PIA bidding set for Oct 1

ISLAMABAD: The government has shared the final draft of bid documents for the privatisation of Pakistan International Airlines (PIA) with six pre-qualified bidders, and would sign the document with them on Wednesday (today), a top official of the Privatisation Commission informed a parliamentary panel.

Initial feedback from the bidders would be gathered as the process advances toward the final financial bidding, scheduled for October 1, for the sale of a 60 percent stake in the national flag carrier.

Privatisation Commission Secretary Usman Bajwa briefed the National Assembly Standing Committee on Privatisation that met here with MNA Farooq Sattar in the chair.

Bajwa informed the panel that on September 25, the draft agreement would be signed, and by September 27, earnest money will be deposited by pre-qualified bidders.

They have conducted site visits to PIA’s facilities in Karachi in late June, followed by a series of pre-bid meetings in July, August and September. These steps are part of a meticulous process leading up to the final financial bidding expected to be held on October 1, which will include live streaming to ensure transparency.

Bajwa said: “We have uploaded the final drat bid documents on virtual data room (VDR) on 18 September 2024.”

Besides, Draft Instruction to Bidder (ITB), SHA and draft purchase subscription agreement (SPS) has been uploaded on the VDR. The pre-qualified bidders are reviewing it, the busying sides due diligence in last stages. Then we would expect to hold financial bidding on Oct 1, and the winner will seek approvals from the Cabinet Committee on Privatisation (CCoP) and the federal cabinet before contract signing and awarding.

MNA Sehar Kamran raised concerns about some reports, stating that bidders for the PIA appeared reluctant to invest $500 to $700 million.

The Privatisation Commission secretary assured the panel that the PIA currently operates 20 planes, and the bidders are expected to increase that fleet to 40-45 aircraft within three to five years. “We have requested the induction of new planes to lower the average age of the fleet from 17 years to 10,” he said.

He also emphasised the importance of retaining human resources for two to three years, along with maintaining perks and privileges for employees. Pension entitlements would also be safeguarded. Additionally, the government must grant permission if bidders decide to discontinue or sell off PIA’s routes, particularly international ones to destinations like Saudi Arabia, Paris, and Canada, as well as key domestic routes.

He mentioned concerns over the ongoing ban on PIA’s most profitable routes to Europe, but reassured the panel that the Civil Aviation Authority (CAA) has made progress, and the ban would be lifted soon. The secretary confirmed that these terms had been incorporated into the final draft of the privatisation agreement.

The committee unanimously requested the Privatisation Commission to share the final draft or hold an in-camera session to review it. The committee’s chair said that if Deputy Prime Minister Ishaq Dar, who heads the CCoP, allows, a meeting on the draft could be held in the next two to three days.

Another member of the committee expressed concern, stating: “We are unaware of the agreement, and it should be presented to the committee.”

When asked about pensions for current employees, Bajwa explained that Rs35 billion had been earmarked for the 7,360 current employees, while pensions for the 16,000 already retired workers would be covered by the government.

In the first year, the winning bidder will need to inject Rs65 to Rs70 billion to cover various expenses, including the restoration of grounded aircraft. He noted that the PIA is currently free from commercial debt and has the ability to raise funds.

PIA CEO Amir Hayat added that the airline’s audit has been completed, and there is optimism that the European Union Aviation Safety Agency (EASA) would lift its ban by the year end. “We have certified 320 highly trained pilots, and after privatisation, we will need more as the fleet expands.”

The committee chair expressed concerns, urging the commission to extend the retention period for employees to four or five years and ensure salary increases. “While overall salaries have risen by 132 percent in the past five to six years, PIA employees have only seen a 32 percent increase,” the chair noted. The committee also demanded to review the draft agreement and ensure that domestic routes remain operational.

Meanwhile, speaking at “High Level Private Sector Dialogue – CPEC-II and the Region” virtually through Zoom from New York, Finance Minister Senator Muhammad Aurangzeb voiced confidence that the International Monetary Fund (IMF)’s board would greenlight a $7 billion, 37-month Extended Fund Facility (EFF), at its meeting tomorrow (Wednesday).

“Pakistan successfully concluded a nine-month SBA (Stand-by Arrangement) with the IMF and we have its board meeting tomorrow (Wednesday) here in the US. We are very hopeful the board would approve the 37-month seven billion dollars programme,” he said.

The event was jointly organised by the Pakistan Regional Economic Forum (PREF) in partnership with the Chinese Embassy in Pakistan. The discussion was co-chaired by Chinese Ambassador Jiang Zaidong and attended by prominent business leaders from Pakistan.

Pakistan and the Washington-based lender reached an agreement on a loan programme in July. The IMF said the programme was subject to approval from its executive board and obtaining “timely confirmation of necessary financing assurances from Pakistan’s development and bilateral partners”.

The finance czar said Pakistan was committed to structural reforms under the programme, and it needed to pursue the reform agenda, whether in taxation, the energy sector, state-owned enterprises, or privatisation.

“We will stay on course,” he resolved.

Speaking at the CPEC dialgogue, Aurangzeb expressed gratitude to China for its support of the fund programme as the country’s lone standing partner.

The minister thanked the Chinese government for its support in meeting the IMF’s requirements for the loan programme, as well as for its overall contribution to Pakistan’s economic stability. He also extended gratitude to Saudi Arabia for its assistance in securing the IMF loan, referring to both nations as “all-weather friends of Pakistan.”

Pakistan’s economic improvement, which started in the last fiscal year, continued into the first quarter of this fiscal year, with notable developments in various economic indicators, according to the minister.

He said the currency and foreign exchange reserves were stable, with two months of import cover, while inflation had decelerated, leading to a reduction in policy rates and eventually Kibor, to the benefit of the industry.

Aurangzeb said the government had recently rejected Treasury Bills (T-bills) and Pakistan Investment Bonds (PIBs), saying the decision aimed to convey a clear message that the government was no longer desperate to borrow domestically.

“If required, the government will borrow domestically on its own terms, signalling the banking sector to lend to the private sector,” he said.

However, he said investment inflows in terms of debt and equity were welcome, as they would bring foreign direct investment (FDI) into the country.

Attaching great importance to macroeconomic stability, the finance minister said a foundation had been laid to promote economic stability.

“The China-Pakistan Economic Corridor Phase II is now underway, building on the infrastructure development of Phase I,” Aurangzeb said.

The minister explained that the Phase I focused on establishing corridors and investing in roads, ports, and energy. “However, the next step is monetising this infrastructure and although momentum was missed, it is not too late to move forward.”

“This initiative, dubbed the new silk roads, aims to attract investment partners worldwide. The private sector will drive growth, with the government providing a supportive policy framework.”

Moreover, the minister urged Saudi Pak and Pak-China Development Financial Institutions (DFIs) to facilitate cross-border investments and corridor development between Pakistan and its brotherly countries.

He encouraged them to capitalise on this opportunity, becoming catalysts for business growth and bilateral investment, and serving as levers through which business can be taken forward.

Addressing the forum, Chinese Ambassador Jiang Zaidong emphasised the importance of strengthening confidence in Pakistan’s development prospects, the China-Pakistan relationship, and the future of humanity. He urged stakeholders to take control of their national destiny and deepen China-Pakistan cooperation.

The ambassador suggested leveraging agricultural advantages from neighbouring provinces as a model for enhancing agricultural cooperation between China and Pakistan. He also called for mutually beneficial preferential policies for Chinese and regional entrepreneurs.

He pointed out that Pakistan’s energy sector challenges were not due to Chinese enterprises or CPEC but were long-standing domestic issues. He explained that while Pakistan’s power generation capacity had improved, the energy sector is currently undergoing a systemic transition aimed at achieving greater efficiency and price stability.

Ambassador Jiang also praised Prime Minister Shehbaz Sharif for steering Pakistan’s GDP back to positive growth and reducing inflation, saying that foreign exchange reserves had surpassed $14 billion and that international credit rating agencies had upgraded Pakistan’s ratings.

PREF Chairman Haroon Sharif highlighted in his welcome remarks the rapid economic transformation occurring in the region and the significant opportunities available in Pakistan for economic development.

He stressed that Pakistan must transition from a debt-based economy to an investment-driven one by leveraging infrastructure connectivity.