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Pakistan Affairs A 100 marks paper divided into mainly two zones: Pre-Partition and Post-Partition

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Post Privatization In Pakistan

Privatization in Pakistan is aimed to achieve the following:-

1- Enhance the quantity and quality of goods and services
2- Strengthen public finances
3- Broaden and deepen capital markets
4- Reduce opportunities for corruption.


Corporation Total Units Units Privatized/ Disposed Leftover Units
FCCCL 13 13 --
NFC 7 2 5
PACO 14 11 3
PIDC 9 9 --
IPI 2 -- 2
SCCP 15 11 4
SEC 12 6 6
PERAC 3 3 --
PAKISTAN STEEL 2 -- 2
GCP 26 21 5
RCP 15 15 --
USC 1 -- 1
TOTAL: 119 91 28

Major projects/companies which are due for privatization are:-

Pakistan Telecommunications Company (PTCL)
Banking Habib Bank
Oil & Gas OGDC, PPL andPSO i.e
Oil & Gas Development Corporation.
Pakistan Petroleum Limited
Pakistan State Oil Co.
Power Vertically integrated KESC i.e Karachi Electric Supply Corporation.
Industries Two large fertilizer units and other smaller units

Steps Taken For Effective Privatization

1- Legal framework (Privatization Commission Ordinance, 2000) established for investors' comfort, assured transparency, and increased accountability.
2- 90% of the privatization proceeds will be used for debt retirement and 10% for poverty alleviation.
3- Privatization Commission(PC) has acquired specialized expertise and business acumen from the private and public sectors.
4- Stature of PC has been improved by making it a Ministry.
5- PC's comprehensive programme for privatization stands approved
6- Regulatory agencies for power, gas and telecommunications established alongwith the Securities & Exchange Commission of Pakistan
7- Economy under constant deregulation through price and import liberalization.
8- Communications with stakeholders have been improved.

Stages of Privatization

PTCL: Expressions of interest for strategic sale were invited evoking response from 11 parties till 30.6.2001. Due diligence by bidders has been delayed due to events of September 11,2001.
HBL: This banks has transferred its non-performing loans to CIRC (Corporate Industrial Restructuring Corporation), have closed down unprofitable branches, and have reduced overheads at headquarters. Corporate tax has also been reduced from 58 to 50%.
OGDC/PSO/PPL: For the first two Financial Advisors (PAs) have been appointed while FA for PPL is underway. Likewise, an FA for the Sui Gas Companies is also in the process of hiring. The Oil companies will go to market by June 2002 and the Gas companies by December, 2002. Sale of minority stake holding and bidding therefor in 9 oil & gas fields delayed due to events of September, 2001.
Power: WAPDA's power assets have been unbundled in to 3 generation companies, 8 distribution companies, and one transmission company. Privatisation Adviser has been appointed for initiation of the privatisation process. They would finish their job by July, 2002. Privatization process of one Distribution Company and one General Company is being initiated.
Industry: In the public sector industries, Pak-Saudi Fertilizer will go for sale within months of the announcement of Fertilizer Import Policy. Other industrial units will also be put to public sale.
For further details please visit the Privatisation Commission Web Site: www.provatsation.gov.pk

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Sardarzada

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Default Privatization Programme Is Transparent

Privatization Programme Is Transparent: Hafeez
KARACHI, Pakistan: Jan 13 (PNS) - Pakistan's privatization programme Has been very transparent and effective. This was stated by the Federal Minister for investment and Privatization, Senator Dr. Hafeez Shaikh, while talking to Reporters at a local hotel on Monday.
He said that the transaction of Habib Bank has been Excellent which has earned a good name for Pakistan the world over. The Minister said that the entire international community understands that Pakistan's privatization programme has been very transparent and effective.
He further pointed out that now this very process is being speeded up. Senator Shaikh remarked that we are lucky that we have Entered into partnership with a nice group like the Aga Khan as far as The Habib Bank is concerned.
He termed this relationship as the joint public-private partnership because half of the Bank has been purchased by the Aga Khan Group while the remaining half is still with the government Of Pakistan.
The Minister expressed the optimism that like the other Banks performed very well after the privatization, Habib Bank will also Be doing pretty well after such a process which will benefit the People as the cost of doing business would reduce.
He said that because of the Aga Khan Group the Habib Bank Will also make headway in the Central Asia, East Africa as well as in Other countries. Senator Shaikh pointed out that the government of Pakistan Has got good revenues which contribute towards increase in profit as Well as would be utilized towards the country's debt retirement programme.
To a question, he said that no serious person has raised Figure as regards the privatization of the Habib Bank but it is obvious That if nice things are performed in the country then there as some Who express unhappiness.

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Post Pakistan expects $4 bil. in privatization of firms

The Pakistan Privatization Commission said Thursday it is privatizing 49 entities during the next two years and is expecting $4 billion from the sales.
Included in the privatization campaign are the coveted Pakistan Telecommunication, four banks and financial institutions, insurance companies, oil and gas companies and power and electricity firms.
The chairman of the commission, Salim Altaf, said privatization has become necessary because of the heavy losses by public sector enterprises.
Pakistan has privatized nearly 100 industrial units since the privatization process was launched in 1990, but bids to privatize major corporations like Pakistan Telecom and two major banks have failed because of related scandals.
Altaf said the government has also decided to privatize Pakistan International Airlines and the Civil Aviation Authority.
The privatization law being prepared by the government stipulates that 90% of the proceeds would be used to clear domestic and foreign debts.


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Default The paradox of privatization

By Sabihuddin Ghausi
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.

In 1985, the Committee on Disinvestment, Deregulation and Privatisation was constituted with the then president of the Federation of Pakistan Chambers of Commerce and Industry, Aziz Zulfikar as its head. It had a few sub-committees that did some preliminary work. In 1988, the Benazir government also formed a privatisation committee and made a French consultant prepare a report on the subject. A small number of PIA shares were offered to the public for the first time as a modest beginning towards privatisation.

After obtaining ownership of the Ittefaq Foundry without getting involved in any hassle of bidding in 1978, Nawaz Sharif’s business empire went on expanding with every passing day and his political power also grew by the day. After becoming prime minister in 1990, Nawaz Sharif himself initiated the privatisation process as per policy of his government. The first entity on his government’s hit list was the Muslim Commercial Bank. The whole process was done in indecent haste. Advertisements for inviting bids for 26 per cent of the shares of the MCB appeared in newspapers in the third week of December, 1990. Bidders were not allowed any due diligence. Only 11 days were given to the bidders as the last date of submission was December 26. Five bids were received and were opened in the conference room of the State Bank of Pakistan by a bidding committee that was headed by the then Governor of State Bank of Pakistan, I.A. Hanfi.

Abdul Qadir Tawakul was the highest bidder who offered Rs56-a-share. The total payment came to Rs838.8 million. Tawakul was refused and his offer was turned down on the ground that the colour of the money he was offering was a bit black. Tawakul made a lot of noise and threatened to take the case to the highest level of the judiciary. But, bankers say, he was promised and later given two billion rupees bank loan to withdraw from the race. Tawakul obtained the loan entirely on bogus documents and is now in jail because of it.

After a series of hectic consultations and meetings, a national group of 10 businessmen was given the management and ownership of the MCB on April 8, 1991. The MCB was then the “pick of the lot” with a reserve fund of Rs970 million, a safe investment of Rs1.55 billion in Bearer National Fund Bonds and Wapda bonds that gave a return of Rs705 million in one year and real estate properties in Karachi, Hyderabad, Sukkur, Quetta, Lahore, Multan, Faisalabad, Rawalpindi, Peshawar and many other places. The bad loans of the MCB were hardly 10 to 11 per cent of its advances as against 33 to 35 per cent in the four other nationalised banks. It had a small and manageable branch network.

Hussain Lowai, a banker who led the national group while taking over the MCB, is not in Pakistan for the last several years after having been declared an absconder in a gold import case. Mian Mansha was also not in Pakistan between 1994 and 1996 when the PPP was in power and Lowai was Chairman and Chief Executive of the MCB. Mansha is now the majority shareholder of the MCB and many of the original 10 members of National Group are no more the co-owners of the bank. For Mansha and Lowai, the MCB has been a game of fluctuating fortunes. Who knows what will happen tomorrow?

Mansha emerged as one of the biggest players in the privatisation game. Along with his in-laws, Mansha enjoys a monopolistic position in cement production in the Northern Areas. He aspired to get the United Bank but was elbowed out in the second bidding as was the case with the MCB where he got the bank and Tawakul was sidelined. He also took over Adamjee Insurance and has now become a big force in the financial sector.

Gul Mohammad Adamjee, the only surviving brother of the late Wahid and Dawood Adamjee, participated in the MCB bidding but could not get any attention from the bidding committee or the Privatisation Commission. He was not even given the right of first refusal. The Adamjees founded the MCB and are considered to be the architect of Muslim business in undivided India and the founding fathers of Pakistan’s modern economy. It is said that the salaries of Pakistan government employees in the initial months after 1947 were paid by the Adamjees. They suffered a lot because of the separation of East Pakistan in 1971. Subsequently, the Adamjees also lost their insurance company.

Privatisation in Pakistan has remained a controversial matter, if not a dirty game. Three of its chairmen, retired Lt-General Saeed Qadir (1990-93), Naveed Qamar (1994-96), and Khawaja Asif (1997-1999) were put in jail for one reason or another after the dismissal of their respective governments.

The Allied Bank was the second bank that was privatised in 1991 and given to an employee management group for a negotiated price. The ABL privatisation was done under the Employees Stock Ownership Plan (ESOP). Some 7,500 employees were given shareholding but were denied any role in its management. The ABL story is tragic. It is full of treachery, deceit and greed. The government agreed to accept Rs70-a-share offer from Khalid Latif who was the founding father of the Employees-Management Group of the ABL and was the first head of the privatised ABL. It was handed over to the employees management on August 8, 1991. A split occurred in the group within weeks after the takeover and rival groups got involved in a litigation process. Khalid Latif was removed and arrested after the dismissal of the IJI government in 1993. His successor too was removed and arrested after the PPP government was dismissed in November 1996. Rashid Chowdhry took over as ABL chief. He and his three colleagues, from the senior management of the ABL, were found guilty by a State Bank committee of being involved in helping and abetting a Hyderabad-based powerful business group in giving an advance loan and then arranging re-purchase of ABL shares from the employees.

The State Bank prepared a detailed report on the episode. Four top executives and two senior officials were removed from the ABL and were declared unfit for employment in any bank for life. But no further action was taken against the business group that got loan using fictitious documents and used the money to buy back shares from the employees to get management control. The National Accountability Bureau did not move at all in this case.

Since its inception, privatisation has come under severe criticism because instead of creating employment, the process has done just the opposite. Besides, some economists believe that privatization has also led to massive corruption in many a case


Bankers estimate a loss of Rs6 billion sustained by the Allied Bank after it came under the control of people who outdid each other as far as loot and plunder went. The ABL did not publish any annual report from 1999 to October 2004 because according to Shahid Hasan Siddiqui, a bank researcher, “The entire capital of the bank was wiped out.” This loss, according to Siddiqui, is much more than privatisation proceeds. These also exceeded the total profit earned by all the banks that were merged into one to form the ABL since 1942.

From 1991 to 1999, the Privatisation Commission completed 109 transactions worth Rs132 billion. One of the stated objectives of privatisation is to “facilitate the government’s policy of deregulation and liberalisation of the national economy through transparent and equitable privatisation of state-owned enterprises. Privatisation is envisaged to foster competition, ensuring greater capital investment, competitiveness, and modernisation, resulting in enhancement of employment and services to the consumers and reduction in the fiscal burden.” Another objective is to safeguard interests of consumers and investors. “The process of privatisation has been a big source of corruption in many cases,” writes Shahid Hasan Siddiqui in his book, Economic Growth and Stabilisation: Myth or Reality. National Fibre used to be a real gem as far as Pakistan’s national industrial assets were concerned, and its capital cost was less than only that of Pakistan Steel’s. It was sold away to a Karachi-based business group that has now left Pakistan and the unit of National Fibre has ceased to exist. Equipped with state-of-the-art machinery, National Fibre boasted one of the best trained cadres of chemical engineers and technicians. Hardly anyone of them now lives in Pakistan. Siddiqui’s work on implications of privatisation has been adopted by the alliance of religious parties, the Muttahida Majlis-i-Amal (MMA) as its policy document.

The privatisation of National Fibre, Bankers Equity, Zeal Pak, Naya Daur and some other classic failures still cast their dark shadows on Pakistan’s national economy. There are many other instances that can be mentioned. The privatisation of Bankers Equity and its subsequent operations are nothing but a fraud.

Since its inception, privatisation has come under severe criticism from the public because of lack of transparency as is evident from the above-mentioned examples. Instead of creating employment, the process has caused massive unemployment. The government invested more than Rs50 billion, threw out more than 12,000 employees from the United Bank (literally at gun point in 1997) and from Habib Bank to make these entities tempting for investors. In addition to it, these banks were given tax concessions. Employees were offered golden handshakes from the funds obtained against a World Bank loan. What the government did was to raise its debt liability, render more than 10,000 employees jobless, and spend more than Rs50 billion of tax payers’ money to tempt two foreign groups pay for acquiring management control and shareholding in the UBL and HBL.

A study of the Asian Development Bank found “very little impact on the employment,” to quote a privatisation website. The ADB surveyed 21 privatised entities and found five were in a poor condition, six were roughly neutral and 10 showed some economic benefits.

After taking over the government on October 12, 1999, General Musharraf, in his first televised address, did not touch upon the privatisation issue. But within a week, he was briefed by international financial institutions on the matter and on October 19, 1999, the government came out with a policy statement on privatisation that aimed at disinvesting and privatising virtually everything. A new privatisation law was framed in the year 2000 and a new privatisation ministry was created.

Ironically, investment and disinvestment responsibilities have been merged into one office. Technically, what is being offered as disinvestment of state entities is now the investment. In the current fiscal year, the government has shown about two billion dollars (Rs120 billion plus) privatisation proceeds, the highest in any single year, and to quote a minister, it exceeds direct foreign investment during the year.

The pace of privatisation gained momentum after 2002 when the impact of 9/11 started to subside and the government resorted to aggressive marketing for privatisation to Arab investors. The KESC, the PTCL and recently Pakistan Steel are important entities, whose privatisation has raised a lot of questions.

The Privatisation Commission was found bending backwards when it came to offering the PTCL to the UAE-based Eitesalat. The group did bid the highest but virtually backed out. Instead of calling off the bid and confiscating the bidding amount according to declared rules, the PC went on extending the payment period. President Musharraf himself intervened in the PTCL cause and talked to UAE rulers on the sidelines of the Makkah summit. All facilities were provided to accommodate the investor. This caused considerable heartburn among the local investors who believed that they were being discriminated against. Eitesalat is a UAE state entity, so where is privatisation? This is another question that is being raised.

Total proceeds from privatisation since 1991 to this day amounts to Rs395.24 billion. Out of this sum, transactions worth Rs217.91 billion were finalised in the last eight months. Under the law, 90 per cent of privatisation proceeds are for debt clearance and 10 per cent for poverty alleviation. “We instantly remit every paisa of privatisation proceeds to the finance ministry,” a spokesman of the Privatisation Commission replied when asked if he could give a breakdown of how the proceeds were being spent.

Trade unions are unable to fight their case against privatisation in a convincing manner. The voice against the process supports the status quo by default. That the KESC was a badly managed entity is a fact that very few would dispute. How could management be improved is a question to which no convincing answer was given.

But the PTCL had shown considerable improvement as far as service goes and there’s no apparent reason for a hasty disinvestment. The Steel Mill disinvestment is a transaction on which the government has not been able to convince the public and it is bound to become a live issue in the next election campaign.


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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Sardarzada
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Default Privatization at what cost?

The government should at least retain 10-15 per cent of the shares of units of national importance
The final phase of the privatization process has begun with the announcement by prime minister Nawaz Sharif that the government will dispose of all the units in the public sector in next twelve months.
In practice, it has started with the privatization of Habib Credit Exchange Bank last week the 42 million or 70 per cent shares of which were sold to Al Nahyan Consortium of UAE at Rs 39 per share.
The government hopes to raise maximum revenue from the sales of fixed assets and installations the total worth of which is estimated at $1500 billion to save the country from an economic collapse. The question is: At what cost.
The indiscriminate selling of public sector enterprises to foreigners has inherent dangers as conferring of full administrative rights and controlling powers is fraught with risks particularly in a country like Pakistan where the corruption has seeped into all facets of life.
While privatisation has become the vogue of the day to be regarded as a cure-all of economic ills, the privatization process in Pakistan differs from the rest of the world as it being done to generate revenues to honour the foreign debt servicing obligations.
Sources in business community generally agreed that much caution should be exercised by the government in disposing of the national assets, particularly those of national importance, to the foreign investors.
Talking to PAGE a source at Karachi Chamber of Commerce and Industry stressed that extreme caution should be exercised to ensure that controlling powers of financial institutions should not be concentrated in the hands of foreign investors.
The government should at least retain 10-15 per cent of the shares of units of national importance to have a presence in the board of directors to safeguard the national sovereignty, he added.
Furthermore, he said, the privatization of all public sector units should be analysed on case to case basis to only the serious investors who have a proven track record of business in the related business.
A high placed source close to foreign direct investment expressed a different opinion: The ambitious privatization plan of the government should not turn into a ‘distress sales’ for the sole purpose of generating revenues to pay the foreign debts.
It should be ensured, he added, that privatization should be carried out in the best interest of the nation not only to generate revenues from professional investors but also to improve the quality of a product or service.
He, however, said that the pressure to generate money amid existing economic situation would ultimately turn the privatization into a distress sales moreso as political favouritism could not be ruled out.
What happens when one is having a financial problem? He asked and then replied that first one tries to get a loan from a relative, a friend, or an acquaintance failing which he sells the wife’s ornaments. The privatization process in Pakistan is no different, he concluded.
Another well placed source shrugged off the buying of public sector units by the foreigners saying the turning of world into a global village and easy access to information virtually leaves nothing secret anymore.
The public sector enterprises, he said, have failed to perform and are a deadweight loss to the national economy and sales of them to professional investors, local or foreign, would result in better performance for the benefit of the economy and the consumer of a product or user of a service.
Besides, he said, for the country facing serious economic problems such as resource crunch to honour its debt payment, increasing trade deficit and domestic debt and plunder of resources and assets, the privatization remains the only option to mobilise foreign exchange as well as speedy transfer of technology.
It is imperative that privatization in Pakistan attracts the foreign investment as the private sector in the country could not make such big investments, he added.
While the importance, and the necessity, of privatization could hardly be understated the privatization experience in Pakistan calls for a cautious approach to ensure the units are sold only to the serious entrepreneurs with a proven record in the related field.

PRIVATIZATION BY END 1992
Sector Number of Units Bid Value Down Payment Collected
Cement 8 Rs 4658m Rs 2253m
Chemicals 5 Rs 1122m 411m
Engineering 4 Rs 243m Rs81m
Automobile 3 Rs 866m Rs 366m
Fertiliser 1 Rs 457m Rs183m
Ghee 10 Rs 513m Rs 215m
Rice 6 Rs 186 Rs 61m
Roti Plant 10 Rs 63m Rs 57m
Total 48 Rs 8,108m Rs 3,627m
Banking
MCB: 26 per cent sold to the National Group through sealed bidding, 25 per cent shares to the general public
ABL: 26 per cent shares dis-invested to the employees at negotiated price



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Sardarzada
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Default Privatization at Whose Stake

27th March, 2006
Karachi, Pakistan.

The process of privatization of all sorts of government and semi government organizations started in Pakistan around 1998, and today it is spreading fast and is affecting the lives of many in developing countries around the globe. Various aspects and effects of privatization were discussed by the speakers at a conference entitled "Privatization at Whose Stake" organized by ActionAid Pakistan. The issues of privatization were discussed in relation to the WTO agenda and privatization of services.Mr.Farooq Tariq (APA and Labor Party), Mr.Taimur Rehman (Mazdoor Kissan Tehreek) and Mr. Kaiser Bengali (Economist) spoke on the occasion regarding the economic and political perspectives and the position of workers and civil society organizations. The conference proved to be a first of its kind as representatives from the labor unions and peasant organizations both participated and both joined hands for the struggle against privatization on the platform of World Social Forum.
Mr. Kaiser Bengali stressed that the issue of privatization of land is the most important issue in this regard. Most of our land is owned by government and army in Pakistan. The land should be privatized first if they want to start privatization in the country. So much land is bound by the army and our farmers and peasants are suffering. After the government and army the third monopoly of land owners is that of the big landlords who own large chunks of land in rural areas and the people are dependent on them for their livelihoods. This gives them political power and control over the resources.
During the Zia-ul-Haq regime the landlords were given more power and incentives by introducing contract system. The speakers suggested that if they want to privatize the business institutes the first thing to be privatized should be the land owned by the government and army and then the factories owned by the military.

Mr. Bengali further said that there are no set rules and regulations for privatization of factories in Pakistan.Definate laws are not made for the process of privatization and hence the system is not transparent. Whenever the government privatizes any corporation or organization, every time they give new reasons for privatization which shows that the rules are changed and modified accordingly for every case.
First they started privatization by saying that only those businesses that are not profiteering and are running in loss are being privatized or they said that we do not have sufficient budgets to run the factories thats why these have to be privatized. Another excuse for privatization was that the efficiency of the workers increases when the organization is privatized and the organization starts working more efficiently than before.But the reality is that when they first started privatizing organizations they started from factories that were already running efficiently and were also giving good profits. Today when they privatized PTCL which was a profiteering business they gave the reason that it is not in governments interest to run such a business.
Employment opportunities are very scarce in our country and especially in rural areas and the ratio of unemployment has further increased by privatization of big organizations. All over the country the major businesses and factories are owned by a few families that were the first families to start these businesses right from the time of the British Government. Only a few areas are developed and factories are built in those areas but the poorest communities are not provided any sort of employment opportunities and factories are not set-up in the far flung areas.
Another speaker at the conference pointed out that the worlds largest funding institutions like World Bank and IMF are imposing on us the ideas of privatization and globalization etc, and are propagating that these new schemes are introduced to bring prosperity and development. In reality they want to get a firm hold of our economies and our markets. They want access to our markets and want to control our economies through these huge corporations while they are only providing 3% employment opportunities to the workers. It is alarming that due to privatization 16 billion people are being unemployed around the world. The privatization policies are made on temporary basis and they keep on changing from time to time.
Mr.Taimoor while talking about the international scenario of privatization said that privatization is a kind of a weapon that is being used by the western powers to attack and control the third world countries. He further said that privatization is against the very basic principles of democracy because when an organization is privatized the control is given in the hands of one owner and he is free to decide the fate of any of the employees, as he is not bound by any rules and procedures that were applicable in the organization previously. On the other hand when any organization is the property of the government it means that it is publicly owned and the public has the right to question the efficiency and the methods of operation in that organization.
He said that 2/3 of the world's capital is deposited in only 10 banks and 10 companies have more money than 100 countries in the world. Companies are richer than the countries and governments, as 40% of
International trade only happens between multinational organizations. But the fact is that these corporations only employ 0.05% labor force and are controlling 80% trade around the world.
He concluded by saying that privatization on one hand produces unequal distribution of wealth and concentration of wealth in fewer hands and on the other hand it is an unjust and non-democratic practice which further increases injustice and power politics. He said that this is the time for us to understand the implications of privatizations for the developing nations and to fight against this process and bring about a revolution by rejecting all such unjust systems.
Mr.Farooq Tariq said that the laborers and workers that were previously working in the companies that were privatized were fired overnight without giving any reasons. These workers lost their jobs and were forced to do odd jobs to run their livelihoods.
Another form of privatization came as the schemes such as the Golden Shake-hand scheme was introduced, according to which the employees were asked to volunteer and leave their jobs and as compensation those who volunteer will get 24 salaries at once. The people were highly misguided by some of the leaders of the workers unions and they chose to leave their jobs against the golden shake-hand scheme. Research shows that 80% of the people who got golden shake-hand are now jobless.
He concluded the conference by saying that today we are here to create alliances of farmers and laborers and to device a clear strategy for revolution and change. We demand that the industries that are being denationalized should be renationalized and the land to be distributed among the farmers.
The conference was followed by a combined rally of laborers, farmers as well as the representatives of various civil society organizations. The crowd shouted slogans against privatization and the unjust government policies as well as against the western powers that are responsible for these discriminatory schemes.


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Default Privatization at Gunpoint

The transfer of assets from peripheral states to international financial oligarchies is one of the defining tenets of the neoliberal counter-revolution. As a general rule, this latest form of neocolonial transfer of surplus to the industrialized core has proceeded relatively successfully in many peripheral states, with many Latin American states standing out as significant exceptions. In Pakistan, where the ruling state oligarchy has historically been the equivalent of a comprador bourgeoisie, this process has accelerated since it was initiated in the late 1980s.
Most of the 160-odd privatizations that have taken place over the past fifteen years have seen the state handing over control of mills, factories, and other relatively small-scale manufacturing units largely to local buyers. An astounding 130 such enterprises have since collapsed, leaving hundreds of thousands of workers in the lurch. Even government economists acknowledge that only a handful of privatized enterprises have actually improved their economic performance. Meanwhile, the army—the most powerful political institution in the country—has also become the biggest corporate power in the land, with interests in sectors as diverse as real estate, aviation, transport, construction, and oil and gas exploration. Many army-run corporations are in the red, yet they continue to be patronized by the state and given exclusive contracts. This is only one of many glaring contradictions in the neoliberal experiment as practiced in Pakistan.
The Pakistani left has been extremely marginal since the privatization process began, having become progressively less and less influential amongst the organized working class since it reached its peak as a political force in the early 1970s. Private sector trade unions are almost nonexistent due to the severe fragmentation of production processes that has been the dominant feature of the manufacturing sector over the past two decades. Trade unions still exist in some shape or form in the public sector which includes the vast industrial powerhouses of railways, telecommunications, airlines, and public utilities such as water, electricity, and gas. Sadly, the vast majority of these public sector unions are severely co-opted by the state, a trend that can be traced back directly to the state’s efforts to dismember a militant and politicized trade union movement in the 1970s.
As a result, when the latest waves of privatizations began following the coup of October 1999 led by General Pervez Musharraf, it is likely that the state expected little in the way of resistance. Importantly, in the 1990s the international financial institutions increasingly pressured Pakistan to divest its more crucial assets, primarily because of poor economic performance and an accompanying decrease in the bargaining power of the state. Even so, the speed with which major state assets have been slated for privatization since October 1999 speaks volumes about the ideological commitment of the present government to neoliberal orthodoxy.
For the most part the suspicion that resistance to major privatizations would be insignificant has been confirmed, even though many enterprises on the chopping block provide subsidized services to the general public. In some cases, such as privatization of the Karachi Electricity Supply Corporation, a large number of politically conscious workers attempted to involve the general public in anti-privatization mobilizations. These mobilizations were relatively successful. Yet, given the lack of political will among the main trade unions (read: co-option by the state), the privatization process eventually went ahead without great difficulty.
Only three state-owned enterprises operate on a healthy annual profit—the Oil and Gas Development Corporation Limited, Pakistan State Oil, and the Pakistan Telecommunications Company Limited (PTCL). The two oil enterprises with obvious strategic importance to imperialist capital are up for sale, with little opposition from the unions and mainstream political parties. The PTCL has been slated for sale for over a decade but the process has never quite taken off primarily because previous governments, unlike the current military junta, were constrained by their nominal accountability to the working class. However, the telecommunications sector has been deregulated in recent years leading to a proliferation of first domestic and more recently international cellular phone providers. It is a part of the overall strategy in the sector to privatize the public monopoly, or what is effectively a natural monopoly.
It is not surprising that the telecommunications sector in Pakistan is a coveted target of multinational telecom companies. Pakistan’s potential consumer market of 150 million people is highly attractive particularly given the tremendous incentives being offered by a government ideologically committed to neoliberalism. In the absence of an organized mass movement to resist neoliberalism, the present military government is unencumbered by meaningful political opposition to its uninhibited commitment to privatization and other such policies.
Given the overall state of affairs, it is difficult to identify precise reasons why PTCL workers have taken a leading role in mobilizing against privatization, especially given that the labor movement as a whole has not put up any meaningful fight against the many other privatizations that have taken place during the tenure of this and previous governments. The most important factor must be that pockets of left workers have penetrated the rank and file within the PTCL and systematically struggled to build an anti-privatization current. Indeed no other major state enterprise that has been privatized in recent years has been witness to a similar mobilization of the left. In particular, in the case of the PTCL, leftist workers refrained from the typically sectarian attitudes that have ravaged the left in the past—left workers from different parties and groups have coordinated their efforts rather than blame one another for their failings.
Another important factor is the relative affluence of PTCL workers as compared to the majority of workers in state enterprises as well as in the private sector. Because of the PTCL’s consistently good performance, workers have experienced material advancement that most state employees have not. Meanwhile the situation in the private sector is dismal, with informalization rife and a corresponding decline in real wages, working conditions, and job security. Needless to say, organizing in such conditions is extremely difficult.
The mobilization of PTCL workers against privatization can actually be traced back to the formation of the Unions Action Committee (UAC)—an alliance of nine of the eleven unions operating within the PTCL—in March 2005. The alliance was formed to protest the death of a young PTCL worker due to negligence by the administration. Subsequently, the UAC almost immediately initiated a nationwide protest campaign against the utility’s proposed privatization, the initial bidding for which was originally planned at the end of May.
As with every major state enterprise, trade union leadership in the PTCL has a long history of co-option by the state. In this case too, in spite of the formation of the UAC, even left workers within the PTCL did not expect any major mobilization. Starting in early May, a series of token protests, demonstrations, and symbolic two-hour long strikes were organized. During this period, the government announced that the bidding date was being delayed until June 10. Clearly, it was believed that the wave of protests would peter out and the demands of workers could be contained through a co-opted union leadership (as has happened repeatedly in the past). In this regard, a benefits package of over three billion rupees (50 million dollars) had been prepared over the preceding few months that was due to workers independently of the privatization process. This package was now being used as bait to distract from the anti-privatization demand.
However, the pressure on the union leadership from “below” was maintained by activists through political education of workers in small corner meetings and through pamphlets, etc. Subsequently a series of large public meetings was arranged in all of the major urban centers of the country, starting with Lahore, and then followed by Quetta, Peshawar, and Karachi. The protests culminated in a large gathering of workers at PTCL headquarters in the capital, Islamabad on May 25, 2005. It is estimated that 12,000 workers were present at the meeting, a significant proportion of the PTCL’s total workforce of 62,000. Activists from around the country gathered at this final public meeting where the mood was very militant.
The state added fuel to the already considerable fire, attempting to prevent the meeting from taking place by locking out workers. However, the authorities eventually had to give in as confrontations took place between police and the locked out workers. With thousands of workers threatening to take to the streets, the gates of the PTCL headquarters were opened. By this time resentment was rife. Due to the conscious efforts of the active left cadre within the workers a one-point demand against privatization was articulated with workers suggesting they were even willing to forego the financial benefits package.
It is certain that the union leadership did not anticipate the dramatic tempo of the mobilization. Unprepared to resist it they were quickly overwhelmed by popular pressure and forced to announce an immediate country-wide strike, starting on May 26. The intent of the leadership can be ascertained from the fact that June 6 was set as the date when the entire communications infrastructure would forcibly be shut down, leaving a gap of eleven days between the beginning of the strike and its logical culmination. Sustaining a strike for eleven days is difficult in any context, let alone in Pakistan where the industrial working class is isolated, fragmented, and politically immature. Clearly the leadership did not expect the strike to last and hoped to squeeze out some concessions from the government that could be claimed as a victory for the workers. Such a scenario would suit the state as it could go ahead with its privatization plan having successfully extinguished the workers’ militancy.
However, the strike not only lasted but the workers’ anti-privatization sentiment intensified. The headquarters compound was totally taken over by the workers with large gatherings taking place on a daily basis after May 25. Mainstream opposition parties—none of whom are ideologically opposed to privatization—jumped on the bandwagon, decrying the privatization of the nation’s most profitable and strategic asset. Nonetheless, the shortcomings of the labor movement as a whole were also painfully obvious. None of the unions in the other major state enterprises mobilized meaningfully, offering only token statements of support. The major trade union federations, notorious for their acquiescence to the very first wave of privatizations in the late 1980s, struggled even to issue token statements. Yet, because of the unanimous strike within the PTCL and the great threat of a complete shut down of the communications infrastructure, the movement persisted. On June 4, after a series of marathon meetings between various government officials and the UAC leadership, a deal was brokered in which privatization was indefinitely postponed. Needless to say, the state feared the prospect of a shutdown on June 6. The union leadership genuinely would not have been able to prevent this from happening.
At the time, given the lack of preparation for the strike and the overall political environment, left activists within the movement believed that this was a great victory as it was a clear retreat by the government, and the first major instance of neoliberal orthodoxy being explicitly rejected by the working class. It was agreed that the impetus generated by this retreat could be used to mobilize more substantively in the future and also to put more effort into extending the movement beyond the PTCL, linking up not only with workers in other state-owned enterprises (in spite of union leaderships) but also with other active counter-hegemonic formations such as landless farming tenants and indigenous fishing communities.
As it turned out, within forty-eight hours of the strike being called off, neoliberal ideologues within the government along with the minister of information technology—the son of a former president and big landlord—started issuing statements that privatization would be completed by the end of the month. The statements even claimed that the union leadership had continued dialogue with government officials after calling off the strike and that it was satisfied with the government’s guarantees that all of the workers’ concerns over privatization would be dealt with.
Subsequently a bidding date of June 18 was announced, and the “agreement” of June 4 totally disregarded. A wave of arrests started following the formal announcement of the bidding date on June 11. Homes of union activists and their families all over the country were raided and anti-state criminal cases were lodged against them. The government managed to parade a handful of opportunist union leaders around who “agreed” to privatization of the enterprise so as to break the workers’ unity. However, the rank and file within PTCL remained steadfast. Unfortunately, the historic mobilization had not been accompanied by comparable action by political parties and other trade unions.
The regime demonstrated its insecurity and also its inherent tendency towards coercion when it deployed regular and paramilitary forces to all PTCL installations in the days leading up to the bidding. For all intents and purposes, PTCL offices and exchanges became no-go areas with roadblocks and police contingents commonplace. While this state action ostensibly marked a political victory for the PTCL workers, it also effectively limited their ability to gather and disrupt the process through direct physical mobilization, and thus undermined their ability to block privatization.
The majority of the PTCL’s 62,000 workers remain dead-set against privatization. However, manipulation of the press, and insufficient support for PTCL workers from other political and social forces, allowed the government to carry out bidding under “high security” on June 18. A United Arab Emirates firm, Etisalat, emerged victorious and was allowed ninety days to complete full payment for the utility. However, it is far from clear that the PTCL workers’ protest is over. The discontent amongst the rank and file remains palpable—and it is likely that after recuperating from the wave of repression another wave of protests will be mounted, even if after the takeover of the company by the successful bidders. It would appear that the co-opted union leadership has outlived its mandate and that a radicalized PTCL workforce will now demand more responsive leadership.
It cannot be reiterated enough that the history of the industrial working class in Pakistan since the late 1970s is a history of co-option and defeat after defeat. The neoliberal counterrevolution has successfully taken back many of the gains made by the working class after tumultuous struggles in the previous decades. In general the industrial working class is a shadow of the genuine political force it was some three decades ago. However, the mobilization of PTCL workers in the face of a regressive political environment, a union leadership prone to opportunism, and the pressure of a militarist state totally committed to neoliberalism, has clearly generated a great deal of excitement among the left and even the general public. As economic and social conditions worsen for the majority of working people, the struggle of PTCL workers is seen as being representative of the needs and wants of working people at large. Given the rapid informalization of labor in Pakistan (as in much of the periphery) the revival of the organized labor force can potentially have a major impact on the very difficult task of organizing informal sector labor. While it remains to be seen in which direction the PTCL struggle goes from here, there can be no doubt that this struggle, if understood in its full complexity by progressive political forces, can provide major impetus to a larger politicized mobilization in the not too distant future.
It is especially important to recognize that working-class resistance against the state and/or imperialist capital has tremendous significance in terms of the underdeveloped bourgeois democratic project in the country. Given that the militarist state wields all effective political power and mainstream political parties remain weak, the establishment of a mere formal democratic process remains the major political goal of liberal and left forces.
That being said, liberals—whether represented by political and social organizations or by the intelligentsia—often have a myopic view of military rule that resembles the modernizers of the 1960s and 1970s. Among other things, many liberals concur with the military’s propaganda that politicians are corrupt and have never displayed the qualities necessary to run the country. This refrain totally overlooks the fact that the civil and military oligarchy has dominated the state since Pakistan’s creation and that mainstream politicians have always been co-opted by the state. The modernizers of previous decades similarly claimed that the military was best suited to spearhead the developmental state. All in all, this co-option of the liberals—among the most vocal and influential political constituencies—insulates the military from meaningful political opposition especially since more radical alternatives are conspicuous by their absence.
However, primarily because of the blatantly unpopular policies that have spanned the six years of the Musharraf dictatorship, there does seem to be a consensus developing across significant segments of society that military rule is inevitably bad in the long-run. In the absence of a meaningful challenge to the military from a largely co-opted leadership of mainstream parties, it is mass mobilizations that represent the major force for democratization.
As pointed out earlier the PTCL mobilization is in large part due to the efforts of leftist workers who have made great strides in raising the level of consciousness within the rank and file. However, it is important, too, that the left engage in self-criticism and consider when it will be able to regenerate itself as a distinct political force rather than continue to act in somewhat renegade fashion, trying to influence mass movements. If the left were to exist as an independent political force, there is little doubt that mass movements such as this one could be definitively influenced, politicized, and linked to other such movements all of which would ideally culminate in a genuine political challenge to the state. As suggested above, the state’s ability to force through the initial bidding process was entirely a result of inadequate support for the PTCL workers, who had maintained as much pressure as could be expected from them. It would be facile to expect that the mainstream bourgeois parties will offer anything more than token support to similar mobilizations in the future as they too remain proponents of neoliberalism. Meanwhile the trade union movement at large cannot be expected to take on a radical role until and unless the influence of the left within individual unions and the major federations increases.
A positive outcome of the entire PTCL mobilization is the formation of an Anti-Privatization Alliance in the three big political centers of the country, Karachi, Islamabad, and Lahore. As a broad coalition of fragmented left forces, the alliance holds out the hope of more meaningful collaboration in the future: one which may culminate in the coming together of left forces to create a nationwide political organization that can be effective in harnessing popular sentiment that is both anti-imperialist and broadly anti-neoliberal. There is little doubt that left forces in Pakistan recognize the need for a dramatic enhancement of the left’s political visibility and effectiveness. More than any other mobilization of the working class in Pakistan in recent times, the struggle of the PTCL unionists reminds us that workers have the potential to emerge as an irresistible force, turning the tide against neoliberalism and even against the military state—if they are sufficiently united and determined, if they are fully cognizant of the strategic terrain in which they are placed.


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Default Directorate Of Planning And Privatization...ministry Of Railways

1- Pakistan Railways has already launched modernization with rehabilitation and improvement plan both for its infrastructure and rolling stock including prime mover since 2001-2002. The ongoing schemes worth over Rs. 30 billion are progressing satisfactorily and have brought in radical improvement in the overall efficiency and performance of the system. During the current financial year the Railway Revenue generation target has been increased from Rs. 14 billion to Rs. 18 billion and it is planned to achieve zero operational deficit during the current year by effective planning and financial management on latest technique. The performance during the mid review i.e. first six month shows the operational surplus of Rs. 927 million against the target for the period.
2- Pakistan Railways plans to achieve a stage of net profit from the year 2007 and accordingly a number of targets have been set out by the Government for Pakistan for achievement by 2007 and onward upto 2010. This target include increase in the sectional speed on Karachi – Lalamusa main line section to 140 KMPH, dualization in the missing link of track on the main line, introduction of modern and latest version signalling system, procurement of diesel and electric locomotives as well as high capacity/ high speed freight wagon and passenger coaches beside improvement and provision of connectivity to Iran, India, upcoming Gwadar Port to Afghanistan and onward upto Turkmenistan
3- To achieve the above targets number of developmental schemes have been proposed in the mid term plan 2005-10 which have in principally been agreed/ approved and hopefully would be reflected in the approved mid term plan before the end of the financial year 2004-05. The schemes are indicated hereafter:-

Pakistan Railways Developmental Plans 2005-10
(Mid Term Plan)
To achieve the targets the following projects are identified:-
Estimated Cost
Rs. Billion
i) Upgradation and improvement of track from Khanpur to Lalamusa 3.50
ii) Dualization of Track from Khanewal to Raiwind and Shahdara to Lalamusa. 7.00
iii) Setting up of a railway yard and railway linkage from Gwadar port to container yard. 2.50
iv) Rail link from Gwadar Port to existing rail link at Ahmad wall on Quetta Taftan section. 12.00
v) Up-gradation of Rohri – Quetta – Taftan section 15.00
vi) Provision of Railway link on remaining portion of right bank of Indus for connectivity upto Peshawar via Kohat 6.00
vii) Rail link from Quetta – Bostan – Zhob to D.I. Khan for provision of direct connectivity from Baluchistan to NWFP. 6.00
viii) Upgradation of Mirpur Khas – Khokhrapar section from meter gauge to broad gauge upto international boarder. 1.8
ix) Feasibility study for provision of rail link from Rawalpindi to Muzaffarabad AJK 0.1
x) Feasibility Study for provision of rail link from Dina to Mirpur AJK. 0.05
xi) Procurement/ manufacture and assembling of 100 locomotives (75 diesel and 25 electric). 16.0
xii) Procurement/ manufacturing and assembly of 1000 freight wagons. 4.8
xiii) Procurement/ manufacturing and assembly of 100 passenger coaches. 4.10
xiv) Electrification of Lahore – Khanewal double line section with rehabilitation of existing single line Lahore – Khanewal section (285 Kms). And extension upto Samasatta (163 Kms). 5.60
xv) Provision of road over bridge at Chowrangi Chowk Export Processing Zone Karachi. (50% of the cost is to be borne by EPZ). 0.125
xvi) Improvement and rehabilitation of old and obsolete signalling system on Karachi – Peshawar section in phases. 15.00
xvii) Other minor projects. 1.00
xviii) For completion of on going schemes. 23.00




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Default EOIs received for 51% SSGC share sell-off

(Updated at 1745 PST)
ISLAMABAD: Privatization Commission of Pakistan has received application of the Expression of Interest (EOI) in response for 51 percent of Sui Southern Gas Company’s share sell-off today.

Privatization Commission has asked that the interested parties to submit their particulars along with their respective company’s details.

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Default Ifc Participates In Bank Privatization In Pakistan

Shelley Rundell
WASHINGTON, The International Finance Corporation (IFC) has signed agreements for its involvement in the privatization of the Bank of Khyber and the extension of a US$10 million credit line for on-lending to small and medium-sized enterprises in the North West Frontier Province (NWFP) of Pakistan. The credit line and share option agreements were signed today in Washington, D.C., by Mr. Jannik Lindbaek, IFC's Executive Vice President and Mr. Bashir Ahmad, Chairman and Managing Director of the Bank of Khyber. The privatization plan involves the selling of shares to domestic and international investors and will increase the Bank's capital to Rs. 500 million (US$14.6 million equivalent). The IFC credit line will have a conversion option for up to a 10 percent shareholding in the Bank which would be exercised as part of the Bank of Khyber's privatization. The Bank of Khyber is the premier provincial Bank in NWFP. Established in 1991 by the NWFP government, the Bank's activities have been focused
on providing trade and working capital financing. It is planning to expand and diversify its operations into project financing which will support economic growth in the province. Mr. Lindbaek said, "The small and medium businesses financed by the credit line will contribute to stimulating industrial activity and increasing employment opportunities in the NWFP." (More) IFC Press Release No. 96/62 Page 2 of 2 He added, "The privatization program -- through an issue of shares on the local stock exchanges -- will contribute to the further development of the capital markets and is likely to have a significant impact on the region's economy." IFC is a member of the World Bank Group and is the largest multilateral source of equity and loan financing for private sector projects in developing countries

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