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One year after the new government took office, BR Research thought it be nice to have a sit down with the man whose opinion matters to all those matters. Mian Muhammad Mansha needs no introduction. It is suffice to say he is arguably the richest man in Pakistan and oversees the Nishat Group as its Chairman. In this interview, Mansha talks about PML-N's performance, the energy issues and the regulatory woes.
Below are selected excerpts from our candid conversation with Mansha at his residence in Lahore.
BR Research: How would you summarise PML-N's performance in the government so far?
Mian Mansha: The government and the Finance Minister have done a good job as they have been successful in stabilising the foreign reserves. Falling reserves portray a bad image of the country.
However, the area where the game plan is not working pertains to the resolution of the real issues, including energy, management and a few other things. The Prime Minister is trying his best. But in the past five years, so much destruction has been done in terms of management and decision making, interference of courts, etc, that leads to panic decision making. There is no doubt in my mind that the government is sincere to work things out.
Privatisation is the key to resolving energy woes and there is no other way of better management of DISCOs and GENCOs. History demonstrates the dividends of private professional management are far superior to the government in similar institutions. Look at NBP, they have a profit of Rs5 billion, and even there may be a case of losses hidden in it; while MCB's annual profit is four times to it. It's not possible in Pakistan for the government to run big organisations; the level of professionalism (in the government) is nowhere close to private enterprises and the country does not have time to experiment anymore.
The idea of rental power projects to meet energy shortfall is not bad as it may be quicker. But, when you give nepotistic and ill-grounded privileges and relaxations, then unscrupulous people come into it and then a seven percent advance becomes 14 percent.
BRR: What are your comments on the ground-breaking of coal power-projects and issuance of LOIs? The government made an announcement to have coal-based power plants of 6600MW in Punjab and similar projects were to be commenced in South within 3-4 years with private sector having stakes in it. How do you see the progress?
MM: Normally, it takes five to six years to set up coal-based power plants. But, if the government plans to set these up in three years, then issues will emerge, like in the case of recent inauguration of the coal-power plant where the tariff has not been fixed yet.
The progress in Punjab is satisfactory. Initially, we all faced financing problems as owing to environmental issues Western multilateral and bilateral lenders were reluctant to finance it. But, Chinese have shown great interest both in equity and debt financing of these projects. We (Nishat Group) are planning to install two projects each of 660MW. Then two each by government of Punjab, consortium of other domestic private players and Chinese investors are in the pipeline as well.
This is due to the efforts of the Chief Minister of Punjab that Chinese investors are interested in financing Pakistani projects. But there are issues of land acquisition and tariff determination (by NEPRA) which need to move side by side also. A few days back, the government has outlined the projects' geographical locations. There are two each in Muzaffargarh, Jhang, Bhikki, and Sahiwal, and so on. We have been given a LOI of one project here in Jhang where Shanghai Electric is willing to provide us with the financing. Others who have received the LOIs jointly are Sapphire, Atlas and Liberty groups.
This all is going to be on imported coal. It is cumbersome to transport coal via railway. Elsewhere in the world, there is a system in place for transportation charges, there's no new science in this. But it requires changing the people's mind. The railway people resist it saying that the private sector will come in and take their profits.
BRR: You have received one LOI. What is the timeline of that project?
MM: It will be a 660MW project. It is very premature to tell you the exact timeline. I have the necessary financing, I know which companies to go to, and I know it's going to cost less than 10 cents per unit. The project cost will be around $1.2 to $1.4 million per megawatt as we have to set up a large infrastructure. Equity will be 20 percent and rest will be financed by the Chinese bank loan. Moreover, the Chinese are also interested in an equity stake in this project.
BRR: So NEPRA being the relevant institution in this case, what are the issues there?
MM: They need capacity building and they have their own issues. There have been new appointments. But the appointments have been shuffling. It's imperative for NEPRA to determine tariffs as private players assume risks to earn returns and in determination actual cost, dollar returns, efficiency of machinery, everything should be taken into account. It will be my risk to profit or loss. But, we have a lot of issues. If I get 17 percent dollar return, you will make it into a tariff and when the profits increase after a few years, I will start getting notices of profiteering.
BRR: It's been a year that the government has been in charge. But regulatory watchdogs like NEPRA, OGRA, SECP and CCP don't have any appointments. The SBP just got its new governor after a long hiatus. That does not indicate a lot of progress.
MM: The problem is that why would someone take up a top regulatory post or government job in Pakistan. Every day, one or the other institution will call upon them. I think that we should have appointments in place, and we should also hire people on competitive salaries. If these regulatory authorities are earning well enough, then paying off appropriately does not hurt.
BRR: How do you see the activity in the textile industry after getting GSP+ and in the aftermath of sharp rupee appreciation?
MM: Textile industry is under stress. The day we got GSP+ status, the very day India started giving rebates to its textile sector. They were prepared for it while we have no fiscal space for that. Still, we are optimistic about GSP+. So many captive plants are being set up. Garment city is also being set up. But there are a lot of energy-related issues.
On currency appreciation exporters are just creating hype out of it. It is just a onetime phenomenon. Last year around July, rupee was at the same level of Rs98. It's just a onetime windfall gain that has been withdrawn, so why cry.
BRR: What are your views on trade with India?
MM: There are many benefits of opening trade with India. Visa issues will be solved. They have a lot of warehouses for storage capacity. You can just go and watch a film in Amritsar with your family and come back. I am opening three MCB Bank branches in India this year: one each in Mumbai and Delhi, and probably another Uttar Pradesh.
BRR: What should the government do about the constraints faced by Pakistan Steel Mills?
MM: This is a very small steel mill compared to other ones in the world. So we should scrap it, and give money to the people. Due to this steel mill, our engineering industry is not working as it is so expensive here. Instead we should allow foreign investors to come and invest in steel; a lot of Indians want to come here as well as Russians to invest in Pakistan.
BRR: Can you tell us a bit about your Nishat Mall project in Lahore?
MM: It's going to be the biggest mall in Pakistan. It will have eight cinemas, one hotel and many shops. This mall will open next year. It will cost around Rs18 billion, including the land cost. It's fully debt-financed. It will create many employment opportunities and enhance domestic commerce.
BRR: Let's address a widespread rumour. Are you buying the PIA?
MM: No, I am not interested in buying PIA because airline is not a good business. Buying new planes does not guarantee profitability as there is a lot pilferage from top to bottom.
Mansha in no mood to buy PIA | Business Recorder
Below are selected excerpts from our candid conversation with Mansha at his residence in Lahore.
BR Research: How would you summarise PML-N's performance in the government so far?
Mian Mansha: The government and the Finance Minister have done a good job as they have been successful in stabilising the foreign reserves. Falling reserves portray a bad image of the country.
However, the area where the game plan is not working pertains to the resolution of the real issues, including energy, management and a few other things. The Prime Minister is trying his best. But in the past five years, so much destruction has been done in terms of management and decision making, interference of courts, etc, that leads to panic decision making. There is no doubt in my mind that the government is sincere to work things out.
Privatisation is the key to resolving energy woes and there is no other way of better management of DISCOs and GENCOs. History demonstrates the dividends of private professional management are far superior to the government in similar institutions. Look at NBP, they have a profit of Rs5 billion, and even there may be a case of losses hidden in it; while MCB's annual profit is four times to it. It's not possible in Pakistan for the government to run big organisations; the level of professionalism (in the government) is nowhere close to private enterprises and the country does not have time to experiment anymore.
The idea of rental power projects to meet energy shortfall is not bad as it may be quicker. But, when you give nepotistic and ill-grounded privileges and relaxations, then unscrupulous people come into it and then a seven percent advance becomes 14 percent.
BRR: What are your comments on the ground-breaking of coal power-projects and issuance of LOIs? The government made an announcement to have coal-based power plants of 6600MW in Punjab and similar projects were to be commenced in South within 3-4 years with private sector having stakes in it. How do you see the progress?
MM: Normally, it takes five to six years to set up coal-based power plants. But, if the government plans to set these up in three years, then issues will emerge, like in the case of recent inauguration of the coal-power plant where the tariff has not been fixed yet.
The progress in Punjab is satisfactory. Initially, we all faced financing problems as owing to environmental issues Western multilateral and bilateral lenders were reluctant to finance it. But, Chinese have shown great interest both in equity and debt financing of these projects. We (Nishat Group) are planning to install two projects each of 660MW. Then two each by government of Punjab, consortium of other domestic private players and Chinese investors are in the pipeline as well.
This is due to the efforts of the Chief Minister of Punjab that Chinese investors are interested in financing Pakistani projects. But there are issues of land acquisition and tariff determination (by NEPRA) which need to move side by side also. A few days back, the government has outlined the projects' geographical locations. There are two each in Muzaffargarh, Jhang, Bhikki, and Sahiwal, and so on. We have been given a LOI of one project here in Jhang where Shanghai Electric is willing to provide us with the financing. Others who have received the LOIs jointly are Sapphire, Atlas and Liberty groups.
This all is going to be on imported coal. It is cumbersome to transport coal via railway. Elsewhere in the world, there is a system in place for transportation charges, there's no new science in this. But it requires changing the people's mind. The railway people resist it saying that the private sector will come in and take their profits.
BRR: You have received one LOI. What is the timeline of that project?
MM: It will be a 660MW project. It is very premature to tell you the exact timeline. I have the necessary financing, I know which companies to go to, and I know it's going to cost less than 10 cents per unit. The project cost will be around $1.2 to $1.4 million per megawatt as we have to set up a large infrastructure. Equity will be 20 percent and rest will be financed by the Chinese bank loan. Moreover, the Chinese are also interested in an equity stake in this project.
BRR: So NEPRA being the relevant institution in this case, what are the issues there?
MM: They need capacity building and they have their own issues. There have been new appointments. But the appointments have been shuffling. It's imperative for NEPRA to determine tariffs as private players assume risks to earn returns and in determination actual cost, dollar returns, efficiency of machinery, everything should be taken into account. It will be my risk to profit or loss. But, we have a lot of issues. If I get 17 percent dollar return, you will make it into a tariff and when the profits increase after a few years, I will start getting notices of profiteering.
BRR: It's been a year that the government has been in charge. But regulatory watchdogs like NEPRA, OGRA, SECP and CCP don't have any appointments. The SBP just got its new governor after a long hiatus. That does not indicate a lot of progress.
MM: The problem is that why would someone take up a top regulatory post or government job in Pakistan. Every day, one or the other institution will call upon them. I think that we should have appointments in place, and we should also hire people on competitive salaries. If these regulatory authorities are earning well enough, then paying off appropriately does not hurt.
BRR: How do you see the activity in the textile industry after getting GSP+ and in the aftermath of sharp rupee appreciation?
MM: Textile industry is under stress. The day we got GSP+ status, the very day India started giving rebates to its textile sector. They were prepared for it while we have no fiscal space for that. Still, we are optimistic about GSP+. So many captive plants are being set up. Garment city is also being set up. But there are a lot of energy-related issues.
On currency appreciation exporters are just creating hype out of it. It is just a onetime phenomenon. Last year around July, rupee was at the same level of Rs98. It's just a onetime windfall gain that has been withdrawn, so why cry.
BRR: What are your views on trade with India?
MM: There are many benefits of opening trade with India. Visa issues will be solved. They have a lot of warehouses for storage capacity. You can just go and watch a film in Amritsar with your family and come back. I am opening three MCB Bank branches in India this year: one each in Mumbai and Delhi, and probably another Uttar Pradesh.
BRR: What should the government do about the constraints faced by Pakistan Steel Mills?
MM: This is a very small steel mill compared to other ones in the world. So we should scrap it, and give money to the people. Due to this steel mill, our engineering industry is not working as it is so expensive here. Instead we should allow foreign investors to come and invest in steel; a lot of Indians want to come here as well as Russians to invest in Pakistan.
BRR: Can you tell us a bit about your Nishat Mall project in Lahore?
MM: It's going to be the biggest mall in Pakistan. It will have eight cinemas, one hotel and many shops. This mall will open next year. It will cost around Rs18 billion, including the land cost. It's fully debt-financed. It will create many employment opportunities and enhance domestic commerce.
BRR: Let's address a widespread rumour. Are you buying the PIA?
MM: No, I am not interested in buying PIA because airline is not a good business. Buying new planes does not guarantee profitability as there is a lot pilferage from top to bottom.
Mansha in no mood to buy PIA | Business Recorder
