Pakistan gives priority to domestic investors as it resumes privatisation drive

ISLAMABAD: Pakistan aims at to raise $350 million from the sale of a stake in Kot Addu Power Company and will also re-launch a share sale in Oil and Gas Development Company (OGDLC) but only to domestic investors, its privatisation chief said.

Chinese companies showed the most interest "by far" in the planned sale of a 40 percent stake in KAPCO during road shows in Istanbul, Dubai and Beijing in October, Mohammad Zubair, Chairman of the Privatization Commission, told Reuters in an interview. He said the government hopes to complete the sale within three months.

The stake sales are part of Pakistan´s privatisation programme, a priority for Prime Minister Nawaz Sharif since he came to power in 2013. A number of them, however, have been delayed but Zubair said the government now wanted to kick start the programme. As well as the KAPCO and OGDLC stakes, it aimed to put at least five companies up for sale in the next six months. They would include Mari Petroleum Company Limited, Small and Medium Enterprise (SME) Bank, First Women Bank Limited and the House Building Finance Corporation, he said.

"The priority is to find local buyers for all these companies," he said. It also plans to re-launch the sale of steel giant Pakistan Steel Mills, after the Privatization Commission approved a 30-year lease structure for the loss-making company earlier this month.

Zubair said Chinese and Iranian companies have shown interest but Pakistani companies like Amerli Steel, Arif Habib Corporation and the Yunus Brothers Group would be given an equal opportunity to bid.

Foreign companies, particularly from China, have expressed keen interest in the privatisations but that has also led to concerns in Pakistan that local companies are being crowded out of the sales. As a result, the government had decided to limit the sale of shares in OGDLC, Pakistan´s biggest energy company, to local investors, Zubair said.

Zubair said Pakistani companies were benefiting from a recent improvement in the economy due to a spike in foreign investment and rising energy supplies. "We strongly believe that there is now enough depth in our economy that domestic investors can raise capital for major big investments," Zubair said.

China is funding $57 billion in planned investment in Pakistani roads, railways and power plants, as well as eying up state assets. "There is a lot of Chinese interest, I think a majority has come from China," Zubair said, when asked about Chinese interest in Pakistani companies up for privatisation.

"There is a lot of concern" from local companies, he added. Among local companies, Habib Bank Limited is interested in buying First Women Bank Limited, while HBL and United Bank Limited are both interested in House Building Finance Corporation, Zubair said.

Dawood Group had shown interest in SME Bank, he said.