EDITORIAL: Bilawal Bhutto Zardari, Chairman of the Pakistan People’s Party (PPP), on the occasion of the International Labour Day, urged the government to explore public-private partnership (PPP) mode for key state-owned entities as an alternative to outright privatisation.

Given that the PPP is a major player in propping up the incumbent government and, in return, succeeded in not only getting key constitutional positions but there is also intense speculation that it may at some point opt to take some cabinet positions the opinion of the Chairman holds considerable weight.

During his speech he mentioned PIA (Pakistan International Airlines) which is approved for sell-off and the bidding process is scheduled to commence from 3 June this year – a date perhaps considered appropriate as political uncertainty would no longer have been a factor at play after the 8 February elections.

While success of the sale will depend on global and domestic conditions, however International Monetary Fund defines PPP as operating “at the boundary of the public and private sectors, being neither nationalised nor privatised assets and services. Thus, politically, they represent a third way in which governments may deliver some public services.

Moreover, in a practical sense PPPs represent a form of collaboration under contract by which public and private sectors, acting together, can achieve what each acting alone cannot.” The World Bank however cautions that “(i) PPP units or PPP laws alone cannot substitute the need for political commitment and broader reforms to resolve underlying infrastructure governance issues; (ii) the development of a PPP legal framework and the creation of PPP units needs to be accompanied by sector strategies and reforms to ensure impact and create momentum and generate interest, particularly on procuring entities (line ministries/departments/agencies); and (iii) a robust legal framework needs to be accompanied by adequate institutional arrangements.”

A well-resourced and staffed PPP Unit and a clear role for both the Ministry of Finance and procuring entities increases the chances of building a strong pipeline and accelerate its implementation. These critical supporting elements have not yet been released by the government.

The then caretaker Privatisation Minister Fawad Hasan Fawad publicly stated on 12 January 2024 that all legal formalities to privatise PIA had been met; a notification to the stock exchange was issued by PIA Secretary Rao Muhammad Imran on 26 March, which stated that “the board of directors of the company in its 83rd meeting held on March 25, 2024 has approved the Scheme of Arrangement for restructuring and privatisation of PIA along with its ancillary modalities to be filed by the SECP.”

On 3 April 2024, the government approved the net worth requirement of a minimum of 30 billion rupees or 100 million dollars. In other words, a seamless process to ensure that bidding takes place on 3 June 2024 is clearly in motion.

The only deterrent for a buyer would be PIA’s cumulative losses of 712.8 billion rupees (end June last year), the interest to purchase the debt it owes to PSO (Pakistan State Oil) of around 27 billion rupees, the cost of running PIA 156 billion rupees while PIA owes 435 billion rupees.

The global investment climate remains poor due to the Israeli war on Gaza and the Ukraine-Russian conflict, while the domestic climate remains poor, reflected by the negative 0.5 percent July-February growth of Large Scale Manufacturing sector. In the event that the stakeholders succeed in luring friendly countries to purchase the airline then are chances of success; however, otherwise a better option would be to support PPP mode as suggested by Bilawal.

Bilawal suggested sale of Pakistan Steel to Sindh, which rejected the offer by the federal government to purchase the Mills and in 2020 Saeed Ghani the then Sindh Education Minister stated that “the government is eyeing the land of steel mills worth billions of rupees.

But everyone should be clear about it. This land belongs to Sindh government, and we will not allow them to take this land. The Sindh government has in the past raised its voice against the privatisation, and we will not remain silent this time as well. We are with the workers, not with capitalists.”

To conclude, any measures that are not premised on a detailed empirical study and supporting legislation/regulation enacted will lead to failure in spite of however attractive a sale may be, which is certainly not the case with respect to these two loss-making behemoths. One would hope that empirical studies be carried out before taking any such major economic decisions that would have repercussions on the socio-economic fabric of this country.

Copyright Business Recorder, 2024


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MH May 04, 2024 10:24am
Good suggestion
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KU May 04, 2024 02:18pm
Well, Mr. Bilawal should feel the grassroot sentiments and building anger/frustration of people, because they are rising like a tide. Perhaps, he can do something meaningful for miserable poor.
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Anonymous May 06, 2024 09:30am
They buffed up these state organizations in 90's with politically motivated inductions and now they have started political point scoring.
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Love Your Country May 06, 2024 07:36pm
Will he jump the ship on this issue is anybody's guess.
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