The PIA’s Board of Directors, in its very first meeting since being reconstituted last Friday, approved the Scheme of Arrangement for the privatization of the national flagcarrier. The same day, Cabinet approval was obtained, by the mechanism of circulation among Cabinet members, for the Board of Directors of the holding company, to which all assets and liabilities of PIA will go. The privatization is to take place by June 15. The new government is thus rattling at full speed down the path laid out for it by the caretakers, who initiated the privatization in right earnest. The sale, which is accompanied by that of four airports, has attracted the attention of an indeterminate amount of local investors, and seven international investors.
The biggest reason to privatize is the sort of money it has been bleeding. Its liabilities are about Rs 1.7 trillion, which is too much for the government to take on. One of the problems with the privatization is No-Objection Certificates have to be obtained from 35 lenders. The financial advisers to the privatization have said that $250 million to $300 million could be obtained. Clearly, the price would be what the market determined. However, the seller is a government and will be sensitive to the charge that it undersold, a charge that its opponents will make whatever the final price. Indications are that the favoured buyer from the Middle East. It should be kept in mind that PTCL was similarly sold, to Etiselaat, of the UAE, back in 2006, a 26 percent share plus full management control, for $2.6 billion. The money was not paid upfront, and diplomatic pressure had to be exerted to get the money.
A wider problem is that the sale might be keep the IMF happy, but what happens when the family silver is all sold? PTCL went for a large sum of money, but Pakistan remains mired in debt, forced to fawn upon the IMF for another handout. It is true that PIA will bring a few hundred million dollars, but the country’s external debt is in the billions. Money will be saved in the Budget, but where will that money go? Paying salaries? Debt servicing? This sale should show the writing on the wall more clearly than anything else. The freeloaders’ ride is over. The state has precious little that can be squeezed out of it.
