PRIVATIZATION

IN

Group Members
o Aroosh Akhter
10
o Mohammad Abubakar
09
o Mubashar Humayun
21
o Iram Shahzadi
26
o Saman Afzal
18
o Muhammad Hasham Ali
24

10
Aroosh

Privatization
The Process of
transferring ownership
of Enterprises from
government control to
private hands fully or
partially

Two sectors
Public sectors

Private sectors

Enterprises are controlled and

owned by Government

Enterprises are controlled by

Private people

Railways, WASA, NBP

etc

PTCL, PSMC, POST OFFICE

etc

Rights of Private sector

Right to private property

Types of Privatization
Types Of Privatization
Asset sale privatization
Share issue privatization
Contracting out
Deregulation

Objectives of Privatization

To increase the efficiency of economic enterprises

To enhance the competition and to improve the quality of goods and services
To stimulate local private savings and attract new investments
To stop public funds draining in form of subsidies and loans
To reduce the burden of public Enterprises on the government budget
To expand the role of private sector in economy and to encourage the private
sector
Moving towards a market economy
To minimize the state involvement in industrial and commercial activities

Major Steps In Privatization

Process

Identification
Hiring of a financial advisor
Due diligence
Enacting any needed regulatory and sectoral reforms
Valuation of property
Pre-Bid Process
Post-Bid Process

Major steps of Privatization

09
Muhammad
Abubakar

History And Evolution Of

Privatization In Pakistan

Privatization of four important

banks in Pakistan has taken place as
on:
United Bank Limited (UBL) was privatized
in 2002
MCB 1991
Habib 2005
Allied 2004

Privatization Under

Nawaz Sharif

Came into power on November 6,1990

Privatized Muslim Commercial Bank (MCB) on December
15,1990
Privatized Sugar Mills & Textile Industries like

Pasrur Sugar Mills

Samundri Sugar Mills
Rahwali Sugar Mills
Paras Textile
Harapa Textile
Ghazi Textile

Sell prices of these units is still a secret

Privatization Under

Benazir Bhutto
Appointed a British firm to formulate a strategy for
privatization
Report recommended on wide spread ownership basis
Potential companies are
o
o
o
o
o
o
o

Habib Bank
Muslim Commercial Bank
Pakistan national shipping corporation(PNSC)
Pakistan International Airlines Corporation(PIAC)
Pakistan State Oil(PSO)
Sui Southern Gas Company(SSGC)
Sui Northern Gas Pipelines Ltd(SNGPL)

Privatization Under

Zardari

New Public Private Partnership (PPP) policy

Privatized the sectors
Oil & Gas Development Corporation Limited(OGDCL)
Pakistan Petroleum Limited(PPL)
Faisalabad Electric Supply Company(FESCO)
Quetta Electric Supply Company(QESCO)
Hyderabad Electric Supply Company(HESCO)
Peshawar Electric Supply Compaany(PESCO)
Multan Electric Supply Company(MESCO)
Central Power Generation Company(CPGCO)
Lakhra Power Generation Company(LPGCO)

BHUTTOS Nationalization
1974
Took power on December 21, 1971
His GOVT. promulgated the nationalization and
economic reforms order nationalizing 31 key
industrial units
Dawood, Amin & Fancy lost heavily

Nationalizing order 1972

o This order was given for nationalizing industry in

Iron & Steel sector

Basic metals
Heavy engineering
Heavy electrical
Assembly & manufacturing of motor vehicles & tractors
Heavy & basic chemicals
Petrochemicals
Cements
Public utilities
Power generation
Transmission & distribution
Gas & Oil refineries

Nationalization in different
years

Basic Industries in 1972

Life Insurance Company in late 1972
Vegetable Ghee units in 1973
Commercial banks & Shipping in 1974
4 Mills, rice bushing & cotton ginning factories in 1976

Advantages and disadvantages of

nationalization

Advantages

Equal Distribution of Wealth

End of Monopoly
Check on Smuggling and
Hoarding
Economic Stability
Effective Planning
Increase in Production
Increase in Social Welfare
Price Stability
Credit facility to agriculture
Credit facility to small industries
Collection of saving
Protection of black money
Growth

Disadvantages

Increase in Corruption
Fall in Production
Sick Industries
Carelessness of Labor
Public Sector Over Weighted
Private Sector Discouraged

Mubashir
Humayun

21

Privatization is necessary for the

economic growth
To avoid effects of nationalization
To avoid continuous loss
To avoid govt. monopoly
For efficient labor
To improve productive capacity
For Better services

To be continued.
To settle fair price
For competition
For creativity and innovation
To attract customers
For profit maximization
For proper payment of tax
To avoid nepotism and red tapism

Is PRIVATIZATION PURPOSEFUL
IN PAKISTAN
Beneficial
Efficiency of Private sectors
Strengthen the Capital Market
Encouraging the Foreign Investment

To be continued.
Not Beneficial
o Inefficiency of Private Sectors
Better

Same

Worse

Total

PMEs

13

16

34

Misc.

10

14

Ghee mills

12

19

Rice mills

Banks

18

37

28

83

44%

34%

100%

Total

Percentage 22%

To be continued.
Non-benificial
o Closure of BEL due to swindling
o Privatization of OGDC
o Privatization of PSO

26
Iram
shahzadi

PAKISTAN RAILWAY

Summary profile
Department of government of Pakistan
Having
7,791 route km
559 stations
Annual revenue of around Rs.20 Billion
(2007-2008)

Operational Structure
Four (4) Directorates in Pakistan Railway
Administrative Directorate
Technical Directorate
Planning Directorate
Finance Directorate

Organization
In the late 1990s, the Government of Pakistan considered selling the
airline to the private sector
The new Railway Board consists of Chairman and five Members out of
which three are from the private sector

Earnings of Pakistan Railway

(In million)
FISCAL YEAR

EARNING

% CHANGE

2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11

11,938
13,046
14,812
14,636
18,027
18,184
19,194
19,973
23,160
22,269
13,060

20.7
9.3
13.5
-1.2
23.2
0.9
5.5
4.1
16.0
-3.8
-19.1

(JULY10MARCH11)
Source :Economic survey of Pakistan

Pakistan Railways driving

towards ruin
Corruption
Mismanagement
Neglect
Looting and plunder
Retirement of 104 of 204 trains
Relies on government handouts of 2.5 billion rupees a
month to pay salaries and pensions
Expected losses of 35 billion rupees in fiscal year from July
2011 to June 2012

Pakistan Railways not to be

privatized
The government had no intention to privatize Pakistan
Railways
Rather steps were being taken to transform it into a profitoriented entity
(26 january,2011-Wednesday)

Saman
Afzal

18

Pakistan Railways has decided to privatize

3 trains
Allama Iqbal Express
from Sialkot via Lahore to Karachi

Fraid Express
from Lahore via Pakpatan to Karachi

Millat express
from Sargodha via Faisalabad to Karachi.

Arguments Against
Privatization of Railway
industry

Employees protest against privatization of

Pakistan railways
By admin on March 24,2011
Karachi, railway employees
Lahore and Multan, railway

employees

Leaders of different political parties

Railway workers stage sit-in against

privatization
(December 21st,2011)

The Rail Mazdoor Ittehad

Labour leader Hafiz Salman Butt

Demands of Pakistan
railway workers
Never ever accept the privatization of Pakistan Railways
Demanded to give workers salaries according to prior
procedure instead of through banks
Urged to give them day-allowance package
Demanded to give them pension after retirement

Comparison of Pakistan
Railway Industry with other
Industries

Country Comparison > Railways > TOP 20

Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

country
United States
Russia
China
India
Canada
Germany
Australia
Argentina
France
Brazil
Japan
Ukraine
Italy
South Africa
Poland
Mexico
United Kingdom
Spain
Kazakhstan
Sweden

Railways
224,792
87,157
86,000
63,974
46,552
41,981
38,445
36,966
29,640
28,538
26,435
21,684
20,254
20,192
19,428
17,166
16,454
15,293
15,079
11,633

How We Can Improve Our

Railway Industry
Best thing for Pakistan Railways is:

Fire all inefficient workers

Get 300 new engines
Hire 18-19 year old workers from Universities
Train engineers, with Chinese engineers to maintain Locomotives
Keep number of people to 5,000 workers, 1,000 train operation jobs
SEAL OFF the entry of people, without tickets
Modernize all railway stations
Put a limit of Bags and carriage

Muhammad
Hasham
Ali

24

Privatization Of
Pakistan Steel Mills

Company oveRview
Pakistan Steel Mills Corporation (Pvt.) Ltd. Which is the country`s largest steel
producer , manufactures industrial materials such as

Steel
Coke
Pig iron
Rolled billets
Hot and cold rolled coils and sheets
Galvanized coils and sheets

Pakistan Steel Mills (PSM) was founded in 1968

It is based in Karachi, Pakistan with additional offices in Lahore, Gujranwala, and
Islamabad
The real founder of PSMC are Professor Niaz Muhammad , Wahab Sidiique and
Russian scientist Michkhail Koltokof

Latest News about Privatization

Of PSMC
Minister for Production Anwer Ali Cheema said on 11/02/2011 that
The government of Pakistan is planning to privatize Pakistan Steel Mills Corporation (Pvt.)
Ltd. instead of dragging on with the loss making entity

After 2 Days

The government of Pakistan is has no plans to privatize Pakistan Steel Mills Corporation (Pvt.)
Ltd. in spite of the government of Pakistan is working on increasing its production capacity

PRIVATISATION OF STEELS MILLS OF

PAKISTAN in 2006
Dawn Newspaper writes about the privatization of PSMC as
the biggest scam in the history of Pakistan, by the political forces.
(Dawn , May 2006)
)

According to DAWN NEWS

PSM was privatized just for Rs 21.6 billion ($362 million)

It is bought by

Saudi based Tuwairqi group of companies

Russia's Magnitogorsk Iron & Steel Works
Local firm AL-Habib

Recommended sale of the shares @ Rs.17.43 per share according to BOPC

But after FA submitted its report, CCOP determined the reference price of the share @ Rs.16.18 less
than the value suggested by Privatization Commission @ Rs.17.43 per share

Historical

loss

of

PSMC

After an 8 year profitability (2000-2008) the steel mills started posting its losses from august 2008, just
after the new chairman Moeen Aftab took over.
PSMC revealed a loss of 22.143 billion during the period August 2008 July 2009
While its profit was Rs 2.375 billion in fiscal year 2007-08.

DATE

Aug 2008

Sept
2008

LOSS/RS

55 million 200
million

Oct 2008 Nov 2008

Dec 2008

Jan 2009 Feb 2009

Mar 2009

660
million

2.5
billion

2.0
billion

2.1
billion

4.1
billion

2.0
billion

Another Plan To Privatize

(dec 22, 2010)

PSMC

The Board of Privatization Commission took up an important matter

on Wednesday (22-12-2010)
In which it is said that
The government is all set to partially privatize the PSM by
outsourcing its management along with floating

10 to 20 percent shares to Chinese and Russians

This is the 2nd effort to privatize PSMC

Pakistan
Telecommunication
Company Ltd...

Company overview
Pakistan Telecommunication Ltd is the largest telecommunication
company in Pakistan
The UAE based company that purchase 26% of shares with
management rights

MISSION
To extend peoples reach

VISION
A world where people reach is not limited by Matter or distance.

Privatization Process of PTCL

In 1991 Govt decide privatize PTCL, by selling 26% shares with
management rights.
In 1994 12% of its shares are divested.
In 1994 Govt issued 1 million exchangeable vouchers, equal to 100
million shares of Rs.10each for Rs.3 billion.
In September 1994 five million vouchers has been issued to
31 international investors for $ 900 million.
In 1997 notes of $150 million are issued to international investors which
are convertible to A class ordinary shares, which are equal to 3.3% of
total share capital.
In 1998 Govt hire M/s Goldman International to provide advisory
services.
According to M/S Goldman Report, PTCL handed over to Etisalat that
purchase 26% shares with management right

ImpactonPerformance

Impacton Competition
PTCLs market share is decreasing day to day , due to the following
reasons:
many competitors entered into the market
People switch toward cellular phones
WLL users switch toward wateen, world call and Tele Card because of
better quality
Customer services are better then PTCL

ImpactonEmployment
Before Privatization:
PTCL has approx. 65000 employees before privatization. The main workforce of
the PTCL is unqualified and unskilled. About 50%employees are under graduate
After privatization the following decisions have taken by management:
Launch VSS (voluntary separation scheme), under this scheme PTCL has to pay
a lump sum amount to employee who is willing to leave.
Step forward to facilitate equal employment opportunities
Inducting fresh blood from the market
T & D department organized a comprehensive six months
Urgent Training Needs program in technical and managerial fields to enhance
soft skills.

Conclusion
Privatizations of PTCL have both positive and negative impacts.
Some negative impacts are
The number of subscribers is decreases year to year because of, poor
quality of services, old technology and higher prices
PTCL is in the process of layoff and provides a huge some for this
purpose while competitors have skilled Personnel and offers attractive
packages
Besides these negative impacts PTCL also have some positive
impacts:
PTCL introduced new technology in some areas
Improve customer services

Mertis and Demerits of

Privatization
Merits
1.
2.
3.
4.

Competiton and better service

Increase in profitability
Increase in efficiency
Avoidness of nepotism and
redtapism
5. Decrease in political pressure
6. Decrease in deficit budgeting
7. Increase in infrastructure

Demerits
1.
2.
3.
4.

Increase in Tax Evasion

Exploitation by Private Sector
National Security Endangered
Number of branches in rural
areas
5. Unbalanced growth
6. Owners association