GOVERNMENT TO PRIVATIZE 17 PUBLIC SECTOR ENTITIES

UNCLAS SECTION 01 OF 03 ISLAMABAD 003598

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON ETRD EAID EFIN ENGY PK
SUBJECT: GOVERNMENT TO PRIVATIZE 17 PUBLIC SECTOR ENTITIES


1. (SBU) SUMMARY. On November 13, Naved Qamar the newly appointed
Privatization Minister presented the fiscal year 2008-2009
privatization plan to Pakistan's parliament despite severe
disagreement on the subject. The Privatization Ministry has
identified 57 public sector entities for future privatization, 17 of
which it proposes privatizing this fiscal year. END SUMMARY.


2. (SBU) On November 13, Privatization Minister Syed Naveed Qamar
presented the 2008-2009 privatization plan to the Lower House of
Pakistan's National Assembly. The move was made despite severe
criticism of the Government of Pakistan (GOP) earlier this week when
it announced the intent to privatize Qadirpur Gas Field of the Oil
and Gas Corporation of Pakistan. Qamar, however, assured the House
that the government would make a final decision on the privatization
of the Qadirpur Gas Field after reaching consensus in parliament.
Parliament members reminded the now ruling party (Pakistan Peoples
Party) that as the opposition party it used to demand that all
privatizations proposals would be brought before the National
Assembly. The Privatization Ministry has identified 57 public
sector entities for future privatization. The Ministry proposes
privatizing the following 17 public sector entities in the current
fiscal year.


3. (SBU) Heavy Electrical Complex (HEC): HEC is one of the
industrial units of the State Engineering Corporation engaged in the
manufacturing and refurbishment of power transformers, and is
located about 65 kilometers (km) from Islamabad. HEC makes various
types of transformers with a primary voltage range of 66 and 132
kilovolts. In addition, the HEC undertakes repair and refurbishment
of old and damaged power transformers up to 500 kilowatts.


4. (SBU) National Power Construction Company (NPCC): NPCC works on
power projects including extra high voltage transmission lines,
cable networks, low voltage distribution network, substations, power
generation plants, industrial electrification, external lighting of
housing complexes. The services offered by NPCC include survey,
design, and procurement of materials, installation, erection,
testing and commissioning. NPCC's main area of operation during the
last three decades has been Middle East with a concentration in
Saudi Arabia and contracts worth over USD 600 million secured and
completed. It is a public sector company under the Federal Ministry
of Water and Power. The privatization Commission has identified
pre-qualified bidders for the NPCC.


5. (SBU) Jamshoro Power Company Limited (JPC): On August 27, 2008,
Pakistan's Planning Commission decided to invite fresh Expressions
of Interests for the privatization of JPC located in Sindh Province.
JPC was established as a result of the unbundling of Pakistan Water
and Power Development Authority (WAPDA) and was organized to take
over all the properties, rights, assets, obligations and liabilities
of three thermal power stations namely Jamshoro, Kotri and Lakhra
with a total nameplate capacity of 1204 megawatts. The GOP intends
to sell 51 percent of the company's equity, including management
control, to a strategic investor or a consortium while maintaining
49 percent. JPC facilities are located near Hyderabad with key
connections to the national grid for supply to Karachi.


6. (SBU) Pakistan Tourism Development Corporation (PTDC): The PC
intends sale of 25 motels and one restaurant owned and operated
throughout Pakistan by the Pakistan Tourism Development Corporation.
The hotels range from four to 47 rooms and are from 90 km to 1620
km (Karachi) from Islamabad.


7. (SBU) Qadirpur Gas Field (QGF): The GOP plans to sell a 37
percent share of OGDCL's Qadirpur gas field along with the transfer
of operational control. The transaction is temporarily delayed
until consensus is reached in the National Assembly on the sale of
the gas field.


8. (SBU) Larkana Coal Mining Project (LCM): LCM is located 176 km
north of Karachi. The mine is owned and operated by Pakistan
Mineral Development Corporation. It has Sub-bituminous to lignite
type coal reserve of 38.82 million tons at production levels of
185,533 tons per year.


9. (SBU) Hazara Phosphate Fertilizer Limited (HPFL): HPFL is located
in Haripur, North West Frontier Province, 75 km from Islamabad. The

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factory is situated on 57 acres of developed land, and includes
factory, housing and other amenities. HPFL is operating in the
fertilizer industry and manufactures Granulated Single Super
Phosphate fertilizers using a combination of indigenous phosphate
rock from the Kakul mines near the plant and imported rock from
Jordan and Morocco.


10. (SBU) Khewra Salt Mines (KSM): KSM is located in Khewra, Punjab,
about 160 km from Islamabad. It is the second largest salt mine in
the world and attracts up to 40,000 visitors per year. Situated in
the foothills of the Salt Range, in an underground area of about 110
sq. km, the KSM are the oldest mines in the sub-continent. Salt has
been mined at Khewra since 320 BC. KSM has an estimated total of
220 million tons of rock salt deposits. The current production from
the mine is 325,000 tons of salt per year. There are seven thick
salt seams with a cumulative thickness of about 150 meters. At
places the rock salt is 99 percent pure.


11. (SBU) Small and Medium Enterprise Bank (SME): SME Bank is a
public limited company that provides a range of financial services
designed for businesses under 250 employees if a manufacturing
concern, or 50 employees if a trading/service concern. SME has
approximately 630 permanent and contractual employees and 27
branches across Pakistan.


12. (SBU) Kot Addu Power Company (KAPCO): KAPCO is a large
independent power producer, with a power generation capacity of 1600
megawatts. The government transferred management control and thirty
six percent of the total shares to International Power in 1996. The
government now holds 64 percent of KAPCO's total 880 million issued
shares. The GOP plans to issue global depository receipts of KAPCO
in the international stock markets.


13. (SBU) Faisalabad Electric Supply Company (FESCO): FESCO is one
of the nine-electricity distribution companies (DISCOs) established
as a result of the unbundling of the vertically integrated power
division of WAPDA. It was organized to take over the properties,
assets, obligations and liabilities of former Faisalabad Area
Electricity Board of WAPDA. The company was incorporated in March
1998 as a public limited company. FESCO distributes and supplies
electricity to a service area with a population of over 15.5 million
to about 1.8 million customers.


14. (SBU) Printing Corporation of Pakistan Press (PCP): PCP was
incorporated in 1969 as a private printing corporation for the
Federal Government Departments. It is a self-financed private
limited company.


15. (SBU) Pakistan Machine Tool Factory (Pvt) Ltd. (PMTF): PMTF is a
precision engineering goods manufacturing enterprise. It was
established in technical collaboration with M/s. Oerlikon Buhrle Co.
of Switzerland, a manufacturer of machine tools. The factory came
into regular production in 1971. It is located about 35 km from
Karachi City near Landhi Industrial Estate and spread over an area
of 226 acres out of which 17 acres are occupied by works. The
factory employs about 1900 engineers, technicians, workers, and
other service staff. This factory is a unit of State Engineering
Corporation of Pakistan and is engaged in the production of machine
tools, automotive transmissions and axles components, gears for
locomotives, pressure die cast parts, and other products.


16. (SBU) MORAFCO Industries Limited (MFCO): MFCO Industries
manufactures and markets cooking oil and vegetable oil. The company
was founded in 1960 and is based in Faisalabad.


17. (SBU) Services International Hotel (SIH): The government is
inviting expression of interest for SIH located on the valuable
real-estate location of Shahrah-e-Quaid-e-Azam, Lahore with an area
of 113 square feet.


18. (SBU) Sindh Engineering Company Limited (SEC): SEC is a private
limited company in Karachi. It manufactures trucks and spare parts.
SED was taken over from Wazir Ali Group in 1972 under the Economic
Reform Order.


19. (SBU) Peshawar Electric Supply Company Limited (PESCO): PESCO is
one of the nine electricity distribution companies (DISCOs)

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established as a result of the unbundling of the vertically
integrated power division of WAPDA. The company was established and
incorporated in April 1998 as a public limited company. It was
originally organized to take over the properties, assets,
obligations and liabilities of former Peshawar Area Electricity
Board of WAPDA serving North West Frontier Province (NWFP) of
Pakistan including the tribal areas. Subsequently, a new company
Tribal Electric Supply Company Limited was spun out of PESCO in June
2002 for supply to tribal areas of PESCO. The present service area
of PESCO includes NWFP, but excluding the tribal areas. PESCO
distributes and supplies electricity to about 1.5 million customers.



20. (SBU) COMMENT. The GOP's fiscal year 2007-2008 privatization
efforts raised only USD 26 million of the over USD 1 billion goal
due to delays and cancellations. Despite the immediate need for
fiscal resources and government statements regarding the benefits of
privatization, the proposed privatization schedule is conservative
and already encountering strong resistance from the public and
Parliamentarians. END COMMENT.

PATTERSON