Who Owns Pakistan - Yimg

The growing subscription of the Pakistan Muslim League government to the
process of accountibility warranted tha valuation of units, the most important step
in the process of privatization was made more transparent and less discreet, in
the light of experience gained during last seven years. Reverse has happened.
The formula for valuation has been made more flexible to create more avenues
for corruption.
Following was the valuation method used by Privatization Commission in first
Nawaz government, as elaborated by booklet, "Privatization Policy and its
implementation" published by Ministry of Finance in November, 91.
It said that " Privatization Commission initiates the process of valuation through
indedpendant consultants, assessors, surveyors, chartered accountants.
Wherever possible the breakup value share is indicated on the basis of revalued
net assets......After the valuation report is cleared by the Commission, it is placed
before the cabinet committee on Privatization for consideration and apporval of a
reserve price. The reserved or reference price normally reflects:
1) Current value of the assets, less all liabilities at book value.
2) Level and growth of earnings.
3) Future earning potential.
Seven years later, Privatization Commission of second Nawaz government
reflected on the valuation process in following manner in the booklet,
Privatization in Pakistan. " A leading firm is hired to conduct valuation of the unit.
The approaches usually used are ( Discounted Cash Flow-DCF, CCOP's earning
potentials, etc.). The valuation information is only for Privatization Commission's
purview and is not shared with bidders...............Reference or reserve price is just
a benchmark price used for reference purposes to ascertain the minimum value
of the unit. The PC however believes that the market is the final determinant of
the value of the unit which will come out at the time of bidding. From the
valuation received from valuators, a refernce price is derived after certain
adjustments (if any) for approvel of the competent authority".
During the last seven years, no reference was ever made in any official booklet
or literature about privatization to the "DCF, CCOP's earnings" approach for
evaluation of the units marked for privation. It is very difficult to understand what
is Discounted Cash Flow (DCF) and CCOP's earning potential. The method of
determinig DCF is not explained in any literature of Privatization Commission.
However, the rationale for its incorporation as an approach, "usually used" for
determining the reference price would be clear to the reader after going through
first case in some landmark cases of corruption in privatization mentioned later
the chapter.
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