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Selling PIA
FINANCE Minister Muhammad Aurangzeb’s assertion that the government hopes to finalise the delayed privatisation of the national carrier next month indicates that issues with shortlisted bidders interested in buying PIA will be resolved soon.
His words were preceded by the parliamentary secretary for communications claiming that the “financially unviable” PIA would be auctioned on Oct 30. Previously, the government had hoped to sell the loss-making airline by June. The minister, who is attending the annual IMF and World Bank meetings in Washington, blamed the delay on macroeconomic instability and insufficient time given to prospective investors for due diligence of the company.
“The reality is, when any foreign investor comes in, or even the local investor, who is going to put in a substantial amount of money, they want to ensure that the foundation is there,” he said. He noted that bidders for both PIA and the Islamabad airport also required scrutiny — another factor that led to the extension of the privatisation timeline.
The last time the government postponed PIA’s auction was a month ago when it was reported that the bidders had demanded changes to Pakistan’s tax laws that would have placed them on an equal tax footing with foreign investors. They also wanted the freedom to change existing terms of employment of the company’s staff, and modifications in sale conditions related to the re-capitalisation of the carrier for refreshing and expanding the fleet with an investment of nearly $800m to make it financially viable.
However, it had been reported then that the authorities’ refusal to give PIA special tax treatment less than a week before final bids to buy the airline were due had dampened buyer interest, forcing the authorities to postpone the auction of the 60pc government stake in the state-owned company for at least a month. It is still not known if these and other issues raised by the potential investors have been resolved.
While some investor concerns are legitimate and buyers should not be compelled to absorb the financial burden of surplus employees, others seem to have been raised to force the government’s hand to make the deal even sweeter amid reports that the authorities would give in to their demands in order to meet the new IMF funding programme.
With the government already taking over most of the airline’s liabilities — its debt of more than Rs600bn, the pension bill of its retired employees, and so on — the bidders’ attempts to force more concessions from the authorities is not acceptable. For the sake of transparency and to prevent any controversy from erupting, the government should make clear the details of the deal it has offered the bidders and the demands they have raised.
Published in Dawn, October 26th, 2024
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