Do we need a privatisation commission?

In early 2008, the interim government offered me the post of chairman of the privatisation commission. The then leadership thought, even after their departure, I could stick to the privatisation commission to carry forward the agreed tasks. I sought advice from my 'guru', a respected business leader. The gentleman, who was also rumoured to take over the leadership of the privatisation commission few years ago, had a feeling that it was hard to do anything good in that place. I also had the same feeling. Rather I had my doubts about the necessity of a privatisation commission in Bangladesh.
The privatisation commission (PC) was formed with a view to expediting the divestment of state-owned-enterprises (SoEs) in Bangladesh. It was initially formed as a board, but later was converted in to a commission empowering it to effectively perform the responsibilities bestowed upon it. However, despite a lot of senior government officials, retired and serving, being put up there and funds allocated, I could see-they lacked the required energy and visibility to drive things home.
I knew for sure, the handling of Rupali Bank privatisation process during the BNP government was not done properly. I don't want to comment on the process of identifying the buyer, the buyer himself or his track record of managing or owning financial assets/organisation, local agent of the buyer, terms of agreement, penalty for failure to execute the contract in time or valuation process itself. Earlier, the privatisation of a few SOEs was done through the sale of assets, which failed to bring much benefit either to government or to industrialisation; rather it ignored the labour and social part of privatisation efforts. We need to see the PC's privatisation efforts to bring in foreign partners and ensure technology transfer or fresh FDI in flows.
If we look at the success of privatisation in Bangladesh in the recent past, we find that the approaches on sale of shares through listing on the stock market, e.g. Jamuna Oil, Meghna Oil, PGCB, Desco etc. and mergers with foreign partners, e.g. Oriental Bank were somehow effective.
None of the above instances required PC's intervention; rather it was done under the active guidance of the respective ministries and the Bangladesh Bank. There are several options of privatisation in the current state of world economy as well as Bangladesh. These options include sale of assets, direct sale of shares through stock market, private-public partnership, mergers with foreign partners and initial public offering (IPO).
Clearly, the two successful models and the four approaches discussed above require banks/ advisers/ financial services institutions to perform valuation, find strategic partners/investors, etc. Corporate and international pressures to privatise SoEs are likely to grow stronger in the years to come. Increasing modernisation of handling such transactions and presenting them in the most appropriate fashion to the international investors is a crucial task that requires professional management of the entire process. Along with privatisation of SoE corporates, a professional adviser (usually a bank or financial institution, what we have seen in India, China or Malaysia) should be able to assist in bringing in insurance companies and pension funds or funds interested in acquiring relevant assets or institutions followed by direct investment, as well as attract private specialist funds to Bangladesh. Private adviser's involvement will increase overall welfare. Given proper incentives and transparent terms of service, engagement of the adviser may bring in better price, flow of appropriate information, right valuation as well as better price offer on the basis of opportunity space available in the specific industry segment or the country itself. Any privatisation move is expected to be successful where the risk and rewards have been clearly defined. A proposal containing lucid and prudent risk strategies are more acceptable to the investors for their consideration.
The public sector needs to recognise the need for rapid execution and value for money to government. As the markets mature, different categories of investors enter markets sequentially. Hence, right timing and speed of execution will result into achievements. Any potential investor and strategic partner would like to see balance between government's objectives. In the recent past, we have also seen the benefits of having proper valuation and professional support from private international advisers, while few of our telecom industry operators in Bangladesh needed to sell-off their ownership partly or wholly. Hence, the government should communicate clear objectives for the public sector to obtain best value for money from the private sector.
In view of the above, the following steps may be considered: (1) giving independence to the relevant ministries to privatise their respective enterprises, (2) focus on valuation, objectives and speed of execution, (3) open mind for seeking support from private international advisors, (4) creation of opportunity for government to focus on core tasks by appointing an external adviser and (5) taking advantage of the markets, which the adviser should be able to provide guidance on.
A sense of urgency within the government to privatise SoEs is required. More options and more structured solutions should be explored while keeping in mind the best global practices. We don't need to reinvent the wheels at all. Open the internet, talk to the relevant agencies in the similar or neighbouring countries answers are already there. With a semi-paralysed and deeply politicised bureaucracy in Bangladesh, our development partners can also help us a lot in this.
(Mamun Rashid is an eminent banker and the vice chairman of Financial Excellence Ltd.
E-mail:mrashid1961@gmail.com)