ISLAMABAD Feb 3 Mohammad Zubair was on a cruise
dinner with Pakistani Prime Minister Nawaz Sharif in Thailand
when he was offered the hardest job of his life: privatising a
huge chunk of the economy while fighting resistance from the
opposition and trade unions.
When the prime minister left the table, a colleague of
former IBM executive Zubair rushed to his side.
"Are you mad? Three privatisation ministers have gone to
jail and most have corruption cases hanging over their heads,"
he said. "Don't take this job."
But Pakistan's new privatisation tsar is determined to find
buyers for 68 public companies, most of them loss-making,
including two gas companies, an oil company, about 10 banks, the
national airline and power distribution companies - all within
the next two years.
The government sees the sell-offs as a life saver for
Pakistan's $225 billion economy crippled by power shortages,
corruption and militant violence. Successful privatisation is
Sharif's top political and economic goal.
"We lose 500 billion rupees ($5 billion) annually because of
failing enterprises," Zubair told Reuters. "Every day a file
lands on a bureaucrat's desk and he has to take a decision he
isn't qualified to. This can't go on, no matter what."
Pakistan can raise up to $5 billion in privatisation revenue
in the next two years to ease pressure on strained public
finance, Zubair said.
Last September, the International Monetary Fund saved
Pakistan from a possible default by agreeing to lend it $6.7
billion over three years. In return, Pakistan must make good on
a longstanding promise to privatise loss-making state companies.
Privatisation officials, requesting anonymity, said several
foreign investors, including the World Bank's private-sector
arm, the International Finance Corporation, and the U.S. mutual
fund Fidelity Investments have shown interest in the companies.
But for Zubair, a former IBM chief financial officer for the
Middle East and Africa, the real challenge is overcoming
resistance from thousands of workers who will have to be laid
off and opposition parties who are against the plan.
Once a source of pride, Pakistan International Airlines
is struggling to stay aloft, having accumulated losses
of more than 250 billion rupees. A quarter of its 40 aircraft
are grounded. Flights are regularly cancelled and engineers say
they have to cannibalise some planes to keep others flying.
Unions strongly oppose the privatisation. The IMF wants the
airline partially privatised by December.
Another asset is Pakistan Steel Mills, which has accumulated
losses of more than 100 billion rupees. Overstaffed by at least
three times, employees haven't been paid since October.
"I should not use this word but what has happened is the
complete rape of this institution," said Zubair.
An attempt to privatise the mill in 2006 was blocked by the
then chief justice. Foreign investment dwindled as deals got
caught up in court. Now, under a new Supreme Court chief,
officials say the prospects of reform have improved.
"NO MAGIC WAND"
Under IMF conditions, financial advisers must be hired to
evaluate the assets and examine accounts by June.
Zubair's daily work includes visits to opposition lawmakers,
parliamentary committees and unions to convince them of his
plan. But he has few takers.
"The answer to our current economic malaise lies not in
hawking of state-owned institutions but in restructuring these
industries," Bilawal Bhutto, chief of the former ruling Pakistan
People's Party, wrote in a commentary.
Asad Umar, an opposition lawmaker and former chief executive
of one of Pakistan's largest conglomerates, said privatisation
was being pursued on an unrealistic time frame and the criteria
for identifying entities was inconsistent.
For Umar, it makes no sense that on the list with a bleeding
airline are Oil and Gas Development Co. Ltd and Pakistan
Petroleum Ltd, which made profits of 91 billion and 42
billion rupees respectively in 2013, and have zero debt.
Not all sell-offs are expected to go smoothly.
A nine-year dispute between the government and Etisalat, the
United Arab Emirates' largest telecoms firm, over payments from
the privatisation of Pakistan Telecommunication Company Ltd, is
seen as a discouragement for investors.
But Zubair says no plan is without risk.
"There is no magic wand to ensure that all these ventures
will be successful," he said. "But the bottom line is that I'm
not going to hold off privatisation for anyone."
(Editing by Maria Golovnina and Robert Birsel)