Pakistan holds back on privatization

Afghan refugees are migrating to Pakistan in fear of U.S. reprisals

ISLAMABAD, Pakistan -- Pakistan will put 70 percent of its privatization program on hold due to the prospect of a U.S. attack on neighboring Afghanistan.

Pakistan hopes to raise $1 billion by the end of the year through the privatization of its major assets in an attempt to reduce the country's foreign debt of nearly $40 billion.

Privatization minister Altaf Saleem said potential foreign bidders could no longer continue carrying out due diligence on major assets due to the Afghan crisis.

"Our total program is about $3 billion and one third of that was planned for the period of October to December 2001," Saleem told Reuters in an interview. "Thirty percent of that may go ahead but 70 percent has to wait till the situation is more clear."

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The delay means that a planned sale of nine oil and gas fields, plus a 26 percent stake with management control in national telecoms operator Pakistan Telecommunications Company Ltd, cannot proceed.

The United States has threatened to attack Afghanistan's Taliban rulers unless they surrender Saudi-born dissident Osama bin Laden, the prime suspect behind the September 11 terror attacks on Washington and New York.

The threat has caused an exodus of foreigners from Pakistan and a drop in the number of tourists, especially since several airlines cancelled flights to the country.

Cost of crisis

A senior official in the state Export Promotion Bureau said on Wednesday that Pakistan could lose up to $1.5 billion from cancelled or delayed export orders because of the crisis.

Foreign lenders to Pakistan had been critical of the slow pace of privatization, but are not likely to complain of the new delays.

Not only is the situation beyond Pakistan's control, but also Washington has been anxious to provide financial assistance to military ruler General Pervez Musharraf in return for his cooperation in the Afghan crisis.

Pakistan's economy is likely to be affected by the Afghan crisis

Saleem said the privatization of some $300 million in state assets that was continuing this year involved mainly small, domestic sales. They include the National Investment Trust, the country's largest investment body.

But Saleem stressed the delays should not have a major impact on the latter stages of the privatization program, which is expected to raise about $2 billion in total.

"We are running our operation on the basis of business as usual. We are going on because the direction still remains the same. We are making some tactical adjustments," Saleem said.

Saleem took on his role a month after Musharraf seized power in October 1999 and was made a full minister last November to demonstrate the government's commitment to privatization.