benefit will be K-Electric itself, which will now get some much-needed direction.
However, one of the issues arising from the present deal shows the SIFC as playing an important role in achieving what amounts to an out-of-court settlement. The SIFC is given so much importance by business enterprises because of its military membership. Its previous forays have been also been mining, and it seems to have established a niche as a fixer for Middle Eastern businessmen. There is no harm in that, but it leaves other foreign investors vulnerable to the bureaucracy. It would be more helpful to foreign investors if the bureaucracy was fixed, which would provide a more lasting path than a one-window operation. It is essential to show the world that Middle Eastern investors do not have an inside track.
