REFERENCE / COMPLAINT NO. III

Reference dated 29-1-2001 – Proposed Sale of Stakes in PTCL

January 29, 2001

Lieutenant General Khalid Maqbool
Chairman
National Accountability Bureau
Chief Executive’s Office
Islamabad

Subject: Selling of Stakes in State Owned Telecom Co.

Dear General Khalid,

Enclosed please see press release dated January 26, 2001 with regard to proposed sale of PTCL. It is requested that NAB look into this matter.  

Yours Sincerely, 

(Jahangir Bader)
Secretary General

The Reference / Complaint is based on the source incorporated as under :

Press Release

PPP challenges Selling of Stakes in State Owned Telecom Co.

ISLAMABAD, 26 January 2001: A Pakistan Peoples Party taking note of the decision by the Finance Ministry to sell Stakes in State Owned Telecom calls upon General Khalid Maqbool of the Accountability Bureau to stop the sale and begin investigations into whether corrupt practices have taken place. 

"Pakistan Telecommunications is one of Pakistan's Crown Jewels. The NAB must investigate reports of a back hand deal before the PTCL is allowed to be sold" the spokesperson said. 

"There are reports that two companies owned by Rafiq Harriri, Prime Minister of Lebanon, have already settled with Finance Minister Shaukat Aziz the purchase. One of those companies is Saudi Oggeh and another a Lebanese company. Given the importance of the position held by Prime Minister Hariri and the possibility of a corruption case subsequently arising, it is important that Pakistan preserve its relations with Lebanon by doing an inquiry before the sale" the spokesperson said. 

Privatization Ministry yesterday announced that the privatization process for state-owned Pakistan Telecommunication Limited Company (PTCL) will begin by the end of February with the invitation of expressions of interest. However, a PPP spokesperson said that it had received reports "that this is a predetermined deal between Finance Minister Shaukat Aziz and Prime Minister Harriri's son who now looks after his Father's business". 

Noting that President Estrada had been forced to relinquish over corruption charges, the spokesperson said, "Any shady deal could have serious ramifications for the country and Pak Lebanese relations and therefore NAB should get involved to allay public concerns before it is too late." 

The spokesperson said that in the PPP government, forty per cent of shares had to be sold before management could be transferred. This was reduced to thirty per cent under Nawaz Sharif. 

"Shockingly, according to reports, the law is to be changed in an abuse of office and public trust by handing over PTCL to a Harriri interest Saudi or Lebanese company for between sixteen to twenty per cent".  

Giving the background, the spokesperson said, "PTCL future earnings of five years can be mortgaged to procure cost of sixteen to twenty percent shares from any leading international bank as PTCL is a profit making company. Thus selling at this rate is selling for free and this is corruption". 

Deriding reports that the privatization of shares would bring in much needed foreign exchange, the spokesperson said, "Pakistan can obtain the same amount of foreign exchange by mortgaging PTCL future earning for five years". He said that a minimum threshold of thirty percent was needed to "bring in genuine money rather than give the shares for free." He said "what else can be concluded other than the shares are being given for free when the threshold of shares is lowered to an amount for which banks are willing to loan money on future earnings."  

The Spokesperson noted that  PTCL has a monopoly on basic telephony in the country until December, 2002. "The PTCL financial record is sufficient for anyone, be it Pakistan government, or a private individual, to get a loan by mortgaging sixteen percent to twenty percent shares with a leading international bank". 

He said that PTCL belongs to the country but "if a private company is able to mortgage the future earnings and buy the smaller amount of shares (between sixteen to twenty percent) it means the private company is getting PTCL for free". 

"Calling it a scandal, the spokesperson lamented, "It is deplorable that the offspring of Prime Ministers and other influential leaders are being involved in the deal. Such involvement can mar relations of Pakistan with other countries." 

The Spokesperson said that the PPP "Valued its relations with Lebanon and held Prime Minister Hariri in esteem. " He doubted that the Lebanese Prime Minister was aware that Pakistan sold shares at thirty percent for management control and that an abuse of office was taking place in reducing the amount for the purpose of the sale." 

Finance Ministry officials have declared that "soft marketing" has invited investors from Saudi Arabia, Lebanon and other countries. But PPP has alleged that reports indicate that the deal has already been settled between Finance Minister Shaukat and Prime Minister Hariri's son. 

Although government is claiming that it is expecting to earn close to US$4 billion from the privatization of PTCL, PPP Spokesperson said "this is a smoke screen. An amount of one billion dollars will be borrowed from Banks against future earnings of PTCL as down payment. Why should a foreign private company get control of PTCL for borrowed money when Pakistan can borrow the same on the same terms and retain control of PTCL."

 The Spokesperson hoped that NAB would examine the matter.

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