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Thursday, 4 October, 2001, 14:52 GMT 15:52 UK
Pakistan ditches privatisation plan
A stock trader in Karachi, Pakistan's main financial centre
The privatisation programme will have to wait
Pakistan has been forced to abandon plans for a $1bn privatisation programme this year.

Privatisation minister Altaf Saleem said the plans could no longer proceed in their entirety because the threat of military action against neighbouring Afghanistan was discouraging potential foreign investors.

Many foreign companies are pulling their expatriate staff out of Pakistan, or are stopping them from travelling there, because of the risk of unrest.

Renewed tension in Kashmir - territory which is claimed by both India and Pakistan - could exacerbate the situation, analysts have said.

That, said Mr Saleem, means that the due diligence necessary to assess whether an investment is financially worthwhile has become impossible.

The government will postpone the sale of nine oil and gas fields and a 26% shareholding in state telephone firm Pakistan Telecommunications.

In total, Pakistan planned to raise $3bn from asset sales in the next 12 months.

Some progress

Mr Saleem told the BBC's World Business Report that the part of the programme which local business was interested in would still go ahead.

"We are making some tactical adjustments but we are not shelving the privatisation programme," he insisted.

"As for the programme which involves foreign investment, there are naturally right now some travel restrictions," he said.

Of the planned $1bn tranche hoped for between October and December 2001, Mr Saleem said 30% would be raised as planned.

He emphasised that as soon as travel restrictions were eased, then foreign investors would return to the country.

Asked whether Pakistan might be tarnished by its association with Afghanistan, Mr Saleem said: "We are with the world community in the fight against terrorism."

Export troubles

The news comes amid a mixed outlook for Pakistan's economy in the wake of the 11 September attacks on the US and the growing prospect of military action in Afghanistan.

Officials in Pakistan are warning that exporters, especially of textiles, are seeing orders for the US and Europe collapse or, at best, get put on hold.

That could mean a shortfall of as much as $1bn-1.5bn on Pakistan's export target for this year of $10.1bn.

If exports do slow, the damage to Pakistan's economy - already burdened by more than $80bn in debt, hit by recent drought and now having to support more than two million Afghan refugees - could be serious.

But the lifting of sanctions, imposed after the tit-for-tat nuclear tests by India and Pakistan in 1998, could help, as could the rescheduling of over $800m in debt by Japan and the US.

And the finance minister, Shaukat Aziz, is now predicting 4% growth for the year ending in June 2002, thanks to rapidly-improving harvests of both food and cotton.

Last year, the economy grew by 2.8%. Economists' forecasts see growth of between 3% and 3.5% this year.

Privatisation Minister Altaf Saleem
"The programme is designed to improve the quality of goods and services."
See also:

27 Sep 01 | Business
Japan eases Pakistan's debt burden
26 Sep 01 | Business
Pakistan wins IMF cash
26 Sep 01 | Business
Japan's slowdown to hit Asia
24 Sep 01 | Business
Pakistan's airline under pressure
24 Sep 01 | Business
Pakistan's exchanges re-open
23 Sep 01 | Business
Sanctions boost for Pakistan economy
19 Sep 01 | Business
Following the money trail
22 Aug 01 | Business
Pakistan seeks new IMF money
14 Aug 01 | Business
Boost for Pakistan economy?
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