Ownership of a prominent bank will be transferred to UAE under a G2G arrangement this year

ISLAMABAD: The Pakistani government has unveiled an ambitious plan to privatise 10 state-owned enterprises (SOEs) within the current financial year, targeting key sectors such as aviation, banking and power.

As part of this initiative, the ownership of a prominent bank will be transferred to the UAE under a government-to-government (G2G) arrangement this year.

Minister for Privatisation Abdul Aleem Khan, along with Secretary Privatization Division Jawad Paul, and Secretary to the Privatization Commission Usman Akhtar Bajwa briefed media persons here on Wednesday about the five-year privatisation, spanning from 2024 to 2029.

It aims to reduce the state’s footprint in commercial enterprises and boost economic growth. Khan outlined the government’s policy, plan and strategy for privatisation, updating on ongoing transactions including PIACL, Roosevelt Hotel, HBFC and First Women Bank.

Aleem Khan, while referring to the statement of the then aviation minister of PTI government, said, “It is sad that he said this.” Khan highlighted the profit potential of PIA, noting that it requires fresh investment and praised the professionalism of PIA pilots. He lamented the past delays in privatisation efforts, which have cost billions in losses.

Half a dozen prequalified bidders for acquiring Pakistan International Airlines (PIA) have started the due diligence of the entity and have been given access to the airline’s data room. The final bidding is expected to be held in August 2024, said Secretary to the Privatization Commission Board Babar Bajwa.

Bidders have raised concerns about the European Union Aviation Safety Agency (EASA) ban on Pakistan International Airlines (PIA) from its European routes, but Bajwa stated that they are addressing these concerns. “Next week, we will hold discussions with the bidders,” he said.

“This Monday, we had a pre-bid meeting with them. And from today [Wednesday], we are starting the expert sessions with the financial advisers of these bidders. Every bidder will have a full-day session with the commission to give them further visibility,” the official informed.

The privatisation process will be conducted in three phases: Phase I (0-1 year), Phase II (1-3 years), and Phase III (3-5 years). During these phases, issues such as employees concerns, property, legislation and liabilities will be addressed to ensure a smooth transition.

Currently, 24 entities are ready for privatisation, with another 41 entities set to be reviewed by the Cabinet Committee on State-Owned Enterprises (CCoSOEs) in its next meeting. The committee will decide whether these entities will be included in the privatisation list. The non-strategic SOEs will be included in the programme.

The officials emphasized the government’s commitment to reducing its role in commercial enterprises and enhancing economic efficiency through this initiative.

Another transaction involves the Roosevelt Hotel in New York, for which the Privatization Commission Board hired Jones Lang Lasalle Americas Inc. (JLL), a Chicago-based real estate management firm, as the financial adviser. JLL was tasked with conducting due diligence of the entity and exploring transaction options, including a long-term lease, outright sale, or joint venture with the private sector. The PC has received the report from JLL, which will be submitted to the Cabinet Committee on Privatization (CCoP) for approval of one of these options. Following this, expressions of interest (EOIs) will be called by the first week of August.

Additionally, the CCoP approved the sale of House Building Finance Company Limited (HBFCL) to Pakistan Mortgage Refinance Company on July 10, 2023. The decision was ratified by the federal cabinet on July 26, 2023. The Privatization Commission is finalizing the terms of the share purchase agreement, with the transaction expected to be completed by the end of July 2024.

The privatization of First Women Bank Limited (FWBL) is being pursued under a government-to-government mode agreement, following interest expressed by the UAE government and a decision by the federal cabinet on February 6, 2024. Preliminary due diligence has been completed and the process now awaits the identification of a UAE state-run company to proceed under the provisions of the G2G Act.

Other entities prioritized for privatization within a year include Zarai Taraqiati Bank Limited (ZTBL), Pakistan Engineering Company Limited (PECO), Sindh Engineering Limited (SEL), Islamabad Electric Supply Company (IESCO), Faisalabad Electric Supply Company (FESCO), and Gujranwala Electric Power Company (GEPCO).

In Phase II (1-3 years), the entities slated for privatization include Pakistan Re-Insurance Co. Ltd. (PRCL), State Life Insurance Co. Ltd. (SLIC), Utility Stores Corporation (USC), GENCO-I, GENCO-II, GENCO-III, GENCO-IV, Lahore Electric Supply Company (LESCO), Multan Electric Supply Company (Mepco), Hazara Electric Supply Company (Hazeco), Hyderabad Electric Supply Company Limited (Hesco), Peshawar Electric Supply Company (Pesco) and Sukkur Electric Power Company (Sepco). In Phase III (3-5 years), State Life Insurance Co Ltd will be handed over to private hands. The privatisation of Power Generation Companies (GENCOs) will be initiated in phases. The Power Division is considering carving out and privatizing efficient power plants (Combined Cycle) from GENCOs, rather than privatizing entire entities. Obsolete plants may be disposed of by the Power Division.

The commission is also exploring options for Distribution Companies (Discos), including privatisation, long-term concessions and retention. Out of 11 Discos, six have been recommended for privatization, including Iesco, Fesco, Gepco, Lesco, Mepco, and Hazeco, while three are recommended for long-term concessions: Hesco, Pesco, and Sepco. The Power Division is working with the World Bank (as a technical consultant) to provide timelines and complete prior actions in consultation with a technical adviser.