Islamabad:
As Pakistan’s wealthiest families express interest in acquiring the struggling national carrier, Prime Minister Shehbaz Sharif’s government remains reluctant to sell at least 75 percent of the state-owned commercial entities.
The government aims to maintain control over key sectors such as insurance, finance, road transport, logistics and oil and gas production. Except for Pakistan International Airlines (PIA) and electricity distribution companies, almost all commercial enterprises are exempted from privatization.
This decision follows internal resistance to the government’s privatization efforts. Of the 87 eligible commercial entities, only 21 have been proposed for active privatisation, sources in the Privatization ministry told The Express Tribune. The ministries have excluded 39 companies from privatization without explanation and have not provided details of another 27 companies. As a result, the government has selected only a quarter of the entities for privatization, while some are facing challenges due to lack of cooperation from government departments, they added.
Among the 21 state-owned enterprises selected for privatization by Prime Minister Sharif’s government is PIA.
Domestic airlines such as Fly Jinnah, Air Sial and Air Blue have received documents to participate in the privatization of PIA. Some may form joint ventures with foreign investors or international airlines, according to a Privatization Ministry official.
Privatization Minister Abdul Aleem Khan announced that 10 prospective investors have submitted Expressions of Interest (EoIs) for the privatization of PIA. However, not all investors have submitted documents yet.
The board of the Privatization Commission approved an extension of the submission deadline for PIA divestment interests, responding to requests from interested parties.
Gerry’s International, which deals in ground handling, has also expressed interest, but requires more time for documentation, according to a senior ministry official. Financial advisers predict that two to three more parties will soon show interest. Consequently, the board extended the EoI deadline from May 3 to May 18 and set up a pre-selection committee to evaluate potential investors.
The government has relaxed the criteria for bidders to participate, notably requiring a minimum net worth of Rs 30 billion. This has attracted interest from Pakistan’s wealthiest families, with no strict conditions attached to airline industry experience.
The government had advertised to invite investors to acquire a majority stake in PIA a month ago.
Prominent business figure Arif Habib and several cement players such as the Tabba family of Lucky Cement, Habibullah Khan of Pioneer Cement and Bestway Cement and Maple-Leaf Cement have shown interest and received documents to privatize PIA .
Two business conglomerates from Sindh, Omni Group and construction firm D Baloch, have also expressed interest, according to privatization ministry officials. However, no regional airline has yet shown interest in acquiring stake in PIA.
The government aims to sell stakes ranging from 51% to 100%. However, foreign investors cannot acquire more than 49% and are required to form a joint venture with local investors if they wish to invest.
The government has restructured PIA’s balance sheet and assumed its debt, parked in a holding company. He also took responsibility for PIA’s debt from commercial banks.
Although Prime Minister Sharif has declared privatization a priority, government ministries have not fully cooperated with the privatization ministry, withholding information about potential privatization candidates.
Of the 87 commercial entities, ministries have shared information on only 60, with no explanation for the omission of 37 entities. Despite long inclusion in the privatization list, 15 enterprises are facing challenges due to the ministry’s lack of cooperation.
The privatization ministry recommends prioritizing the privatization of loss-making entities and limiting state involvement in strategic interests.
Due to a lack of cooperation from these ministries, the privatization ministry is proposing to give the ministerial committee on state-owned enterprises sole authority to decide which entities to retain due to their strategic importance.
The Cabinet opposed the privatization of Pakistan Tourism Development Corporation and Printing Corporation of Pakistan. The Commerce Division has opposed the privatization of Pakistan Reinsurance Company Limited, National Insurance Company Limited, State Life Insurance Corporation of Pakistan, Trading Corporation of Pakistan and Pakistan Expo Centre.
The Ministry of Communications has opposed the privatization of the National Highways Authority and the Pakistan Post Office.
Finance Division has opposed the privatization of SME Bank Limited, National Bank of Pakistan, Industrial Development Bank of Pakistan, Pak-China Investment Company, Pak-Iran Investment Company, Pak-Libya Investment Company, Pak-Oman Investment Company, Pak-Kuwait , and Pak-Brunei Investment Company. The Finance Department has also opposed the privatization of the National Investment Trust Limited.
The industry ministry has also not agreed to the privatization of National Fertilizer Corporation, Pakistan Industrial Development Corporation, Pakistan Steel Mills, Small and Medium Enterprises Development Authority, State Engineering Corporation and Utility Stores Corporation.
The information technology (IT) ministry has opposed further offloading of shares in Pakistan Telecommunication Limited.
Published in The Express Tribune, May 4u2024.
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