Islamabad: The Pakistani government has granted a two-month extension to the due diligence period for the airline’s privatisation, now set to conclude on October 1, 2024.
As per details, this decision, driven by requests from prospective bidders, includes a proposal from the Privatization Commission to ensure that the winning bidder retains PIA’s current employees for up to three years, acknowledging the sensitivity of labor issues in public sector privatisations.
Since February 2015, PIA has amassed staggering losses totaling PKR 599 billion (USD 3.34 billion), with PKR 75-80 billion lost in the past year alone. The extension follows requests from four out of six bidders for additional time, ranging from 60 days to six months. The government settled on a two-month extension to allow for thorough due diligence, which will involve site visits and pre-bid meetings, conducted with transparency through live streaming. The final bidding documents will be prepared post-due diligence, with approvals from the Cabinet Committee on Privatization (CCoP) and the federal cabinet expected before the contract signing.
During a recent National Assembly Standing Committee on Privatisation meeting, MNA Sehar Kamran raised concerns about whether a performance audit of PIA had been conducted, suggesting that inefficiency might not be the sole reason for the privatization push. Chairman Farooq Sattar echoed the need for deeper scrutiny but acknowledged the urgency of proceeding with the privatisation to prevent further financial losses.
The meeting also addressed other privatisation efforts, including the Roosevelt Hotel in New York. The government has appointed Jones Lang Lasalle Americas Inc. (JLL) as the financial adviser to explore various transaction options, from a long-term lease to an outright sale or joint venture. JLL’s findings will be reviewed by the CCoP on August 28, 2024, before calling for expressions of interest from potential investors.
Additionally, the sale of House Building Finance Company Limited (HBFCL) to Pakistan Mortgage Refinance Company (PMRC) is progressing towards completion. Despite some reservations about privatizing a profitable entity, the deal has been approved by the CCoP and the federal cabinet. HBFCL’s Managing Director indicated that the withdrawal of a Bangladeshi company was influenced by the macroeconomic environment, though the company has effectively reduced its non-performing loans to just 17% of its total portfolio.
Farooq Sattar, while supporting the ongoing privatisation of HBFCL, called for further discussions to ensure that the government’s privatization strategy aligns with broader economic objectives.
