AMID talks on the sale of 46 percent of Zain’s shares to an Indian company, we crave for answers to some pressing questions. Why should we sell the shares of a strong company like Zain, considering our public funds, oil establishments and investment companies are major investors in India, US and Europe? The equation changes under the so-called ‘globalization of capital’, since our strategic investments are being controlled by those who manage the affairs of our country — location of the headquarters of Zain, which is considered the ‘telecommunications ambassador’ of Kuwait in the Gulf, Africa and many other Arab nations. We are not against privatization or distribution of profits to small shareholders, who are part of the deal, because we respect their right to grab every profitable opportunity.
However, when the deal targets a company like Zain, we cannot help but ask about the role of the Kuwaiti government. Why would Kuwait Investment Authority (KIA) sell its shares at KD2 each, which is an acceptable and fair price? Isn’t the government supposed to take the initiative in this deal and use the budgetary surplus in many of its departments, such as the Public Authority for Social Security (PASS), Kuwait Foundation for the Advancement of Science (KFAS), Awqaf Fund and oil revenues? This surplus should be utilized to purchase 46 percent of Zain’s shares, or even 100 percent of the company, instead of allowing foreign hands to grab these shares. Zain is not an ordinary telecommunications company. It is not also the oldest, yet it is a Kuwaiti establishment that carries the name of Kuwait in many places. It has produced a large number of national manpower with good experience and trained them until they became experts in the operations of telecommunication companies.
If we look around, we see governments injecting large sums to save major strategic companies because investments in such companies are part of national security and sovereignty, especially in Gulf countries like Saudi Arabia. At this point, I call on PASS to follow the example of its counterparts in other countries, such as the Saudi Arabian Public Authority for Social Security which owns 21.6 percent of shares in Riyadh Bank, 21.5 percent in Investment Bank, 9.6 percent in Saudi-Holland Bank, 12.8 percent in Saudi-French Bank, 9.5 percent in Saudi-British Bank, 10.8 percent in Arab Bank, 11.4 percent in Al-Inma Bank, 9.9 percent in Al-Rajjihi Bank, and 10 percent in Islamic Al-Inma Bank. The Saudi government has been focusing on injecting money in petrochemical companies like ‘Sabic’, as the Public Investment Bank of Saudi Arabia owns 70 percent of shares in this company. We can cite more examples not only in Saudi Arabia, but also in Qatar and United Arab Emirates (UAE) where there is clear policy to keep strategic companies under the management of citizens, either individuals or groups.
Going back to Zain, many individuals or companies are selling their shares to earn higher profits or for liquidity. Demand for cash (liquidity) came after the government failed to provide liquidity in the market, prompting companies and individuals to look for cash by selling their shares. It is natural for the government to step in as buyer of Zain’s shares, especially after noticing the sale operations. In this way, Zain will remain a Kuwaiti company in many Arab and foreign countries. However, the government aggravated the problem when KIA announced its plan to sell its shares at KD 2 each, considering Zain is expected to become the sixth largest telecommunications company in the world by 2011 or 2012.
It is unacceptable to say that KIA needs liquidity like other shareholders, or it is selling its shares in Zain to earn profits. Here are some questions for those spreading such objectionable and imaginary ideas, why did KIA not sell its shares in City Group and Merrill Lynch? Why did it not reduce its shares in Mercedes - a German company, instead of selling its shares in Zain? Didn’t the government and KIA hear about the outrage in the United Kingdom after Barclays Bank revealed the Arab origin of majority share buyers? Didn’t the UK government rescue Royal Bank of Scotland? This happened in the UK because they focused on keeping the identity of the bank, instead of getting cash.
We will soon face a very serious problem due to the government’s negligence, particularly its failure to support a company that has political and economic value to the country, not to mention its strong presence in other parts of the world. This negligence has caught the attention of potential buyers, who are keen on owning Zain’s shares, from India, Pakistan and several other nations. The government should take into consideration the crucial role of Zain in training a huge number of citizens, who will greatly contribute in the telecommunications sector in the future.
If the government does not control this deal, the future generation will never forget its negligence. The deal is at a crossroads and this is the right time for the government to participate as a buyer to correct its mistakes. In this manner, Zain will maintain its identity as a Kuwaiti company and ‘telecommunications ambassador’ of Kuwait.
Nevertheless, we don’t imply reduction or cancellation of foreign investments. We want the concerned authorities to prioritize this deal to keep Zain a hundred percent Kuwaiti company. It is time for KIA to invest in the local market as it has earned more than 40 percent in spite of the small amount of its investments. If KIA invests in the local market, it will enhance the performance of the market, but there should be a certain degree of interference from relevant authorities to look into the political aspect of the deal and put it on the right track.
Email: ahmed@aljarallah.com
By Ahmed Al-Jarallah
Editor-in-Chief, the Arab Times