KARACHI - The Federal Government has been advised to privatize the Industrial Development Bank of Pakistan (IDBP) in order to improve its performance and make it more viable. The seasoned bankers and industrialists have warned the government that it would lose its credibility within the financial and manufacturing sectors if it closed the IDBP, which is one of the oldest Development Finance Institution (DFIs) in the public sector. The government has come under fire from all banking and industrial stakeholders over its plan to start the process of winding up the IDBP due to reporting heavy losses caused by huge write-off of loans. The government should sell the entire assets of the IDBP to a strategic investor through auction as the IDP deals with development banking business and commercial banking business and it has both types of banking licenses. If the government seriously considers the potential sale of its ownership in any international group, then it could not only boost the working of the IDBP, but bring a needed foreign investment in the country, said a senior banker. In addition to that, it would also help to bring full transparency into the functioning of the institution ranging from credit disbursement to loan recovery process, he added. Contrary to this recommendation, the well-placed sources in the Ministry of Finance and banking sector indicated that the IDBP is likely to be merged into the National Bank of Pakistan just like the National Development Finance Institution, another DFI, had merged into the NBP earlier. Johar Ali, Chairman Korangi Association of Trade and Industry, said the experience of financing the industrial sector through a public-owned development finance institution, instead of a commercial bank, has proved very effective in many developing countries of the world. However, the role and performance of DFIs is more debatable in Pakistan. It might be mentioned here that the government had decided the restructuring of the IDBP in 2003, but SBP recommended its bankruptcy. Since then, no decision has been taken so far. According to the reports, the cabinet in its recent meeting decided to do so in view of a report submitted by the State Bank of Pakistan (SBP) as convener of a committee formed to fix responsibility on people who caused losses to the bank from 1971 to 2009. The committee informed the cabinet about various reasons that resulted in bad loans and write-offs. It is pertinent to mention here that the IDBP was created with the primary objective of extending term finance for investment in the manufacturing sector of the economy. IDBP is wholly owned by Government of Pakistan with 57 per cent of its shares held by Federal Government, 36 per cent by State Bank of Pakistan and 7 per cent by Provincial Governments and other Public sector corporations. Its Board of Directors consisting of the representatives of private sector is appointed by Ministry of Finance, Government of Pakistan.