Govt decides to sell HBFC

Government's Decision on Privatization in Pakistan

The government on Monday decided to vend House Building Finance Company (HBFC) under a negotiated deal but remitted the decision on appointing a fiscal counsel for the privatization of Roosevelt Hotel, New York.

The opinions were made by the Cabinet Committee on Privatization (CCOP), which also green-lighted the handing over of Services International Hotel (SIH) to the buyer after two rounds of privatization. Finance Minister Ishaq Dar chaired the CCOP meeting.

The Privatization Commission streamlined the CCOP on the privatization process of Roosevelt Hotel, said the Ministry of Finance. The CCOP, after discussion, remitted the decision on a summary with the directive to submit an update on the privatization of Roosevelt Hotel after discussion with the aviation ministry.

In July 2020, the civil press had decided to appoint a fiscal counsel for giving Roosevelt Hotel on lease under a joint venture. However, for the third time, no government could appoint the counsel.

Meanwhile, Pakistan gave the hotel on a three-time lease to the New York City Health and Hospitals Corporation as an immigration detention facility.

The Privatization Commission informed the press commission that the aviation ministry wasn't responding to a question whether the government should still hire the fiscal counsel. Committee members were of the view that the hiring of fiscal counsel at this stage may result in additional costs when there was no clarity on the part of the aviation ministry.

Pakistan's privatization process has remained painstakingly slow and numerous privatization deals carried out since the 1990s remain disputed, including cases where some of the buyers are withholding payments to the government.

The Privatization Commission also submitted a summary on the sale of SIH and streamlined the commission on the privatization process.

The CCOP, after detailed discussion, allowed the commission to proceed towards the successful conclusion of the SIH sale with the completion of the transfer and mutation process in the name of the purchaser, said the finance ministry.

In August 2021, the government had sold the hotel to Faisal Town for a price of Rs1.951 billion. The buyer paid the full amount in January 2022 but has not yet received possession of the property.

In the past, the CCOP has repeatedly referred the matter to numerous forums and also sought fresh verification of the market price of the hotel. But all inquiries simply wasted time and eroded the credibility of the government.

The Privatization Commission also presented a summary on the sale of HBFC with a single pre-qualified buyer.

The CCOP decided to allow the Privatization Commission to proceed with a single source and a negotiated sale with Pakistan Mortgage Refinance Company Limited (PMRCL) for the privatization of HBFC, according to the finance ministry.

HBFC has been on the active privatization list since 2018. Four parties had shown interest in acquisition. Two foreign buyers, ICD-Islamic Development Bank and IFIC Bangladesh, later didn't show interest in the sale. The State Bank of Pakistan didn't clear the third buyer, Pakistan Housing Finance Company, due to its "non-compliance status".

The Privatization Commission tabled a summary related to its budget estimates for the financial year 2023-24 to the tune of Rs1.25 billion. The CCOP, after detailed deliberation, approved the summary.

It was for the first time the commission presented its budget to the CCOP as per the conditions of the Privatization Ordinance.

The Privatization Commission also presented summaries on the privatization of Pakistan Engineering Company (PECO) and Sindh Engineering Limited (SEL) and briefed the meeting on their status. Following discussion, the CCOP remitted the decision on both the summaries with directives that the clerk of the Privatization Commission, the clerk of law, and the clerk of diligence may hold collective consultations and come up with a future course of action in both cases.

Both entities have been on the privatization list for a couple of decades but no decision could be made on their fate. SEL has not been functional since 2008 and its audited accounts have been pending since 2018. There are serious controversies over its two prized parcels – a commercial galleria in Lahore and an agricultural land in Kasur.

Also, there are numerous interruptions in the privatization of PECO, which include a disagreement over Rs7.2 billion in receivables, a NAB inquiry, an illegal joint venture formed by the PECO managing director without seeking the government's blessing, and a disagreement over its prized land.