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Power to be handed over to caretaker set-uP in august, says PM shehbaz
Profit
Friday, 14 July, 2023 I 25 Zil Hajj, 1444
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HIGHLIGHTS GOVT'S ACHIEVEMENTS ON ECONOMIC, POLITICAL FRONTS INCLUDING IMF DEAL
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ISLAMABAD
CLAIMS ‘BEGINNING OF A NEW ERA’ FOR PAKISTAN AFTER INITIATION OF ECONOMIC STABILITY
STAFF REPORT
RIME Minister Shehbaz Sharif announced on Thursday that the incumbent government will hand over power to the caretaker set-up in August 2023. PM Shehbaz Sharif made the announcement while addressing the nation. Besides, the premier also highlighted the economic and political achievements including the successful talks with International Monetary Fund (IMF) and also covered his plans about the upcoming general elections. PM Shehbaz Sharif said that he assumed the prime minister’s office in April 2022 and power will be handed over to the caretaker set-up in August 2023. The premier said that the incumbent government fended off ‘landmines’ laid by the previous government of Pakistan Tehreek-i-Insaf (PTI) besides ending Pakistan’s isolation on the economic and foreign-level fronts. He termed his government the ‘beginning of a new era’ from economic destruction to the initiation of economic stability. He also claimed that the incumbent government culminated worst corruption and conspiracies of the previous government. He added that the government starts the journey from unemployment to the provision of employment, as well as the freedom of the press and speech.
“The coalition government was established for a short period in which it made maximum and intelligent efforts for addressing the issues. We sacrificed our politics to save the state,” he said. He criticised that the previous government for signing an agreement with the International Monetary Fund (IMF) on tough conditions and later it violated the terms. PM Sharif said that the incumbent government made tireless efforts to revive the IMF agreement. PM Sharif said that friendly and brotherly countries cooperated with Pakistan. On behalf of the nation, PM Sharif thanked friendly countries including
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China, Saudi Arabia and United Arab Emirates (UAE) for their financial support to Pakistan. He said that they are grateful to the leadership of the friendly countries for providing timely financial assistance to Pakistan. The premier also praised Foreign Minister Bilawal Bhutto Zardari’s efforts on the diplomatic front. He also praised Finance Minister Ishaq Dar and Chief of Army Staff (COAS) General Syed Asim Munir’s efforts. PM Shehbaz Sharif said that the time has arrived to regain the lost ground. He highlighted that a comprehensive na-
tional plan has been devised for economic stability and a special investment council was formed and made functional. The premier said that the government is paving the path to receiving big investments from the Gulf countries. He vowed that the plan will be executed with tireless efforts. PM Sharif said that global institutions are predicting further improvement in Pakistan’s rankings. “The investors expressed their full confidence in the stock exchange after the announcement of the IMF agreement. The stock exchange crossed the 45,000 points mark and the value of the Pakistani rupee is gradually increasing,” he asserted. “The incumbent government gave Rs2,000 billion Kissan Package. Easy loan schemes were launched to promote agriculture, IT and other sectors besides awarding laptops to the students. The initiation of new projects are glimpses of the successful economic journey of Pakistan.” PM Sharif said that there is only one way to cope with the challenges which is becoming a self-sufficient state. He added that the entire nation is focused to get rid of the loans. He prayed that the country would never see a black day like May 9 riots in future. The premier said that Nawaz Sharif will bring the country to the path of development and prosperity once again. PM Shehbaz Sharif called for national unity by spreading peace and love and eliminating hatred.
Pakistan receives first tranche of $1.2b from IMF: Dar g
STATE BANK RESERVES ADD ANOTHER TWO BILLION DOLLARS THIS WEEK PROFIT
STAFF REPORT
Finance Minister Ishaq Dar has stated that Pakistan has received the first tranche of 1.2 billion dollars under the stand by arrangement reached with the IMF. In a televised message on Tuesday, he said the IMF’s Executive Board meeting approved the nine month stand by arrangement of three billion dollars last night. The Finance Minister said the receipt of IMF’s tranche will further improve our foreign exchange reserves. He
pointed out that the reserves of State Bank of Pakistan has increased by four point two billion dollars this week. He said it is expected that our foreign exchange reserves will be between thirteen and fourteen billion dollars when the central bank will share the exact figures tomorrow at the close of the week. The Finance Minister said Pakistan will receive the remaining 1.8 billion dollars from the IMF after two reviews in November and February. Ishaq Dar said this stand by arrangement has been limited to nine months so that the next elected govern-
ment could take its own decisions. The Finance Minister expressed his gratitude to Prime Minister Shehbaz Sharif for the support extended by him in reaching the stand by arrangement with the IMF. He was also appreciative of his economic team for supporting him during this difficult process. The Finance Minister said Pakistan has been put on the positive journey, stressing for collective efforts to further consolidate these gains and take the country towards positive growth trajectory.
Caretaker Prime Minister yet to be decided; says Khawaja Asif ISLAMABAD
STAFF REPORT
Defence Minister Khawaja Asif said on Thursday that no name had been finalised for the appointment of caretaker prime minister. “The caretaker government will hold elections within 60 or 90 days. It hasn’t been decided who will be the caretaker prime minister,” Asif told a TV talk show. His statement about the interim PM came hours after Prime Minister Shehbaz Sharif assured the nation that his government would hand over the reins to an interim setup next month after the completion of their tenure. He said that Pakistan Tehreek-e-Insaf (PTI) Chairman Imran Khan had been involved in a “proxy war” since his ouster from the prime minister’s office. “For one-and-a-half years Pakistan Tehreek-e-Insaf Chairman Imran Khan was involved in a proxy war,” the federal
minister said during Geo News show Capital Talk. Asif, who is also a senior leader of the Pakistan Muslim LeagueNawaz (PML-N), alleged that the PTI chief was fulfilling the “Israeli agenda” in the country, adding that Tel Aviv was
worried that its “agenda” was being stopped in Pakistan. The PML-N stalwart further said that the PTI chief asks his people to tweet to check the response of institutions, adding that the deposed prime minister, who was
removed from power via a vote of noconfidence in April last year, wants Pakistan to remain unstable. “They have targeted defence institutions only,” said Asif, referring to the May 9 mayhem when defence institutions were mostly targeted. The defence minister was connecting the former prime minister to Israel as Tel Aviv had recently targeted Pakistan during the presentation of the Universal Periodic Report of Pakistan at the United Nations Human Rights Council. The report was unanimously adopted, with Pakistan receiving commendations from various states and civil society organisations for its significant strides in advancing human rights. However, Pakistan slammed Israel for objecting to it, with the Foreign Office saying that Islamabad believes that Israel’s statement at the UN Human Rights Council during Pakistan’s UPR review process was politically motivated.
Major changes in the offing at K-Electric g
Process to outsource airports initiated g
OPERATIONS AND MANAGEMENT OF KARACHI, LAHORE AND ISLAMABAD AIRPORTS SET TO BE OUTSOURCED TO GENERATE FOREIGN EXCHANGE PROFIT
DANIYAL AHMAD
The Government of Pakistan has initiated the process to delegate the operations and management of Karachi, Islamabad, and Lahore airports – with the aim of generating foreign exchange to support the economy. This development was conveyed to the National Assembly Standing Committee on Aviation by the management of the Pakistan Civil Aviation Authority (PCAA) during a meeting held on July 13. The PCAA elucidated to the Committee that it is not relinquishing ownership of the airports, but rather conferring control over their operation and management for a specified duration. “Rest assured, no airport is being sold. This is merely a process of delegating specific activities while retaining state ownership of the asset,” declared PCCA’s spokesperson, Saifullah Khan. The transaction to any potential bidder is set to be governed under the Public Private Partnership Authority Act (2017). Which airport is set to go first? The PCAA, however, did not delineate which airport is set to be outsourced first. The Committee also did not broach the aforementioned question during the meeting. Based on the meeting alone, one would surmise that all airports might be simultaneously outsourced – but that is not the case. Media reports from last month indicate that the Government of Pakistan has opted to initially commence with the Islamabad Airport, as they have encountered practical complexities in executing the outsourcing for the Karachi and Lahore airports for now. These two are set to follow suit after the Islamabad airport has been successfully outsourced. What does outsourcing an airport mean? Outsourcing control of airports can take many forms, but there are three main approaches: outsourcing airport services, airport concession and lease agreements, and divestiture of ownership. The final option does not exist in the case of Pakistan. So what about the remaining two? Outsourcing airport services involves the state retaining ownership and control of the airport, but contracting out specific services to private companies—such as cleaning, maintenance, or technology. For instance, the state-owned airport in Athens, Greece, outsourced its ground handling services to Swissport, a private company. This approach enables the state to retain overall control of the airport while benefiting from the expertise and efficiency of private companies. However, it also means that the state remains responsible for the overall management and development of the airport. Airport concession and lease agreements involve the state transferring most of the authority and control of the airport to a private enterprise for a long period of time—while imposing regulatory conditions to protect the public interest. The private enterprise pays a royalty to the state for using its assets. An example of this is the 30-year concession agreement between the Brazilian government and the private consortium Invepar-ACSA for the operation and expansion of São Paulo-Guarulhos International Airport. This approach allows for greater private sector involvement in the management and development of the airport while still ensuring some level of public oversight. Nevertheless, it also means that the state has less direct control over the operations of the airport. Which form of outsourcing is Pakistan taking again? The initial meeting, chaired by Prime Minister Shehbaz Sharif on 31st December 2022, envisaged a twenty-year arrangement between the Government of Pakistan and the party that wins the tender for the airport. Based solely on the duration of the transaction, it is likely that the agreement will be arrangement number two. Furthermore, looking back at the transactions involving the terminal at berths 6-9 on Karachi Port – a concession agreement was agreed upon both times: with PICT in 2022, and more recently with Abu Dhabi Ports Group last month.
NEW OWNERS HAVE FILED TO DISSOLVE THE HOLDING COMPANY THAT OWNS KE PROFIT
ABDULLAH NIAZI
Changes are afoot at K-Electric (KE) as a legal effort to harness control of the utilities company was initiated by its new owners in the Cayman Islands. As reported by Profit earlier this month, KE was sold to a company by the name of a Sage Venture Group back in September last year. The group is owned and operated by AsiaPak Investment which is a company headed by Shaheryar Chishty — a Pakistani investor with interests in Thar Coal. The ownership structure of KE is complicated, and according to a recent report by Reuters has long been considered an impediment to its acquisition by China’s stateowned Shanghai Electric, a deal that has lingered for years due to regulatory and legal hurdles in Pakistan. Now, Chishty and his AsiaPak Investment is looking to dissolve the Cayman based holding company that owns the majority of KE and acquire a direct con-
trolling stake in the Pakistan based company. “We have filed with the Cayman Court and the Court has admitted our petition to wind up KESP which is the holding company of KE,” Chishty told Profit. “KESP will be dissolved and after paying off liabilities each shareholder will get their due shares in KE directly instead of going through a holding company.” Understanding the ownership structure There is some background needed to understand the current happening at KE. The company was owned by the federal government until 2005 which is when it was privatised and sold to the Al Jomaih Group — a consortium of Saudi and Kuwaiti investors. When the Al Jomaih group entered the picture in 2005, they created KES Power Limited (KESP) which was a Cayman Islands company. This company paid the government of Pakistan directly and acquired a 66.4% stake in K-Electric in Pakistan. This essentially means that since 2005,
while KE has remained a Pakistani company listed on the Pakistan Stock Exchange, the majority of its shares (66.4%) have been owned by KESP — the Cayman based holding company. In 2009, after failing to turn KE around, Al Jomaih had enough and decided to exit. Except it did not sell its direct stake it simply restructured the ownership makeup of KESP. Abraaj funnelled over $370 million in foreign direct investment into KE through the KESP company in Cayman. To date, the US$360 million invested by Abraaj in KE (routed through KESP) remains the only equity FDI invested into KE as new capital used principally to fund capital expenditures driving efficiency. This is where another name enters the picture. Abraaj’s investment in KE was undertaken through the Infrastructure & Growth Capital Fund L.P. (“IGCF”), a $2 billion Cayman Islands private equity fund with investment contributed by over 100
different international investors, managed then by Abraaj Investment Management. When Abraaj faced bankruptcy in 2019, management of IGCF was taken over by Abraaj’s liquidator. So when new investors wanted to acquire Abraaj’s position in KE, they had to get the IGCF fund. That is when Chishty’s company, AsiaPak Investments, created a special purpose company called Sage Venture Group Limited (Sage) and registered it in Cayman. Sage then bought out the Infrastructure Growth and Capital Fund LP (IGCF or the Fund), which holds an indirect material stake in K-Electric Limited. Current happenings So this is where things stand. The IGCF fund is owned by Sage which is in turn owned by AsiaPak investments. Now, IGCF has filed a petition in the Grand Court of the Cayman Islands for a “just and equitable winding up” of the holding company of K-Electric. “This is essentially an irreconcilable
difference which requires a parting of ways,” Chishty tells Profit. “It does not mean anyone’s intentions are bad just that we don’t agree on how to manage affairs at KE and as owners we’re deciding to move forward with this plan.” According to the new owners now looking to dissolve the holding company, minority shareholders (which includes the original Al Jomaih) have been “denying us from exercising our rights as KESP shareholders by preventing us from appointing our nominees to the KE Board of Directors, stymying the smooth functioning of KESP, whose sole function is to act as the holding company for KE, and consistently and wilfully misrepresenting our plans to improve KE.” The detailed statement essentially points out that despite Sage coming in and acquiring a majority stake in IGCF and thus in KESP, the minority shareholders have not been giving them their due rights. In a recent conversation with Profit, Shaheryar Chishty had said their aim was to come in as “long-term owners” and that they were not looking for a “quick-flip.”
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