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PIA Privatisation Hinges on Financial Advisers Report

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Posted by on Friday, January 3, 2014, 12:09
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Pakistan’s commitment to the International Monetary Fund (IMF) to sell 26% shares of national flag carrier Pakistan International Airlines (PIA) by the end of this year was not sacrosanct and a lot depended on the report of financial adviser, said Privatisation Secretary Amjad Ali Khan.



In a briefing on Thursday to the Senate Standing Committee on Finance and Privatisation on the brewing controversy over the privatisation of PIA, Khan said the December 2014 deadline could be extended, if needed.

He said the government would hire a financial adviser by the end of March, who would come up with a report on the technical and financial aspects after due diligence. The report will determine whether the state-owned air carrier could be privatised by December or more time would be required to complete the process.

The secretary’s statement highlights the widening gulf between different government agencies as the Ministry of Finance is being accused of taking all policy decisions without consulting relevant stakeholders.

Khan said Pakistan had earlier agreed with the IMF that it would sell PIA shares by June this year. “During meetings for the recently concluded first review, I told the IMF team that the June 2014 deadline was not doable and after that the date was extended to December,” he added.

Under the $6.7 billion IMF programme, Pakistan has committed to sell 26% shares of PIA to strategic investors.

It was not only the privatisation secretary, who appeared on a different page, the PIA management too complained about the Ministry of Finance’s solo flight.

“The government has not shared its privatisation strategy with the PIA management, which is in the dark about what approach the government will adopt to sell the entity,” said PIA Deputy Managing Director Air Vice Marshal Qasim Masood Khan.

Members of the standing committee criticised the federal government for not taking on board the main stakeholder in the privatisation decision.

Finance Secretary Dr Waqar Masood reiterated that Pakistan had committed to sell 26% shares of PIA to strategic investors by December 31, 2014. He said the government had also committed to the IMF that in the meantime PIA would continue acquiring planes on lease and would also rationalise routes.

But the government’s problem is that it cannot press on with PIA sell-off until it is cleared by the board of Privatisation Commission. The privatisation secretary insisted that the PC board was independent.

Masood said PIA’s employees would be protected through a combination of limited job security and golden handshake offer.

The approval for PIA privatisation along with 64 other state-run enterprises was given by the Council of Common Interests during the tenure of the PPP government, he said, adding the government would not sell the airline in haste.

Masood said PIA’s losses had increased to Rs180 billion and the airline was suffering a monthly loss of Rs3 billion.

Senator Islamuddin Sheikh of the PPP alleged that the ulterior motive of privatising the air carrier was to create chaos in Karachi, as the expected layoff of thousands of employees, as a result of the privatisation, would cause social unrest. “The PPP will not allow PIA privatisation at any cost,” he added.

Without separating the employees who were incompetent, PIA could never be turned around, said Muhammad Zubair, who was recently appointed chairman of the Privatisation Commission. “A mix of PIA employees was substandard,” both on account of quality and quantity, he said.

The PPP government had inducted more than 5,000 employees in its five-year rule, many of whom were reinstated with backdate benefits, increasing the wage bill manifold. Zubair said total workforce of PIA was over 19,000.

“Fire incompetent people but do not sell the assets,” remarked Senator Osman Saifullah of the PPP.

Standing committee chairperson Senator Nasreen Jalil of the MQM supported PIA’s sell-off, but sought to safeguard the interests of employees. She said government’s interference in state-owned entities would ruin all the remaining institutions as well.

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