The Pakistani government is planning to take advantage of its improved international standing and a strong local stock market to relaunch its stalled privatisation drive, including initial public offerings of several state-owned entities Pakistan International Airlines and the National Bank of Pakistan. However, it is feared that proposals to sell-off national PTO, PTCL, could once again be dashed due to the poor global climate for telecoms and unresolved issues within the company. PTCL has performed strongly in the last nine months, increasing operational profits by 18% to USD269 million, thanks in part to lower interest costs stemming from a successful reduction in its borrowings the previous year, and in the same period installed around 200,000 fixed lines to boost its subscriber base to over 3.8 million lines. However, whilst its recent achievements would appear to make it an appealing prospect for investors, on the downside the company has yet to tackle internal reforms such as the need to sharply reduce its 55,000-strong workforce to compete alongside its leaner Asian rivals. Added to this, Pakistan’s commitment to open up its telecoms sector from 1 January 2003 has faltered somewhat and investors are still waiting for a new telecoms policy which will be critical in helping them decide whether to buy out PTCL or acquire a new operating licence. Given that a sell-off will be difficult to achieve in the current market and PTCL has yet to begin its programme of reform, is now feared that privatisation will not take place for at least another two to three years.
This scenario is more bad news for Pakistan’s 145 million-strong population where despite a period of steady if uninspiring growth, the country’s teledensity remains woefully low, reaching just 3% by May 2003. In recent years, in addition to the political and economic difficulties facing the region, development has been hampered by a lack of competition to PTCL, by a strict regulatory environment and the dearth of investment opportunities for private and foreign players, as well as by a history of government interference which has seriously hindered foreign investment. Despite its apparently comprehensive regulatory structure, in reality Pakistan lacks an effective regulator and operates under a complex and opaque tariff system.