Articles of the year 2005

Due Diligence
Published on November, 03rd 2005

The Minister of Privatization Dr.Hafeez Shaikh, has restored the faith one had in his capabilities, and the trust reposed in him by the President. The KESC deal has been finalized after some major hiccups, what with one Arab party backing out, and another one stepping into the breach. The prices achieved by the Privatization Commission are in themselves a tribute to a successful marketing strategy, and brilliant salesmanship by the Doctor.

The surprising part is that in both the KESC, and the PTCL bids, the successful candidates showed a serious lack of non-professionalism after the bids had been opened. Surely due diligence had been exercised by the contenders, for this was not a fish market, and the diligence had been done by some very highly qualified companies –and paid very well for this service. For the buyers to then have second thoughts smacks of an attempt to an unlawful gain, and would damage greatly the credibility of the Privatization process. This has been pointed out by senior Bankers such as Shaukat Tarin the head of Union Bank –on Television the other day. And rightly so. The whole bidding process could be jeopardized by the successful buyers in not fulfilling their part of the completion, for if allowed to withdraw without a high penalty, or to extract further concessions from the Government, the other bidders would have every right to cry foul. The harm done to Pakistan, would be far greater than the amounts in question. Walking away from the deal is their option, but it should not be cheap. I would like just for a moment to consider what would happen to a Pakistani bidder if the positions were reversed.--- in a word—unthinkable. Having entered the International field, we must learn to play by the rules, for that is what they're for. With Transparency International putting Pakistan at the bottom of the Corrupt table yet again, it is a matter of pride that one Ministry has indeed achieved the best result and attracted some very high profile players, each a success story and market leader in his field. Under the circumstances, the Privatization process being open, and very carefully monitored it would be indeed a great disservice to Pakistan if there is any deviation from the rules. The Pakistani bureaucracy has a knack of 'adjusting' the rules, but this time there are too many big players sitting on the sidelines, who would surely not allow any such favours.

These two deals are now even more important for they will encourage others to come forward knowing that they will not be unfairly dealt with nor will they be allowed to do so . Our corporate culture needs the fear of transparency to keep them honest. To compromise transparency in this instance will certainly do much damage for the future transactions that are in the pipeline. PSO and Pakistan Steel are two mega projects, that are earmarked for privatization, and the buyers who are already lining up, are watching carefully the events that are unfolding over the two latest deals which must be successfully closed to safeguard our credibility, something we desperately need. This transparency becomes threatened when our Stock market continues to climb even during a crisis that has shaken Pakistan to its roots. I am sure if the Ayah of one of our big five dealers caught a cold the market would dive, yet here we are witnessing a bull run over the last 20 days as if nothing untoward had happened in the country, and all was indeed well. But that is the way of business in this country, and the Stock market is paying heavy consience money to the Presidents earthquake relief fund, to make up for the unfeeling behavior of the market itself. In any case, the sanctity of the open bidding is something to be protected, lest the whole system be derailed. Pakistan has a position to be defended. We are putting on the block the family silver,and there are many against this move, and especially PTCL that is a money earner, and one that can easily pay its own way—but for the bureaucrat. In other countries it is PTCL's equivalent that is cash rich, and is the buyer. Eitesalat, Singtel, China telecom, are all their local PTCLs. We should be buying out the smaller companies, or at least bidding for them. Instead PTCL is on the block. Well God bless it. But if the Arabs do baulk, then PTCL should remain in Pakistani hands, private hands this time, minus the bureaucratic stranglehold, and I am sure they will be in a position to mount a bid for Eitesalat itself!