Investment opportunity: PC approves further share-selling of state-owned units

The Board had already approved the privatisation of Pakistan International Airlines, National Power Construction Company and Heavy Electric Complex. PHOTO: FILE

ISLAMABAD: 

The Board of Privatisation Commission (PC) approved on Thursday to sell significant number of shares owned by the state in two energy sector companies and three commercial banks aimed at raising at least Rs200 billion to pay off the country’s mounting debt.

The Board that met under Privatisation Commission Chairman Mohammad Zubair Umar approved divestment of shares in Habib Bank Limited (HBL), United Bank Limited (UBL), Allied Bank Limited (ABL), Oil and Gas Development Companies Limited (OGDCL) and Pakistan Petroleum Limited (PPL).

The Board had already approved the privatisation of Pakistan International Airlines (PIA), National Power Construction Company (NPCC) and Heavy Electric Complex (HEC).

The Board also allowed the Commission to initiate the process of hiring financial advisors for off-loading shares of these five entities in the domestic and international markets, and constituting Transactions Committees (TCs).

All these companies are considered ‘blue-chip’ and are performing well in the Karachi Stock Exchange. On the basis of present value of their shares, the government has estimated a minimum of Rs175 billion in receipts. However, officially, the PC Board has neither announced the number of shares that will be off-loaded, nor the anticipated price tags.

Since 1991, significant number of shares of all these entities have been sold in the stock markets and the government earned Rs150.3 billion from these five entities in the past, showed the Privatisation Commission documents.

“Let the financial advisor study the market and suggest the number of shares that should be off-loaded”, said PC Chairman Mohammad Zubair while talking to The Express Tribune. He said both the options of going to the international market for issuance of Global Depository Receipts and floating shares in the domestic market were on the cards.

Zubair said the PC Board internally discussed and approved the number of shares of the each company that will be off-loaded. The government will ensure transparency in the process of privatisation and all stakeholders would be taken into confidence, he added.

Under an ambitious privatisation plan agreed with the IMF, the government has announced to privatise 32 entities in what it said is an attempt to reduce losses and retire the country’s total public debt that has crossed the threshold of Rs15 trillion. The capital market transactions are purely meant to retire public debt.

Another PC official did manage to give an idea of the decisions taken by the Board. According to him:

OGDCL

The PC Board approved to sell up to 10% shares of OGDCL out of total 85% shares held by the government. The minimum expected earning is estimated at Rs80 billion, according to officials privy to the discussions. From 2003 to 2007, the Musharraf government sold 15% shares in domestic and international markets in three transactions and earned Rs56.25 billion.

PPL

Out of government shareholding of 78%, the PC Board decided to off load 5% shares. The anticipated earning is Rs20 billion. In 2004, the government sold 15% of PPL shares of at Rs5.6 billion.

HBL

The PC Board decided to sell up to 20% shares of HBL out of total state owned shares of 42%. The expected minimum return is Rs50 billion. From 2003 to 2007, the Musharraf government sold 58.5% shares at Rs34.6 billion in two transactions.

ABL

The PC Board decided to sell the remaining 10% government shares in ABL. The anticipated minimum income is Rs10 billion. In 1991, the PML-N government had sold 51% shares of ABL at Rs971.6 million.

UBL

The Board also decided to sell 10% government shareholding in the UBL out of the remaining 20%. It has expected that minimum Rs15 billion will be raised from the process. Since 1996, the previous governments sold 80.2% state shares in three transactions and earned Rs52.8 billion.

The PC chairman said that the market appetite and availability of capital will be key determinants for off loading the numbers of shares, as the government will not sell shares over and above the market needs in order to get best possible price.

Despite hard times, Pakistan remains a top ship breaking destination

In terms of numbers, the three South Asian countries accounted for 50 percent of ships, but in terms of tonnage, they accounted for 71 percent, Robin des Bois said. PHOTO: AFP/FILE

PARIS: Pakistan, along with India and Bangladesh, remained the market leaders in global ship breaking, with the subcontinent accounting for more than two-thirds of business, a French monitoring group said on Thursday.

In 2013, 1,119 ships went to the world’s breaker’s yards, a decline of 16 per cent over 2012 which was an “exceptional year,” the environmental watchdog Robin des Bois (Robin Hood) said.

The figures “confirm that the ship demolition sector is in good health,” Robin des Bois said.

It is the second highest tally since 2006, when the group began compiling annual reports in an effort to boost transparency in a sector with a contested environmental record.

In terms of number of ships demolished, the three South Asian countries accounted for 50 per cent of ships torn down in 2013.

India, being the world leader, tore 343 ships, or about 26 per cent of total ships demolished.

Bangladesh and Pakistan stood third and fifth in the list with 210 and 104 ships or 16 and eight per cent respectively.

In terms of tonnage, the three South Asian countries accounted for 71 per cent of the worlds scrapped ships. India came in at the top with 2.8 million tonnes or 31 per cent of total metal recycled globally, while Bangladesh and Pakistan accounted for 2.3 million (25 per cent) and 1.4 million (15 per cent) respectively.

India headed the list in both categories, but China was also a big player, ranking second in the number of ships that it demolished and third in terms of tonnage. Pakistan came in fifth (by number of ships) and fourth (by tonnage).

Turkey captured a significant market as it came in fourth by number of ships, tearing down 136 ships (10%) and fifth by tonnage with 514,000 tonnes (six per cent).

Of the 1,119 ships, 667 were scrapped after being held at ports, along with their crew, for failing to meet international safety standards, the report said.

“Port inspections are playing a solid role in cleaning up the world’s merchant fleet,” it said.

Roughly a third of ships that were broken up were bulk carriers, while container ships accounted for one in six – a sharp rise over the last six years.

According to the report, out of 1119 ships that were scrapped in 2013, 387 were bulker, 245 cargo, 180 container ships, 164 containers and 39 Ro Ro.

Environmental concerns

South Asia has long been a graveyard for merchant ships, but it also carries a reputation for poor safety and environmental hazards.

The European Union has approved regulations requiring large EU-flagged vessels to be recycled at approved facilities.

Robin des Bois described the intention as “pious,” given that only eight per cent of such vessels were scrapped at European yards in 2013, and many European ships were given a flag of convenience by their owners for their last voyage.

Market share: Wireless takes over fixed line networks, PTA report reveals

The growth of the WLL sector, according to the data, was supported by the broadband sector, which recorded a 30% YoY growth in FY13. PHOTO: FILE

KARACHI: 

As a sign that Pakistan is trying to keep pace with the global trend, wireless technology took over fixed line networks for the first time in the country, revealed Pakistan Telecommunication Authority’s annual report for the fiscal year 2013 (FY13).

The combined subscriber base of Fixed Local Loop [cable network] and Wireless Local Loop [wireless network], the report said, grew by 8.7% to reach 6.38 million at the end of June, 2013.

“Wireless technologies have finally taken over the leading position in the market with 59% share, while fixed line technologies hold 41%,” the telecom regulator said in the report.

According to a sector-wise analysis by PTA, the WLL sector added 473,737 new subscribers to reach 3.3 million at the end of FY13, which translates to a 16% year-on-year growth. The FLL sector, however, grew its subscriber base by a meager 1% during the same period to end at 3 million.

Pakistan Telecommunication Company Limited remained the main contributor with more than 95% share in the FLL subscriptions and 37% share in the WLL market.

The local loop sector performed well to help the combined teledensity of both FLL and WLL services reach 3.6% at the end of FY13, up from 3.3% in FY12. The WLL sector was the main contributor, increasing its penetration to 1.87% in FY13, up from 1.7% in the previous fiscal year.

“This huge addition of subscribers by WLL sector has brought a new lifeline to the local loop sector – which includes both WLL and FLL sectors,” the PTA said. “Hopefully, the growth pattern will be sustained in the years to come.”

After five years of continuous decline, the penetration of the local loop sector reversed, which is a healthy sign for the sector, added the PTA.

The growth of the WLL sector, according to the data, was supported by the broadband sector, which recorded a 30% YoY growth in FY13.

More than half a million, 620,344 to be exact, new subscribers joined the broadband platform in the last fiscal year, according to PTA statistics. The total number of broadband subscriptions reached 2.72 million at the end of FY13.

The broadband penetration level remained low at 1.52% but the growth of wireless technologies was an encouraging sign for the sector, added the authority. “The growth pattern of broadband industry in Pakistan is typical of any market as the growth starts to drop as the subscriber numbers moves up the ladder. However, the satisfying thing is that the average annual growth rate is still above 100% in the broadband sector.”

Meanwhile, Parvez Iftikhar, an expert on information communication technology, said the technological shift is in line with the global trend. “The wireless technology has evolved so much that the cable one, such as the copper wire or fiber-to-the-home (FTTH), have become less important, at least for voice services,” said Iftikhar.

He added that copper has become expensive, leading to higher infrastructure costs. The laying of cable network is also problematic, he said. Wireless network, he said, serves as a good alternate.

He, however, added that wireless technology took over the fixed line networks over a decade ago – a cellular phone is also a wireless technology, he said.

“If we talk about voice service, wireless technology surpassed fixed line a long time ago but in terms of data service, it may have happened recently,” Iftikhar said.

Pakistan’s guar is as good as India’s, says agribusiness investor

$152m was the amount fetched from export of guar and guar products in 2011-12. ILLUSTRATION: JAMAL KHURSHID

KARACHI: 

Indian and Pakistani farmers growing a lesser-known crop called guar or cluster bean made a lot of money in 2012. A surge in global demand on the back of guar’s use in shale fracking pushed up the price manifold. Farmers were netting more profit than they would by planting paddy or even cotton.

In India, which meets 85% to 90% of global guar demand, it was given the status of a cash crop as more and more area came under plantation.

But while business magazines and newspapers were sharing stories about the crop changing lives of poor farmers in Indian Rajasthan, little was said about Pakistan, which meets 10% to 15% of world’s supply.

However, that is about to change.

“Traders are under the impression that our guar is somehow inferior to India’s,” said Aamer Sarfraz, the founder of Indus Basin Holding, which invests in agribusiness. “We have scientific evidence that this is not the case.”

His company United Guar, which was set up in 2012 in Islamabad, is already exporting guar gum, which is basically seed in powder form.

Besides being backed by investors like Tim Draper, one of the leading venture capitalists in Silicon Valley, United Guar has now successfully raised capital from China’s leading private equity firm, IDG Capital and Baron Lorne Thyssen, a prominent European industrialist.

United Guar runs a state-of-the-art plant in Faisalabad. And now it has Halliburton’s veteran Dr Lewis Norman on board as VP technology.

Pakistani traders complain that they get a low price because of low viscosity in their guar. However, Sarfraz says that’s ‘all nonsense’.

“In a test carried out in a leading US oil and gas lab, it was found that samples of Pakistani guar seed can in fact produce a premium grade gum,” he said.

Guar gum is made from seeds and it is increasingly being used by oil and gas drilling companies, which need high viscose material like the guar gum to crack open shale formations to allow petroleum to flow.

This drought-tolerant crop, grown almost entirely in the subcontinent, has traditionally been used as animal feed and a vegetable.

Pakistan expected harvest of over 250,000 tons in 2013, highest in 18 years, after more land came under cultivation following a spectacular rise in price in the last two years, traders say.

“The problem is not with our seed. The processing facilities are old here and that is what undermines the quality,” he said.

Pakistan has 11 companies making guar split with Pak Gum Industries being the largest producer. Most of the processing facilities are 20 to 30 years old.

Already dealing with a network of rice farmers under a contract farming arrangement, Sarfraz says the same approach is being made to cultivate long-term relationship with guar growers.

“It is really a poor man’s crop. Some of the big farmers actually rebuked us for even suggesting that they should grow guar,” he said.

The company is building a network of growers by paying them on time, eliminating the role of intermediaries, supplying the inputs and compensating for the transportation cost. It is specifically focusing on Thal region.

Sarfraz has initially set a target of exporting 30,000 tons of guar gum.

Guar and guar products’ export from Pakistan was just $29 million in 2006-07. It shot up to a record high of $152 million in 2011-12 before coming down to $139 million, still more than many other items.

It is hard to estimate the exact size of the cultivated area as guar is sown in far-flung arid and semi-arid areas of Punjab, Sindh and Khyber-Pakhtunkhwa. Most of the production comes from Sargodha and Tharparkar.

But according to the Pakistan Bureau of Statistics, guar was cultivated over 154,821 hectares in 2008-09.

Gaining ground: German textile event yields order bonanza

222 textile exporters of home textile bed-wear and towel manufactures displayed their products in the exhibition. PHOTO: FILE

FAISALABAD: 

Pakistan Textile Exporters Association (PTEA) Chairman Sheikh Ilyas Mahmood said exporters are expecting to get foreign orders worth $1 billion from Heimtextil as the Pakistani commodity has been an attractive one on the opening day of the world’s largest home textile event in Germany.

While talking to members of the association on Thursday, Mahmood said that though Pakistani exhibitors were fewer this year than compared to the previous years, they got a positive response from international buyers.

“Heimtextil holds a great importance for Pakistani textile exporters,” said Mahmood. “Retailers around the globe visit this fair for new fashion trends and to place their orders for the upcoming spring season.”

World’s renowned departmental stores like Walmart and JC Penney also stock their inventories through this exhibition.

Pakistan has been a big participant of the Heimtextil for the last several years and has been earning foreign exchange every year by getting export orders through this event. This year, 222 textile exporters of home textile bed-wear and towel manufactures displayed their products in the exhibition.

Mahmood termed the GSP Plus status as a great edge for Pakistani textiles and said that the duty-waiver facility has provided great support to the exporters, enabling them to compete well with regional rivals in the international market.

“At the opening day of the exhibition, our exporters were confident, while the rival exporters failed to receive a response. However, Chinese exporters are a tough competition to the Pakistanis.

“Despite deceptive propaganda that Pakistani exporters could not fulfill their export commitment on time due to energy shortage, Pakistani textiles have received positive response from the buyers.

“We have introduced new designs and products to our customers for quality checking and they showed interest to place new orders.”

Mehmood said the textile industry constitutes a large share of Pakistani exports and have the ability to support the sagging economy of the country. “With better access to the EU market, Pakistan is expecting to achieve $14.5 billion of textile exports by the end of fiscal year 2014.

Availing opportunities: China’s RUYI to invest in Pakistan

RUYI group chairman Yafu Qiu in a meeting with Prime Minister Nawaz Sharif at the PM House. PHOTO: PID

ISLAMABAD: 

RUYI, a Chinese company, is planning to invest $2 billion in Pakistan’s energy and textile sectors in the next two years, informed the group chairman Yafu Qiu during a meeting with Prime Minister Nawaz Sharif at the PM House.

During the meeting, the chairman said his company will construct two coal-fired power plants in Pakistan each having a power generation capacity of 300 megawatts.

Meanwhile, the prime minister said Pakistan is one of the emerging economies of the world and the government is making structural reforms to make it more attractive for local and international investors.

“Pakistan provides ample investment opportunities in the energy infrastructure and textile sectors,” he said.

The premier added that the government was pursuing investment-friendly policies that attract worldwide investors, including China. He said the investment will not only create job opportunities for the skilled youth but will also introduce new technology in the textile sector.

“After getting the GPS Plus status, Pakistan has become an attractive destination for investment in the textile sector,” said the RUYI group chairman.

He added that Pakistan has a booming textile sector and, in order to take advantage of the available opportunities, his company had planned to invest in the textile sector besides its production of high quality yarn.

He said that they were encouraged by the support and assistance provided by the government of Pakistan. Governor Punjab Chaudhry Muhammad Sarwar and Chairman Board of Investment Mifta Ismael were present during the meeting

German discount grocers Aldi, Lidl bite into profits of UK retail giants

Britain's biggest supermarket group Tesco reported Thursday that crucial Christmas sales had dropped substantially. In the six weeks to January 4, sales in its home market declined 2.4 percent compared with the same period a year ago, Tesco said.

Further weakness in the UK grocery market continued to impact Tesco's performance, Chief Executive Philip Clarke noted.

Tesco's results for the all-important Christmas season came one day after Britain's second largest retailer Sainsbury announced shallow sales with gains of just 0.2 percent around Christmas. Sainsbury blamed tightening consumer budgets amid austerity for the drop.

To add to the gloomy picture, WM Morrison issued an unscheduled trading update in which it revealed a sharp fall in like-for-like sales over Christmas and said its full-year profit might come in at the bottom end of market expectations.

Britain's fourth largest supermarket chain was hit especially hard by the growth of German discount grocers Aldi and Lidl. On Tuesday, both retailers said they enjoyed record trading.

Although it has not disclosed sales figures, Aldi said it recorded its busiest Christmas since opening in Britain two decades ago. For Lidl, Christmas shopping at its 600 nationwide stores was the best to date.

Industry data published by Kantar Worldpanel in December showed that more than half of Britain's households shopped at Aldi or Lidl in the previous two months. As a result, the combined market share of the German grocers grew to 6 percent at the end of 2013