FOLDER - Privitization in Pakistan (09/2002)

Pakistani_Tiger · October 18, 2002, 11:59pm

ISLAMABAD: On receipt of full payment Privatisation Commission has finalised all arrangements for handing over United Bank Limited to the highest and the successful bidder the Consortium of Abu Dhabi Group (UAE) & Bestway Holdings Limited (UK) on Saturday.

PC had received the highest bid of Rupees twelve billion and thirty five hundred million for 51 % GoP shares in United Bank Limited (UBL), which was approved by the Cabinet Committee on Privatisation (CCOP) also.

**UBL is a historic and landmark transaction for the country, which will pave the way for other upcoming transactions being scheduled for the near future and will have a positive impact on them. **

UBL transaction promotes the broad policy objectives of the Government, which inter alia envisage the private sector as the engine of economic growth and employment.

**UBL’s privatisation would develop a sound and efficient banking system with the capacity to mobilize savings effectively and allocate them to the most economically productive uses. UBL’s importance within Pakistan’s financial landscape cannot also be overemphasized, as it is the 4th largest Bank in Pakistan. **

It has a 9% market with 1,101 branches across Pakistan as well as a valuable franchise of 16 international branches in the USA and the Middle East, with a subsidiary in Switzerland, rep offices in Egypt and Iran and a 55% stake and management control in a UK based joint venture with 7 branches and a 25% stake in a joint venture in Oman. UBL today is a bank with a remarkable turnaround story.

PJ · October 19, 2002, 8:08pm

This process has to be excellerated, that is the only medicine for loss making public enterprises

Pakistani_Tiger · October 20, 2002, 2:13pm

UBL Management Handed Over To UAE-UK Group

ISLAMABAD: The Privatisation Commission on Saturday handed over the management of the United Bank Limited (UBL) to the Consortium of Abu Dhabi Group (UAE) and Bestway Holdings Limited (UK).

The sale agreement for the transfer of 51 per cent shares of the UBL was signed by Minister for Privatisation Altaf M Saleem and Chairman of the Consortium Sheikh Nahayan Mubarak Al Nahayat, here on Saturday.

Finance Minister Shaukat Aziz, Law Minister Khalid Ranjha, Interior Minister Moinuddin Haider and senior officials of ministries of finance and privatisation also attended the ceremony.

Speaking on the occasion, Finance Minister Shaukat Aziz said the country has received $600 million from the privatisation proceeds, during the last three years. “Ninety per cent of the proceeds would be spent on debt retirement, while the rest of 10 per cent to be spent on poverty reduction.”

He said the privatisation process is part of the government’s structural reforms programme that has brought economic stability in the country. He expressed confidence that the new management of the bank would convert UBL into a top-class professional institution.

The Minister for Privatisation, Altaf M Saleem, said the UBL transaction has brought $209 million for Pakistan. “The sale shows confidence of overseas investors in our economy,” he added.

He said that the transparent transaction would also encourage other investors to make investments in the country. “It will also open opportunities for Pakistani investors to borrow money at more competitive rates,” he added.

The UAE Minister for Education and Chairman of the Consortium, Sheikh Nahayan Mubarak al-Nahayat, said through UBL, the UAE would make more contribution towards development of Pakistan and progress of its people. “This transaction reflects close friendship between Pakistan and the UAE.”

He lauded the economic policies of Pakistan saying that the reforms have brought stability to the economy of the country and has developed investors’ confidence. Chief Executive Officer of the Bestway Holdings, Sir Anwar Pervez said that the consortium would run UBL on modern professional lines. He said the new management has no immediate plan to close any branches or lay off any staff. All recruitment, transfers and promotions in the bank would be based on merit alone."

He said they are committed to long-term progress and prosperity of Pakistan and wish to play their due role in this regard. “We have resolved to improve the level of services to all the existing and future clients of the UBL,” he added.

APP adds: The UBL is the forth largest bank in Pakistan. It has a nine per cent market with 1,101 branches across Pakistan as well as a valuable franchise of 16 international branches in the US and the Middle East, with a subsidiary in Switzerland, rep offices in Egypt and Iran and a 55 per cent stake and management control in a UK-based joint venture with seven branches and a 25 per cent stake in a joint venture in Oman.

Pakistani_Tiger · October 21, 2002, 6:44pm

New Management Gets Control of UBL

Pak economic recovery has begun’

Consortium chairman says world has regained confidence in Pakistan’s economy
Shaukat Aziz says govt’s economic revival plan yielding results
$600m received from privatisation

ISLAMABAD: Sheikh Nahayan Mubarak Al-Nahayan, chairman of the consortium of the Abu Dhabi Group (UAE) and Bestway Holding, on Saturday said Pakistan’s economy had started picking up which was why the consortium had bought 51 percent stake in the United Bank Limited (UBL) along with its management control.

Sheikh Al-Nahayan was speaking during the signing ceremony for the transfer of the UBL management.

“This is a turning point in the bilateral relations between the United Arab Emirates (UAE) and Pakistan and this should be considered as another strong base for future endeavours,” he said.

Altaf Saleem, federal minister for privatisation, and Sheikh Nahayan Mubarak Al-Nahayan signed the sale agreement for the transfer of 51 percent UBL shares and management.

Federal Minister for Finance Shaukat Aziz, Interior Minister Moinuddin Haider, Law Minister Khalid Ranjha, attorney general of Pakistan, UAE Ambassador to Pakistan Ali Saeed Al-Shamsi and Sir Anwar Pervez of Bestway Holdings Limited (UK) were also present o the occasion.

“My presence here is a testimony to the confidence which the world has regained in Pakistan’s economy and I am confident that more foreign investment would find its way into Pakistan,” Al-Nahayan said.

Speaking on the occasion, Altaf Saleem said the formal transfer of share, which marks the conclusion of the UBL transaction, would send positive signals to the investors in the country and abroad.

“This investment of $209 million for the purchase of 51 percent stake along with management transfer of the UBL shows the investors’ confidence in Pakistan’s economy and the government’s growth-oriented policies,” said Altaf Saleem.

The Privatisation Commission chairman said there were many more opportunities for the investors and the commission was offering a level playing field to all the investors to come forward and invest in the country.

“The UBL is a historic and landmark transaction for the country, which would pave the way for other upcoming transactions being scheduled for near future and would have a positive impact on them,” he added.

Finance Minister Shaukat Aziz said the government had started on a journey of economic revival through restructuring and instituting reforms three years ago “and today it gives me great pleasure to witness the fruits of the efforts”.

“Including the UBL (transaction’s) money, the government has received almost $600 million as privatisation proceeds and as we have pledged that 90 percent (of the proceeds) would be used for debt retirement and the remaining 10 percent for the poverty alleviation programmes,” Aziz said.

He, however, warned that the expectations would be higher from the new UBL management and hoped they would keep all the stakeholders on board for smooth functioning of the bank in the future as well.

Sir Anwar Pervez said the Abu Dhabi Group had joined hands with the Bestway Group to acquire the controlling shares in the UBL.

“The decision of the UAE Group to invest in Pakistan shows their confidence in the positive business prospects in our country,” Pervez said, adding, “The UAE Group already has its presence in Pakistan’s banking industry in the shape of Bank Al-Falah.”

“The two groups intend to make UBL an economic force of Pakistani community by upgrading, refurbishing and modernising the domestic and international network of branches to increase the amount of foreign remittances through the official banking channel,” Pervez said.

Later, the handing over of the UBL management to the consortium took place. The Privatisation Commission had received the highest bid of Rs 12.35 billion for 51 per cent shares in UBL. Amir Zafar Khan, president of the UBL, senior officials of the State Bank of Pakistan, ministry of finance, Privatisation Commission, Securities and Exchange Commission of Pakistan, Members of the PC Board and other dignitaries were also present on the occasion.

Pakistani_Tiger · October 22, 2002, 2:30pm

EDITORIAL: Privatisation Must Forge Ahead

Last week’s handing over of United Bank Limited to the consortium of Abu Dhabi Group and Bestway Group is a major economic achievement of the current regime. The Rs 12.35 billion deal is the first major privatisation transaction to be completed since Muslim Commercial Bank and Allied Bank were sold in the early nineties. But UBL’s sale was not a painless process. In fact, it finally took place after considerable controversy and delay. And although this government’s performance on the privatisation front has been better than that of previous regimes — in addition to UBL, a handful of small transactions have also been completed — the Privatisation Commission’s calendar for the sell-off of state assets has been revised several times over. The target of selling Pakistan Telecommunications Company Limited (PTCL), Pakistan State Oil (PSO), Habib Bank and Karachi Electric Supply Corporation by December and amassing $2 billion in the process has not yet materialised. Now it seems that the process will be subject to even more severe delays.

Already Mr Altaf Saleem, the outgoing chairman of the Privatisation Commission, has said that a delay of two months in the privatisation of PTCL, PSO, Sui Southern Gas Company (SSGC), Sui Northern Gas Pipelines Limited (SNGPL) and WAPDA should be expected for political reasons. In our view, he is being overly optimistic. We don’t think that a single major transaction is likely to completed before June next year. And even that will only be possible if three critical conditions are met.

First, a conducive environment must be created for foreign and domestic investors to participate in the bidding for these state-owned corporations. This means, before anything else, an environment of domestic political stability and regional peace. For this, significant and sustained de-escalation of tensions with India will be necessary. And a smooth and transparent transition to a new government which is forecast to complete its term in office is also critical. Already, this year’s privatisation programme was dealt a major blow by successive incidents of violence against foreigners in the county. The murder of U.S. journalist Daniel Pearl in January was followed by the bomb attack near the Sheraton Hotel in Karachi and the bombing outside the U.S. Consulate soon after.

Building the right environment will also necessarily involve a continuation of this regime’s economic reform programme. Continuity will send the right signals to unnerved investors both here and abroad that the clean-up started under the IMF programme in 1999 is set to forge ahead to the next level where growth is spurred in the economy and debt is further contained.

Second, unlike the UBL case, the privatisation process itself must be unwaveringly transparent and consistent. The botched sale of UBL has not escaped the attention of potential buyers and is not being looked upon well by either local or foreign investors. In the first bidding Muslim Commercial Bank bid Rs 8 billion for the bank and won the bidding since the consortium of Bestway and Abu Dhabi Group offered Rs 4.8 billion. Then the PC asked the bidders to increase their offers to match a reference price of Rs 11.8 billion. The MCB complied but the others did not. However, just when the bank was about to be handed over to MCB, the Abu Dhabi group jumped in and upped the offer. When MCB refused to concede the appropriateness of an auction instead of bidding according to the rules of the game, the government handed the bank over to the Abu Dhabi group. Another messily executed transaction like this one could send the wrong signal to many potential investors.

Third, the new government will have to institute an effective financial clean-up within most public sector organisations. Many institutions currently on the selling block, especially KESC and WAPDA, are unattractive to investors because they are running in the red with corrupt, inefficient managements. But inspiration can come from the reform of the three big banks, all of which were unmanageable behemoths with bleeding balance sheets and have now become organised, professionally managed, profitable concerns which are giving foreign banks here a real run for their money. Unless the new government can tackle the massive line losses at both the electric utilities, which top an appalling 40 per cent, little progress is likely on these transactions.

But there are some small positive signs. General Pervez Musharraf is taking a personal interest in expediting the sale of PSO, with many issues relating to its sell-off having been resolved. Indeed, equity investors are holding their breath in anticipation of the sale of this all-time investor favourite at the stock markets. In the banking sector too, the over-subscription of National Bank’s second public issue just days before the election is an encouraging sign. And Finance Minister Shaukat Aziz said this week that all remaining banks would be privatised by the middle of next year.

The privatisation programme was originally aimed at retiring expensive debt. But now that the coffers are under less strain because of substantial debt re-profiling, it could help initiate desperately needed poverty eradication programmes. That is why it is imperative that the new government should forge ahead with the programme in proper political and economic conditions.