The overall experience of the government with privatization has been varied. From the time that privatization started off as an attempt to retire the country’s debts, the impulse to sell off the family silver reflected the reality that the books could not be balanced unless the family silver was placed under the auctioneer’s hammer. The PIA privatization marked a change, for essentially one of the best assets the government has ever had was sold off for peanuts, with only a risible Rs 100 billion coming to the government, and the remaining Rs 175 billion of the total Rs 185 billion final bid to be paid by investing in PIA. Essentially, that investment should have been made by the government, but it did not; instead it got the successful consortium to pay for the privilege of making that investment. Something of that spirit is visible in the deal with the UAE announced by Deputy Prime Minister and Foreign Minister Ishaq Dar, in which it will take up a share in Fauji Fertilizer in exchange for $1 billion of its deposit in the State Bank. The remaining $2 billion will be rolled over when the entire amount falls due in January.
From one point of view, the PIA sale was straightforward, as it owned the company.
However, how it managed to swap for Fauji Fertilizer is not yet clear, but instead of putting up money up front, it put up a company owned by a foundation controlled by an organization of the Defence Ministry. If foundation property is thus to go up to pay off the country’s forex needs, there are breakfast cereals and a bank next on the cards. There is every sign of panic selling. The cancellation of the sale of two of three electricity distribution companies is also indicative of difficulties. It seems as if the government has assumed that the sale of PIA is enough of a sop to the IMF to allow it to avoid the sale of three DISCOs. Instead of selling them outright, it proposes giving them on concession. That may not work well, for such ‘farms’ applied to taxes have ultimately not worked. Pakistan has still not solved its central problem, that of exporting as much as, or more than, it imports. Previously, it borrowed, but now it is saddled with insurmountable debt. The sale of the family silver is no guarantee the need will go away. Take the example of PTCL, which was sold to the UAE’s Etisalat. There may still be payment issues, b ut what happened to the money received?
