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Privatisation & InvestmentPrivatisation & Investment
Dr. Abdul Hafeez ShaikhMinister for Investment & Privatisation
April, 2005
Key FeaturesKey FeaturesHighly Centralized Economy
Dominant Role of State
High Population Growth
Low Exports and Low Investment Growth
Low Emphasis on Human Development
Declining Development Expenditure
Infrastructure Constraints Population, UrbanisationIncreasing GDP
33
BROAD TRENDS OF ECONOMYBROAD TRENDS OF ECONOMY(Historical Perspective)(Historical Perspective)
Consolidation
Instability
Bad Governance
Growth
Missed Opportunities
Populism
Bad Economics
Uneven growth
Main Features
5+4.66.54.86.8Average Growth
(%)
2000+90s80s70s60s
44
Low Exports and Low Foreign Investment have resulted in low econLow Exports and Low Foreign Investment have resulted in low economic growthomic growth
PAKISTAN INVESTMENT INFLOWS (1990 – 2001) PAKISTAN INVESTMENT INFLOWS (1990 PAKISTAN INVESTMENT INFLOWS (1990 –– 2001) 2001)
237335 306
354442
1,102
682601
472 470
322
0
200
400
600
800
1,000
1,200
90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01
Source: State Bank of Pakistan
Mill
ion
US$
55
Pakistan’s Investment & Infrastructure Pakistan’s Investment & Infrastructure Needs are EnormousNeeds are Enormous
Investment in infrastructure has been Stagnant Investment in infrastructure has been Stagnant
Public Sector Infrastructure Investment Unlikely to Public Sector Infrastructure Investment Unlikely to Increase in a Big Way:Increase in a Big Way:
-- Fiscal Constraint Fiscal Constraint –– Deficit TargetsDeficit Targets-- competing Needs from Social Sector and Irrigationcompeting Needs from Social Sector and Irrigation
The Private Sector has beenThe Private Sector has been Missing in InfrastructureMissing in Infrastructure
Lack of Private Sector Investment in Infrastructure Lack of Private Sector Investment in Infrastructure Connected to Other Connected to Other Long Term Trends in FDI and Long Term Trends in FDI and PrivatisationPrivatisation
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Slow pace of investment and Slow pace of investment and privatisaitonprivatisaiton caused by ...caused by ...
Political InstabilityDifficult NeighborhoodPolicy and Implementation GapResistance From Hidden OpponentsLimited Financial Resources and Capacity Lack of Coordination - Center / Province Complex Dispute Resolution
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RECENT CONSOLIDATIONRECENT CONSOLIDATION
Debt Position
GDP Growth
FDI Increasing
PS Credit Increasing
Privatisation Success
88
Situation Improving …Situation Improving …
Policy Regime StablePro Business Investment PoliciesImproved Regulation
Regulatory Bodies set up in various sectors: PTA, OGRA, NEPRA etc.
Financial Sector & Capital Market Reform
99
Pace of Privatisation Picking up
0
5
10
15
20
25
30
35
40
91 99 '00 '02 '03 '04
Avg Proceeds03-04
Avg Proceeds99-02
Avg Proceeds91-99
Rs in Billions
1010
Achievements of Present GovernmentAchievements of Present Government
21 transactions totaling Rs. 75.1 billion
Habib Bank largest Strategic Sale value 22.4 billion for 51% shares
Thatta Cement, Rohri Cement, Hyatt Regency, ICP-SEMF mutual fund, Kohinoor Oil Mills
Sale of KESC (73%) valued at Rs. 20.24 billion
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PrivatisationPrivatisation For The PeopleFor The People
Objectivebroadening & strengthening capital marketsfacilitating general public’s participation in the processshares in various entities divested through capital markets.
AdvantagesTransparent processBroad based ownership / citizen participationTapping available liquidityStrengthening stock markets
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PrivatisationPrivatisation for the Peoplefor the PeopleShares in KAPCO, OGDCL, PPL, PIA, SSGC, NBP, POL, ARL, DG Khan Cement, Bank Alfalah and others sold / approved to date amounting to Rs 28.1 billionNumber of applicants for OGDC IPO - 97,000 (offer subscribed 8 times)Number of applicants for SSGC shares -258,089 (offer subscribed 15 times)Nearly 716,000 people benefited / to benefit from the divestment of sharesOther divestments being planned such as SLIC, UBL etc.
1313
Increase in Investor Awareness & ResponseIncrease in Investor Awareness & Response
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000 KAPCO
PPL
OGDC
NBP
Lessons LearntLessons Learnt
Good IntentionsStrong CommitmentAppropriate DesignTransparent ProcedureStrengthened RegulationCommunication with peopleNeed for concurrent reform processMarket final determinant of price
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Investment ProjectionInvestment Projection
Promotion of Investment Marketing of Investment incentives & opportunitiesFacilitation of Prospective Investors Image Projection
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RESULTS BEGINNING TO SHOWRESULTS BEGINNING TO SHOWINCREASING INVESTMENT INFLOWS (2000 INCREASING INVESTMENT INFLOWS (2000 –– 2005) 2005)
322
485
800
950
1,250
0
200
400
600
800
1,000
1,200
1,400
00/01 01/02 02/03 03/04 04/05
Source: State Bank of Pakistan
Mill
ion
US$
Projected
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RESULTS BEGINNING TO SHOWRESULTS BEGINNING TO SHOW
PRIVATE SECTOR CREDIT HAS SHOT UP PRIVATE SECTOR CREDIT HAS SHOT UP
0
50
100
150
200
250
300
350
FY99 FY00 FY01 FY02 FY03 FY04 FY05*
2 Apr 05
Credit to Private Sector (flows in billion Rs)
1818
RESULTS BEGINNING TO SHOWRESULTS BEGINNING TO SHOW
IMPORT OF MACHINERY HAS RISEN IMPORT OF MACHINERY HAS RISEN
0
1
1
2
2
3
3
4
4
5
5
FY99 FY00 FY01 FY02 FY03 FY04 FY05*
estimate
Machinery Group Imports (billions US$)