The privatisation of United Bank (UBL) failed to take place as scheduled on 29 January, raising questions about the whole privatisation process. Faysal Islamic Bank of Bahrain informed the Privatisation Commission that it would not be submitting a bid. The Bisharahil group of Saudi Arabia sent a bid lacking the required bond, rendering the bid invalid. Faysal Islamic Bank had warned that it would pull out of bidding if the government failed to provide a package to compensate for the bank’s Rs 20,000 million ($585 million) bad loans portfolio (MEED 2:2:96).
A second major privatisation, the sale of Pakistan Telecommunications Corporation (FTC), looks set to miss its schedule. The completion date of 31 March is likely to be missed by at least six weeks, according to government sources.
Anxious to please the IMF, the government has set itself an ambitious programme for 1996. Sui Southern Gas Company, Sui Northern Gas Pipelines, Oil & Gas Development Corporation, Bankers Equity, and Habib Bank are all scheduled to go to the private sector in 1996.
The overall plan also includes textile mills, power stations, and cement and fertiliser plants. The IMF wants the government to use the proceeds to retire some of its debt and reduce the growing cost of debt servicing.
However, critics of the privatisation programme have said that the government will find it difficult to generate interest simultaneously in all the companies on offer.
They also identify a need for more careful planning and realistic pricing.
The Privatisation Commission has announced that the two bidders for UBL are to have two more weeks to submit valid bids. However, there has been no commitment to compensating the bad loans.
If no satisfactory bids are received the government will have to consider the remaining two options: to reopen the bidding process or abandon the privatisation.
Either way, analysts say, confidence in the whole programme has been severely shaken.