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Brief History of privatisation in Pakistan
It was in 1978 that General Ziaul Haq introduced the privatisation
process in Pakistan. Now that another military ruler, General
Musharraf, is holding the fort, the process has gained momentum.
Many financial writers want us to believe that the process of
privatisation was initiated in 1991 and not in 1978. The
Privatisation Commission website also misinforms the public that
privatisation began from Jan 22, 1991 in the country.
In 1978, General Ziaul Haq handed over Ittefaq Foundry to the Sharifs
of Lahore without inviting any bids. In fact, two other nationalised
units, Nowshera Engineering in the NWFP and Hilal Ghee in Multan,
were handed over to their original owners. Subsequently, a Transfer
of Managed Establishments Order 1978 was enacted as a law to provide
legal cover for this imperial gesture of kindness.
Steely resolve?
In January 2004, the chief executive of the Saudi group Al-Tuwairiqi,
Tariq Barlas, came to Karachi to announce a $100million steel billet
project for Pakistan in which Pakistan Steel Mill would also have a
10 per cent equity share in the form of land.
"The plant will export billets worth $250 million annually to Saudi
Arab, the UAE, Kuwait, Muscat and some other countries of the Gulf,"
reported a national newspaper in Karachi while quoting the chief
executive in January 2004. The plan, according to the chief
executive, was to manufacture one million tons of billets in the
first year and then expand it to more than five million tons annually
in the next five years.
The Al-Tuwairiqi group, according to Mr Barlas, would have 55 per
cent equity in the project, Pak-Kuwait 15 per cent, while 20 per cent
would be raised from the public, and Pakistan Steel would have a 10
per cent share in the form of land.
In one year or so, some time in the year 2005, the group was given
the choicest plot of 220 acres located between the sea and water
intake channel and the sea water disposal channel belonging to the
Pakistan Steel Mill. A 10 per cent shareholding in the $100million
project is $10million or Rs600 million. It means that Pakistan
Steel’s 220 acres of prime land has been given to Al-Tuwairiqi at
Rs600 million or at Rs2.73 million per acre whereas the minimum
market price is Rs10 million for an acre. The official price for
developed land is Rs3 million an acre.
The Central Board of Revenue did not take much time to declare the
220-acre plot `the Al-Tuwairiqi Export Zone’. All import of inputs
and machinery for the project would be exempt from taxes. In January
2006, a government SRO gave a special status to the project on the
220-acre plot of Pakistan Steel already declared the Export Zone.
This project will have the permission to market the 100 per cent
products in the tariff area of Pakistan. The 97 projects in the
Export Processing Zone under an SRO can market only 20 per cent of
their products in the tariff area of Pakistan while 80 per cent has
to be exported.
On March 30, 2006, President Musharraf laid the foundation stone of
The Al-Tuwairiqi Steel Mills. No reference was made of Pakistan Steel
as a partner in the project. On March 31, the bidding for auction of
75 per cent shares of Pakistan Steel was held and Al-Tuwairiqi’s bid
at Rs16.80 per share was accepted. The group was asked to pay Rs21.68
billion for 75 per cent shares.
Was the process transparent? It is a question that was answered by
the sequence of events since the arrival of the Al Tuwairiqi
executive in Karachi in January 2004 and the developments took place
thereafter. The acting privatisation minister did not waste time or
money on convening the meeting of the Cabinet Committee on
Privatisation (CCoP) headed by the prime minister and instantly
issued a letter of acceptance. Acting Privatisation Minister Awais
Leghari explained on a TV channel the reasons for issuing a letter of
acceptance without the approval of the CCoP. He said the meeting of
the CCoP cost money for air fare and hotel accommodation. It took
some time for all the members to get together. The next day, the
statement was changed. The CCoP was said to have given prior approval
to the acting minister to issue a letter of approval. "But all
members of the CCoP are residents of Islamabad and after all the CCoP
has been holding meetings to approve transactions in the past," a
bewildered observer remarked and wanted to know why not in case of
Pakistan Steel.
The successful bidder paid 25 per cent of the money on April 21 and
an agreement for the purchase of 75 per cent shares of Pakistan Steel
was signed on April 24. In all likelihood, the successful bidder
would be given physical charge of the Pakistan Steel Mill by May 29
next.
On May 29, the successful bidder will take control of Pakistan Steel
spread over an area of 4,500 acres that has the infrastructure to
sustain more than three million tons of steel products in a year.
Market observers say that the upcoming Al-Tuwairiqi project will
fully benefit from the infrastructure of Steel Mills.
It wouldn’t be a surprise if in the next one or two years the entire
project - the new as well as the privatised one - will be declared
the export zone. - S.G.
Politics and economics
Privatisation in Pakistan was initiated by General Ziaul Haq for
obvious reasons. But it is these days going on with religious zeal
because of the Musharraf-Shaukat regime. It is also considered to be
the backlash against the late Zulfikar Ali Bhutto’s decision to
nationalise industries, banks, insurance and shipping companies in
1972.
Mr Bhutto was the leader of a political party, the Pakistan Peoples
Party, and contested the 1970 elections by offering a manifesto to
the people of Pakistan. The manifesto announced nationalisation of 12
categories of industries plus banks, insurance companies, shipping
and other areas of public interest. This can be read on a website now.
Many other political parties participating in the 1970 elections,
including the Awami League and the National Awami Party, offered
radical economic programmes. Even the Council Muslim League offered a
radical programme and promised agrarian reforms. Only the Jamaat-i-
Islami showed too much attachment to private property and personal
belongings.
Following the separation of East Pakistan and Pakistan Army’s
surrender, Zulfikar Ali Bhutto took over power on a wintry night of
December 1971. He came out with an Economic Reforms Order in 1972
followed by nationalisation of shipping according to the promises
made to the voters during the elections.
The tragic events of 1971 had badly shaken Pakistani businessmen who
were brought up in a virtual greenhouse environment with state
patronage. State capitalism was the only way out for any government
that would be in power. The private sector had neither the capacity
nor the vision in 1971. Even now it can’t take up projects like Steel
Mills, Heavy Mechanical Complex, Heavy Forge and Foundry, Heavy
Electrical Complex, Port Qasim, National Fibre, fertiliser and cement
projects.
What were the options left to the government for offering jobs to the
people? To address this issue, avenues in the Middle East were opened
but the three per cent annual growth in population demanded more
opportunities.
Back in 1968, the late Dr Mahbubul Haq spoke of 22 families that
controlled 68 per cent of industrial assets, 86 per cent of banking
assets and many other sources of income generation. Mahbubul Haq went
on to join the World Bank and returned home as adviser to Gen Ziaul
Haq.
Shahid Javed Burki too is a World Bank man who is now warning of
a “casino culture” enveloping Pakistan’s economy. He is concerned
that the bubble might burst any moment and compares Pakistan with the
Mexico of 1996. According to the 1970 PPP manifesto, "Pakistan’s
economy is a prisoner of bankers." Is it not the case even now? - S.G.
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