The government has identified at least seven state assets with a net worth of Rs2.3 trillion to be transferred into a new Pakistan Sovereign Wealth Fund for raising funds through the sale of shares and using their earnings for capital investments. Senior finance ministry officials informed The Express Tribune that the outgoing government is in the final stage of establishing the Pakistan Sovereign Wealth Fund through an Act of Parliament. They stated that the government might table a bill in the National Assembly next week to set up the Fund. They added that the new sovereign fund will be proposed to be exempted from three core laws: the Privatisation Commission Ordinance, Public Procurement Regulatory Authority Ordinance, and the State-Owned Enterprises (SOE) Act, 2023. The decision to seek exemption from these laws suggests that the government might quickly sell some of the identified assets or use them to raise loans. Government officials said that the $850 billion worth Abu Dhabi Investment Authority (ADIA) has provided technical assistance to Pakistan in drafting the law. The federal government will fully own the fund, and the initial capital will be provided through the transfer of shareholding of the SOEs. The sources revealed that initially, the government may transfer seven companies into the new sovereign wealth fund. The net worth of these assets is Rs2.3 trillion, which will provide a major impetus to the wealth fund. The government has identified Oil and Gas Development Company Limited (OGDCL), Pakistan Petroleum Limited, National Bank of Pakistan, Pakistan Development Fund, Government Holdings Private Limited, Mari Petroleum Company Limited, and Neelum Jhelum Hydro Power Company Limited. The United Arab Emirates (UAE) has shown interest in the past to acquire stakes in Pakistan’s oil and gas sector companies, indicating a possibility for divesting shares of these assets. Pakistan’s economic relations with the UAE have suddenly taken an upward trajectory. The government is in the process of handing over 85% of the east wharf of the Karachi port to the Abu Dhabi Ports. It is also pushing the Ministry of Commerce to sign a Comprehensive Economic Partnership Act (CEPA) with the UAE before the end of the term. The Pakistan Business Council reacted to the government’s decision to sign the CEPA, stating that it will bring 80% of the tariff lines to zero duty in 10 years, harming local manufacturing. The latest International Monetary Fund (IMF) staff level report also mentions the sale of state-owned assets to official bilateral creditors and foreign sovereign wealth funds. The finance ministry stated that Finance Minister Ishaq Dar chaired a meeting on Friday to discuss and finalise the broad parameters, including utility, governance structure, and transactions flow of the Pakistan Sovereign Wealth Fund (PSWF). The Sovereign Fund will be established for optimal leveraging and better management of the government’s assets in line with international standards, policies, and practices, it added. The sources revealed that the new Fund can make direct investments in existing and new projects. It will be used to leverage against existing assets and invest through joint ventures with private parties, foreign sovereign wealth funds, and governments. In light of the arrangement with foreign investors, the structure could be any legal form such as a company, trusts, etc. The money raised through the sale of the assets can be used as Pakistan’s shares in joint ventures in areas of agriculture, mining, and information technology sectors, according to the officials. The finance ministry officials said that there was no centralised pool of national assets and a lack of structure to leverage and generate liquidity. They mentioned that the government was unable to attract foreign investment against fragmented national assets. The government is going to propose setting up a Supervisory Council that will be chaired by the prime minister. The minister of finance, minister of planning, finance secretary, governor of SBP, and the chief executive of the fund will be its members. The supervisory council will make decisions about the transfer of the state-owned enterprises to the sovereign fund. The government will also appoint a seven-member advisory committee and a seven-member board to run the affairs of the new fund. The committee will give approvals for the annual budget and distribution of profits. The advisory committee will compose of seven experts, which may also be foreigners. It will advise to attract investment and marketing of the Fund. The committee will recommend board members to the supervisory Council. There will be a seven-member board that will manage the affairs of the Fund; develop financial, administrative, and investment policies. Published in The Express Tribune, July 22nd, 2023. Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
source https://tribune.com.pk/story/2427380/assets-worth-rs23tr-identified-for-new-sovereign-wealth-fund
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