Strange things are happening. In times when states are rethinking AAA investments to ensure fiscal sustainability, we are busy disinvesting our prized (perhaps irreplaceable) financial assets and that too at discounted rates. As if this is not foolish enough, our economic managers are shamelessly going on to term these non-prudent disinvestments as successes and touting them as a feather in their caps. Nearly 14 percent of Pakistan Government’s stake in Allied Bank Limited (ABL) was sold off recently at a discount of about 3% from the prevailing market-par through a dubious book building exercise - rationale of this discounted share price being that disposal of large chunks need a ‘sale’ offer to attract large institutional investors. Whatever happened to the age old theory of significant share positions, especially the ones with rights to management position in blue chip firms, carrying a premium? Think about it, if you were to invest in a 1000 yard plot in Defence and then instead decide to invest in a side by side pair of 2000 yards, would you be required to pay a premium or get a discount? In addition if one of these pair plots happens to be a corner-plot, the premium goes up even further!

Further, when it comes to acquiring stakes in key financial institutions, nations very jealously guard their underlying ability cum leverage to govern and regulate national financial markets. For example, the Indian Government still maintains a majority stake in the overall national cover of Indian financial institutions and a control they are reluctant to relinquish in spite of the reins of their Central Bank being in the hands of its new flamboyant Governor, Raghuram Rajan, who hails from and is known to cater to the Freedman mindset advocating a minimized governmental footprint in the corporate world.

Ironically, the champion of Laissez-faire, the US, also comes across as being no different. Post 2008 financial crisis when a majority of icon American banks and financial institutions were in trouble, the US government moved in itself to ensure that ownership of these crucial corporations do not change hands and remain within the old established framework. Offers from Japan, China and the Arab world were shunned as the US treasury was conscious that losing control or providing significant access to foreigners in the all important financial sector would be akin to losing one’s freedom. Likewise, if we recall, a few years back the US Congress’s national security committee had intervened to stop handing over of operational management of seven key American ports to a UAE based firm, citing America’s sovereignty and its security as the principal reasons for doing so.

What this means is that when it comes to banks and financial institutions, other more important concerns override the mere monetary transaction numbers. These concerns relate to: the nation’s sovereignty (freedom to be the master of its own financial markets); regulator’s oversight also from the inside through direct Board representation, a positioning crucial to ensuring an economic management that strengthens good corporate governance and is in the real interests of the people at large; discouraging concentration of wealth by assuring equitable distribution of resources and opportunity; having the necessary leverage to intervene as and when required to control inflation, spur growth or to provide relief when and where necessary; access to the tools and authority to undertake measures to check anti-trust violations and to address conflict-of-interest - Pakistan’s banking sector is already riddled with serious conflict-of-interest issues that violate the basic precaution of avoiding inter-twining of industrial and banking ownerships; safeguarding national currency; and last but not least, in ascertaining the transparency of ownership, since no country would like its underlying financial assets to be controlled by undesirable elements.

When it comes to selling family silver, the debate is always one that ignites passion and generates heat. Privatization is a sensitive topic not only because it affects the present lot but also our future generations - If we clean up the safe today then in more ways than one we are actually making life difficult for our children and putting at stake the very long-term sustainability of our country. And this is why when nations choose to indulge in selective disinvestment or privatization, they are very careful to ensure that the endeavor meets the following objectives cum criteria: a) Generally only those entities are brought to the altar that are either loss making or are in the sectors from which the government wants to exit, b) Their value is determined after factoring in hidden asset values, goodwill, market positioning, net present replacement cost also factored in for environment, incidence of time and a ‘decelerated future returns mechanism’, c) The sale helps employment generation and equitable distribution of wealth/resources in an economy, and d) The sale proceeds are used in a pre-announced transparent manner, which mostly means either using the funds to retire national debt or investing them in projects that guarantee enhanced returns from the ones they were deployed in earlier. Regrettably, the ABL shares’ sale meets none of the above objectives and what is alarming is that similar stakes in an even bigger financial institution, Habib Bank Limited (HBL), are next.         

Finally, privatization drives tend to be big gambles as a wrong call can damage the very fabric that keeps a nation united. For example, one of the many functions of an institution like the national flag carrier, Pakistan International Airlines (PIA), is that it keeps the people gelled together by providing a common identity symbol. Once again, we see this government more interested to do away with PIA than to seriously turn it around. The corporate world is full of airline turnaround stories. In the US, when Delta emerged from bankruptcy, its leaders knew that a full recovery would depend on innovative thinking. They began by instituting an employee profit-sharing program and a unique ownership plan that gave 15% of the company’s equity to pilots, flight attendants, ground crew members and support staff. Thanks to these and other unconventional moves, Delta is now one of the healthiest, most profitable airlines in the world. If Delta, after being in a far deeper hole than PIA can be, was rescued as recently as 2007, PIA can be too.  

The writer is an entrepreneur and economic analyst. He can be contacted at