ISLAMABAD, PAKISTAN — AFTER an embarrassing start, Pakistan is trying to generate fresh interest in the privatization of the country's exclusive telephone network.
The initiative is emerging as an important test of Pakistan's climate for free enterprise, which has been clouded by continuing violence and the government's previous difficulties selling the company.
The plan to sell more of the Pakistan Telecommunications Corp. (PTC) during the next four months is also crucial for Prime Minister Benazir Bhutto's government, which faces mounting pressure because of recent disappointments on its management of the country's economy, including privatizations.
The response to the offer of shares in PTC, known as the ''flagship'' of Pakistan's huge public sector, could well determine the response by investors to other privatization plans, business analysts say.
Nations around the world, from South America to Southeast Asia, have been moving state-run industry to the private sector, with varying degrees of success. Recently several Russian banks criticized that country's privatization as ''questionably organized.''
Farooq Leghari, Pakistan's president, recently delivered a word of caution against the pitfalls of worsening public perception of the country's privatization plans. ''The cynicism against the manner of privatization has to go. The government has to ensure that this cynicism is replaced by full understanding of the manner in which state assets are being privatized.'' Some analysts say President Leghari's remarks refer directly to the PTC case.
Ms. Bhutto's government initially won acclaim for selling up to 11 percent of PTC's shares through public offers on Pakistani and foreign stock markets last year. The offering raised almost $900 million.
But the initiative quickly became shrouded in criticism when it was revealed that the documents supporting the offer had overstated the PTC's client base. As a result, critics say, investors were enticed by inflated projections for future revenue growth.
This time, government officials say they have thoroughly examined all the documents to be certain there are no oversights. Pakistan plans to sell up to 26 percent of the company's shares and transfer its management to private hands by March 1996.
More broadly, the government is trying to put down concerns about Pakistan's investment climate. During the past year, business confidence has taken a beating with continuing violence in the Southern port city of Karachi, the nation's business capital.
More than 1,700 people have been killed in political and ethnic violence this year. The government blames the Muhajir Qaumi Mahaz (MQM), the city's largest political party, for being behind most of the violence. Still, after more than six months of negotiations, there are no signs of an agreement between Bhutto's government and the MQM to squelch the violence.
Naveed Qamar, chairman of the privatization commission, argues that concerns about the present PTC offering are unfounded. He says he is convinced that the troubles will not deter investors willing to stay put for an ''excellent'' long-term opportunity.
Investors looking at the PTC will be attracted by its large base of potential clients, which is expected to rise to more than 4 million by the turn of the century, Pakistani officials say. Potential shareholders are also encouraged by the latest financial results of the company announced this month. The PTC's annual profits this year rose to 16.84 billion rupees, or $483 million, up from 16.02 billion rupees, or $459 million, last year.
Other analysts disagree with the government's optimism and say that memories of last year's troubles and the current investment climate may together dampen investor response.
Hafeez Pasha, a former commerce minister and the director of Karachi University's prestigious Institute of Business Administration, warns: ''The PTC privatization has not been altogether handled very well. I think in the very first round, we've eroded the credibility of the exercise, and the confidence [of investors] has been affected.''