The last time privatization was seen in Pakistan, iPhones were just released and the sub-prime crisis hadn’t even hit yet. That all changed in the summer of 2014 when Pakistani-owned United Bank (UBL) executed its US$388 million secondary placement. It was the first time international investors had been exposed to the Pakistani equity markets since 2007 and marked the return of the privatization programme in the country.

Created in 1991, the Pakistan Privatization Commission had been an important tool for generating growth and opening up the country’s economy to competition. However, once the new government took over in 2013, it discovered that the organization had been neglected for a number of years by the previous administrations. “When we came to power in June 2013, there was nothing in the privatization programme,” says Mohammad Zubair, chairman of the Privatization Commission.

Seemingly starting from scratch, Zubair's first order of business was to rebuild the resources of the commission and generate trust from international investors anew. "We needed to get the best of the private sector to do all of these major transactions," he adds. Travelling to New York City to get support for the re-launch of the programme, he was given the cold shoulder by several financial institutions as they questioned the commitment to execute the proposed privatization deals. “Some of these financial advisors were unhappy that there wasn’t any recent capital market activity in the country,” Zubair notes. “There had been several transaction attempts, but the ball was dropped midway through.”

In the face of scepticism, the Privatization Commission announced the secondary offering for UBL on February 2014. For Zubair, it was all about presenting the Pakistani story to the world. “During our roadshow, we were able to tell people that despite our turbulent history, we had political stability since 2008,” he explains. “There had been a smooth transition from one government party to another through the electoral process.”

With a June 2014 completion date in mind, the Privatization Commission with its financial advisor partners had to rapidly build investor confidence for their offering despite several investors not even having trading accounts in the country. Furthermore, raising US$388 million in a short period of time also proved to be a tall task. According to the State Bank of Pakistan, total foreign portfolio investment in 2013 was only US$119.5 million.

Engaging investors from Singapore to the US eventually paid off for the privatization scheme, with 90% of the book covered prior to the launch. However, just days before the transaction, there was a major militant attack on Karachi’s international airport, one of the busiest transport hubs in the country. “We were debating at that time if we should’ve gone through with the deal,” Zubair recalls. “I had to attend to several calls with some investors.”

The chairman eventually made the decision to go ahead because “withdrawing at this point would have been its own negative”, he notes. “We wanted to create some positives in the country despite the trouble at the airport.”

In the end, the transaction was a success, attracting high profile international investors like Franklin Templeton, Morgan Stanley and BlackRock. Due to unprecedented demand, the deal was upsized from 160 million shares to 242 million shares. “We want to maximize the price for every transaction the government of Pakistan does,” says Zubair.

The UBL deal has set a healthy precedent for future privatization deals in Pakistan such as the government’s divestment of 11.5% stake in Allied Bank (ABL). That deal raised US$142 million and was bought up by a mix of foreign (13%), domestic (43%) institutions and high net worth individuals (40%). The Privatization Commission is very optimistic and has a long list of transactions earmarked to take off in 2015 that involve Lahore Electric Supply Company (LESCO) and Habib Bank which analysts are predicting to fetch up to US$1.2 billion for the government.

Zubair seeks to raise US$4 billion by the end of fiscal year in June 2015, despite the inactivity over the last several years. “During the first 22 years of the privatization process, around US$4.5 billion was earned by the government of Pakistan,” he adds.

With the backing of a business-friendly government, Zubair is confident that these schemes will be hugely beneficial for the country. “We want privatization so these institutions can provide top quality service to the people of Pakistan,” he explains. “More than 20% of the total government revenue for the year has gone to maintaining these government-owned organizations despite the fact that they don’t provide the Pakistani people the services they deserve.”