Govt invokes nationalisation order

ISLAMABAD:

The bureaucracy is trying to take over management of a publicly listed company by invoking the “notorious” 53-year-old Nationalisation and Economic Reforms Order of Zulfikar Ali Bhutto that torpedoed the economy, revealed proceedings of a parliamentary committee meeting.

In order to stop further destruction of Pakistan Engineering Company (PECO), the existing shareholders complained to Prime Minister Shehbaz Sharif and Special Investment Facilitation Council (SIFC) National Coordinator Lt General Sarfraz Ahmad, Arif Habib, one of the key shareholders, told the National Assembly Standing Committee on Privatisation on Tuesday.

The State-Owned Enterprises (SOEs) Act empowers boards to appoint managing directors of government-owned companies but the government wants to exercise this right in case of a public listed company by invoking the Nationalisation and Economic Reforms Order of 1972, revealed Arif Habib, who owns a 25% stake in PECO.

PECO affairs have to be managed under the Companies Act 2017. Then president Zulfikar Ali Bhutto had promulgated the Nationalisation and Economic Reforms Order in 1972 to nationalise industries. This is considered a key reason behind the destruction of Pakistan’s private sector and it took 20 years before former prime minister Nawaz Sharif liberalised the economy.

“I explicitly conveyed to the board of directors that the company’s affairs have to be governed by Economic Reforms Order 1972,” said a letter written by a joint secretary of the federal government.

Pakistan had enacted the SOEs Act in 2023 as part of its commitments to the World Bank and the International Monetary Fund to free public sector companies from the clutches of bureaucracy and politicians.

Habib said that he had taken up the matter with the prime minister and SIFC’s Lt General Sarfraz Ahmad. On Tuesday, he also met Minister for Economic Affairs Ahad Cheema on the instructions of the PM.

The hurdles created by the bureaucracy in smooth functioning of the economy and businesses were one of the reasons for setting up the SIFC – a hybrid civil-military body.

Privatisation Commission Secretary Usman Bajwa said that the cabinet had decided in August last year to place Peco on privatisation list.

PECO has been part of the privatisation programme since the 1990s and yet the small company could not be privatised, said Arif Habib.

Bajwa said that until the issue of selling 23% shares by National Investment Trust (NIT) in the stock market back in 2003 remained unresolved, the entity could not be privatised. He added that in July 2023, the Cabinet Committee on Privatisation had set up a three-member secretaries committee to resolve the share sale issue but its report had not yet been finalised.

The mentioning of just two examples – the 2003 alleged illegal share sale and the 2023 secretaries committee underscores the bureaucracy’s attempts to maintain the status quo.

The SIFC last month removed a federal secretary, who did not move a summary seeking permission of the Economic Coordination Committee (ECC) for export.

NIT, in which the government has only 8.9% shares, had offloaded its 23% shareholding in PECO, which the government termed illegal. In 2004 – a year after the sale, Arif Habib bought those shares and he currently holds 25% shareholding.

Usman Bajwa said that the Ministry of Industries had not provided clarity on the sale of 23% shares and “terms it an illegal transaction”. “We are not proceeding with PECO privatisation until this 23% sale issue is resolved,” he stressed.

“People say Pakistan is not progressing. Can it progress when small issues like the sale of shares remain unresolved for decades,” questioned Arif Habib.

He mentioned that the National Accountability Bureau (NAB) conducted two separate inquiries on the sale of shares and gave the clean chit.

“The government does not feel and raise the real issues the company is facing, which are either privatisation or its revival,” said Arif Habib.

There used to be a time when the company had 25,000 employees and the Chinese PM visited it in 1964, but now it has been restricted to two plots, he said.

Habib pointed out that the government “appoints managing directors, who do not know the basics of PECO business”. One MD did not even know the price of electric towers and sold them below production cost, he added.

The financial crisis follows years of catastrophic mismanagement under former MD Mairaj Anis Ariff, a nominee of the Ministry of Industries whose tenure saw the company incur losses exceeding Rs1.2 billion, according to the board.

Standing Committee Chairman MNA Farooq Sattar said that PECO could not be left in the current state of affairs and the Ministry of Industries should have proved its case before NAB. He told the Privatisation Commission to resolve all outstanding issues in the next 40 days.

Sattar said that the government should find a solution to the payments owed by PECO. Arif Habib proposed that the government could recover its loans by selling one property located in Lahore.

The government should also make a decision whether it wants to privatise PECO or revive it. Arif Habib called for setting up a garments city on the piece of land in Lahore. The company has a monopoly over manufacturing high-voltage transformers, provided it is revamped.