Finance Minister Muhammad Aurangzeb’s recent reaffirmation regarding the disinvestment of the national carrier by the end of June or early July underscores the government’s steadfast commitment to privatization. By echoing the age-old adage that “the government has no business being in business,” Aurangzeb signaled the government’s determination to shed loss-making state-owned enterprises. He further disclosed plans to privatize the country’s three main airports in Islamabad, Lahore, and Karachi, following the footsteps of Pakistan International Airlines (PIA).
During a news briefing at the conclusion of his weeklong visit to Washington to negotiate a new IMF package, Mr. Aurangzeb announced the imminent opening of bids for PIA within the next two to three weeks. He anticipates finalizing the sale to investors by the end of June or early July. This commitment to privatization is encouraging, considering the massive annual losses incurred by state-owned enterprises, amounting to Rs500bn, which pose significant systemic risks to both the national budget and creditors.
However, while the push for privatization is commendable, there remains ambiguity regarding the government’s long-term privatization roadmap beyond PIA and airport outsourcing. The current initiative, spearheaded by the Special Investment Facilitation Council, appears geared towards expeditiously transferring assets to investors from friendly Gulf countries, possibly through government-to-government deals. This strategy, aimed at alleviating pressure on the current account and budget, risks raising concerns about the hurried nature of the privatization process.
While taxpayers can ill afford to sustain state-owned resource-draining entities, hastening privatization, particularly of PIA, may raise doubts about the legitimacy of the process, potentially inviting legal challenges. Multilateral institutions like the World Bank have cautioned against the dangers of a disorderly privatization process, advocating instead for a meticulously planned approach. They recommend establishing a revamped privatization commission staffed with competent professionals capable of developing tailored financial models for each entity earmarked for privatization.
Transparency and full disclosure are imperative to instill public confidence in the privatization process and mitigate risks of complications or legal disputes for investors. Such transparency should also help secure better prices for these assets, ensuring optimal returns for the government and investors alike.
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