Pakistan steel mill the only steel mill of Pakistan was sold on 31st of march to Mr. altuwairi of saudi araibia. its 75% shares were sold in 21 billion.... while another commetti has been working on the remaining 25% of shares...
My father belongs to steel mill and i have some very intersting thing about this PRIVITISATION......
Pakistan Steel Mill was constructed in early 70's with a cost of 25 to 30 billion rupees with the help of USSR.
The actually value of the land now, except steel mill plant which is the main asset,the steel mill officer coloney and remaining vacant land is 300 billion rupees... and if we include the Plant of steel mill and the officers coloney in it..it would be around 350 to 375 billion..
Bilal musharaf is also a hidden share holder in this bidding and it all was pre decided that who will take steel mill bcz a day before the bidding of steel mill started, MUSHARAF in a debate in port qasim where Mr. ALTUWAIRQI was starting to build his own steel mill said that "tomorrow Mr. Tuwairqi is buying this steel mill as well"
so it was all pre decided...
why was it privitasied when it was announced with great proud that steel mill is producing what was targeted and going very good....
it was ruined by the army officers most of the times through their corrupt minds...they made steel mill an inefficient structure.... and who will suffer for that....OF COURSE THE EMPLOYEES...who else could....
these employees came here in their young ages and build this mill...its basic infrastructure.. but they r getting what in return....VOLUNTARY RETIREMENT SCHEMES.....JOB INSECURITY....BLA BLA BLA.....

WELL this will happen to us until Mr. MUSHARAF(mr. perfect) starts believing what he is really doing for his country.....and believe me..i see no future for improvements in this country...poor still suffers...rich still enjoys and always will..

assalamoalaikum
4 privatization of karachi mill i'll just comment that"musharaf re musharaf teree kon c kal seedhee" what was the unique idea he had to sell this mill in too less prices(oonay poonay daam). let c perhaps have some positive reply from some other member?
just pray 4 all n also remember me in prayers
may ALLAH helps all
ALLAH HAFIZ

asalamo-alaikum
i also realy felt sad,,,,musharaf is losing the respect he earned day by the day with the decisions he is making,,,,,abdul hafeez sheikh of privatisation comission also left the job,,,,today i was watching one of tv channels and Mr.sattar ,who was representating employess of pakistan steel mill saying that even the money of graduity of emplyees is more that 24 billion ,,and emplyees of pakistan steel can buy steel mill in 24 billion,,,,he was saying that as a emplyee he was expecting bid like 150 or so,,,,,
this move of him cann't prosper the country,,,

SalamAleikum
I don't get it! When ppl hate mushi bhai so much, y on earth does he still have to be our president? I mean its not only Qualititavely, that ppl who hate him, hate him more than they anything, its increasing Quantitatively as well....

He loves to do NEW things, can't he do one more new thing in the history of Pakistan? I'd suggest him the idea to step down voluntarily, for that too would be the first time in the history of our beloved nation that a powerful leader stepped down himself

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[FONT="Arial Narrow"]"Nothing sharpens sight like [COLOR="Red"]envy" [/COLOR] - Thomas Fuller[/FONT]

i think that he cannot do even if he want to bcz from inside there will be a voice a passion of power he have in the region will definitly resist him to leave the president place. ITS THE GAME OF POWER ALL AROUND THE WORLD.

Brother Waqas,

This story is interesting but it is quite un-believable. You say 75% shares of steel mills have been sold for 21 billion …...

The original cost of this mills was 25-30 billion Rupees.

The un-believable aspect is your current valuation. You say that value of ONLY land is 300 billion whereas the value including main plant would be about only 350 billion. This is not understandable because value of only land cannot be 300 billion. The main value should be that of main plant and the value of main plant should have to be more than the value of land. According to your information, value of main plant should be only 50 billion Rupees.

So your current value figures are quite confusing.

Second thing is that when any company is sold, it is sold not for the price of its assets. Of course company have to be sold at price of ‘assets’ minus ‘liabilities’. You have not told us about the value of current liabilities of this Mills. Realistically, value of liabilities also must be very huge because this mill had been operating in such huge losses as tens of billion rupees, for many years.

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Salaam,

PSMC is the country’s largest and the only integrated steel manufacturing plant, with an annual designed production capacity of 1.1 million tonnes. It was incorporated as a private limited company in 1968 and commenced full-scale commercial operations in 1984. The history of performance is bleak, however it is confirmed that the mill has been performing well since the last three years.

The mill comprises of 19000 acres of land and a generation plant. Out of the 19000 acres, some 14500 acres have been reserved for other industrial activities, while the rest (4500 acres) along with the plant have been sold at allegedly throwaway prices.

1.29 billion stakes (75% shares) + Administration of the mill are being sold to a consortium consisting of Russian, Saudi Arabian and Pakistani buyers. I don't know why Mr. Waqas has mentioned the name of a single person. The total cost of the deal has been established at $362 dollars (Rs. 21 billion) for Rs. 16.8/share. The price is divided for the land and plant. The developed land of 4500 acres is estimated at $ 251 million (Rs. 15 billion) while the plant alone is tagged $ 111 million (Rs. 6 billion).

Now for Brother Waqas's observations:

Brother, I have come to know that the price of the land alone was established in March 2006 at Rs. 27 billion. This cost actually varies with the quality of land. The developed land is valuated at Rs. 5.5-6.0 million/acre, while the under-developed one is around Rs. 3.0-3.5 million/acre. The cost is so high due to the available facilities like road, railways, electrical generators etc.

(NOTE: Rs. 300 billion is a large amount. The argument is totally unacceptable.)

Now my bias against Privatization:

Benefits of Privatization:

1) It is a kind of foreign + local investment, which is good for economy.
2) It raises the efficiency of assets being privatized.
3) It creates competition, ultimately, cheap and quality services and products.

Disadvantages: (There are too many)

1) It results in the loss of good performing assets. Take the example of PTCL. It was performing very well and was a good source of income to run the government. Previously the government was entitled too 100% of the profit which has however been reduced to a considerable extent now.

2) Governments in Pakistan are incompetent and corrupt. They sell the national assets and insteading of utilizing the funds for development - they either switch to debt-servicing or try to pocket the money. Hence, in the end we lose up all the money and our dear assets with no positive results. Kaiser Bengali argues that presently all the money earned by privatization is going to debt-servicing or filling the trade-deficit.

3) In case there is no competition, a monopoly in private sector is too hazardous.

4) Pakistan already has very low market regulation system. The more privatization we go through, the more we're left at the mercy of capitalist. And capitalists are bad people .

5) the list goes on... let the other people add.

Regards,
Adil

__________________
"The race is not over because I haven't won yet."

Adil Memon
Police Service of Pakistan (P.S.P)
37th Common Training Program

I think it is just the transfer of ownership of already existing capital asset. It would generate no new production in the Economy so there shall be no corresponding positive effect on over-all GDP. It shall have positive impact only on government's current account i.e. government shall meet some of its current liabilities. Yes government shall lose any anticipated future revenue arising out of this asset but on the other hand, govt will have to make less payment on account of foreign debt servicing in the future periods.

Over-all GDP shall be improved only in this sense that performance efficiency of the already existing capital asset shall improve. More efficency means more production and so improved GDP.

Government shall earn more tax revenue due to the better effeciency and performance of Mill in the future periods.




PTCL was 'good' performing assets only because of some artificial means. It was enjoying quite fake and artificial monopoly. Sooner or later, its performance had to be brought down to normal market level. So I see no real loss in case of PTCL.

Second thing is that; in my opinion, the policy of discharging of debt servicing out of privatization money is QUITE WRONG.

Instead, policy should be to make investment in NEW PROJECTS using the so privatized money. For example this money can be lended to local investors who want to establish new earning ventures. Government itself also can undertake to invest in new ventures. This policy would have such results as; generation of new employment oppertunities, increased future production and therefore GDP, increased future govt revenue in the form of future taxation.

Tranparation in the utilization of funds, in any option is must however.

Thanks!

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Where is the SIGNATURE....????

Salaam,

Brother, thanks for your lovely feedback.

I appreciate your response. But however it has failed to convince me to change my statement.

Brother, when we privatize things, we sell our assets in return of 'money'. And all these bidders pay us money before taking charge of the assets. This money isl circulated in our economy. Isn't this growth?

I didn't say it will generate any new production, but we have some more finance now flowing in our economy. Previously that money was lying with the investors in their countries, after the privatization of the mill, that money has flowed into Pakistan. I think it supplements our economy... afterall this is the role that foreign aids play.

(Just pause for a while and think if they don't have any impact on economy, why should we privatize things?)

Thanks for raising that current account issue. Bhai, I have time and again read this term 'current account'. Isko please thora sa explain kar dein, mujhe nahin pata yeh kya hota hai.

I agree with your statement that government will have to pay less on account of foreign debt servicing in future which will forstall any budget deficits.

I don't think that GDP is only affected by production. It is equally affected by the amount of money flowing into the economy. It also includes foreign investment and remittances.

I further agree with your assertion that PTCL was enjoying a great place due to its monopoly. But we must not forget, the huge profits earned by the monopolist were flowing into OUR national exchequer. It is indeed a loss that a large amount of money that was reserved for the treasury before will now be shared.

Well, I would agree with you over your objection to the debt servicing from privatization money. I believe, military dictators have created hell in Pakistan's Debt Sector. When they come, they suck a lot of foreign aid and when they leave the civilian governments are left to pay the consequences. We should have a self-reliant economy, independent of foreign debts. Privatization money must go into useful sectors like creating employment opportunity, health, education, clean drinking water etc.

And regarding your suggestion of issuing loans from the privatization money, I would again point out some disadvantages here. Currently we are facing a boom in real estate and vehicle prices. People take loans, invest them in speculative businesses like buying cars and after delivery sell them instantaneously with 'OWN' (premium).

This practice gives rise to inflation. However its the job of economists to set things straight. Giving loans by virtue isn't bad, but we need effective monitoring. We can limit loans for certain areas like agriculture, industry etc.

Any correction is welcome.

Regards,

__________________
"The race is not over because I haven't won yet."

Adil Memon
Police Service of Pakistan (P.S.P)
37th Common Training Program

Adil Bhai, please do not mind of my contentions. I only consider any critical debate as excellent way of learning. This is a good learning forum and we should use it in the best possible way.

Now I come to discussion points:

GDP calculations do not include counting the currency notes. It only include what has been 'produced' by the economy. 'Production' includes capital goods, consumer goods plus any kind of services. Money is not included in production. Availability of extra money however enable us to exchage it for various 'capital' goods due to which future production and therefore GDP can be increased.

In this case we do have temporary increase in the amount of money available to us. Problem is that we are not going to exchange it for capital goods. We are just going to discharge some burden of debt servicing. Lessening of debt burden is equivlent to lessening the burden on the current account only of the government. It has little to do with the over-all GDP of economy as a whole.


Yes previously that money was lying with the foreign investors. But very soon, again this money shall go in the pockets of our foreign creditors. So this temporary availability of extra money only can reduce the burden of current account of government. With this money, no new mill or factory is going to be installed in the country. It means that production level of economy shall remain the same even in the future period.

In this way government budget figures can be improved but over-all economy shall remain at the same level. And this is what is really happening in our country. We have 'improved' budget, foreign exchange and foreign debt 'facts' and 'figures' but the over-all economy is just stagnant. There is no improvement in employment, poverty reduction etc. etc.


It has impact but only on government budget figures. Government Budget is NOT equivalent to the over-all GDP of Economy as a whole. If Pakistan's GDP is 70 billion USD, then government budget is just about 11 or 12 billion USD. The ideal situation is that government should meet all its yearly expenditure out of current years GDP only. By selling capital assets, government is not meeting its current expenditure out of current GDP.

I try to explain it with simple example. I should meet my monthly expenditure out of my salary only. If my salary is lets say Rs.25000, and my monthly expenditure (i.e. total budget figure) is Rs.35000 and I have to meet the extra expenditure by selling my mobile phone set. Here I 'successfully' have met the extra expenditure of Rs.10000. But in real terms, this is no success. I cannot count this Rs.10000 in my 'income'. This amount was not my 'income'. This was just replacement of my old asset with some money.

In this way, we are 'successfully' meeting our current liabilities.



Government's current account refers to "account of one years (fiscal year) income and expenditures OF GOVERNMENT"

lets say in one year government earns total $10 billion through taxation and non-taxation sources. Non-taxation sources include profits of government owned enterprises such as Railways, post offices; then various types of registration fee etc.

In the same year, government has to meet expenditures of $12 billion. Here $2 billion would be referred to as 'current account deficit'.

How to fill this gap .... i.e. what is known as 'deficit financing'.

To fill this gap government can resort to internal and external debt. Lets say government manages to collect $1.5 in this way but still there is a gap of $0.5 billion. Now obviously government shall sale out its old mobile phone and in this way 'successfully' meet the total current expenditure of $12 billion.



No Comments.


Foreign investment in new capital assets shall obviously improve GDP because it would result in 'new' production of goods and services. But foreign investment in our own 'old' capital asset will have no direct impact on GDP. Only in case where we sell our old asset to some foreigner for money and then invest that money in 'new' capital asset, only here there can be any positive impact on GDP. But if we sell our 'old' capital asset to a foreigner for money and then we make payment to another foreigner using that money, here there is no any impact on GDP.

Foreign remittences has different and POSITIVE implication. Foreign remittence is not equivalent to 'privatization' strategy. In the case of foreign remittences, we are not selling our old mobile phone for meeting our current expenditure. Foreign remittence is our valid INCOME using which we can import new mobile phone. Mobile phone is a 'good'. There is an 'intake' of a new 'good' in this case. So foreign remittences do have positive impact on GDP. But this 'foreign remittence' is a separate issue and it has no link with the current discussion topic.

So if amount of money has come from selling old mobile phone and this amount of money is not properly used in any productive asset, then there is no positive impact of this money on the GDP.


Yes huge amount was coming to exchequer but it was all artificial. Responsibility of government is not to just look after its exchequer. Government has to provide its people efficient and economical infrastructure, including communication infrastructure as well. Previously our communication infrastructure was artificially much high than many other countries. So our cost of production was also high etc. etc.



I agree ... Privatization money should have been invested in new capital assets.




I gave this suggestion with the condition that there should be complete transparency in the utilization of that lended money. If there is no transparency, then I also agree with corresponding results which you have pointed out.

Yes there should be effective monitoring of such loans.

Regards!

Khuram

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