Daily Times Editorial Jan 4, 2014

PIA’s privatisation In Pakistan there is seldom something that is completely controversy-free. To illustrate, take the example of the meeting of the Senate’s Standing Committee on Finance, Revenue, Privatisation and Statistics the other day. The secretaries of two divisions of the finance ministry, privatisation and finance, came up with divergent views on the issue of the privatisation of the national flag carrier, PIA. The committee, chaired by Senator Nasreen Jalil of the MQM was informed by Finance Secretary Waqar Masood Khan that the government was required to appoint a financial adviser by end-March and privatise 26 percent shares of PIA by December this year as part of the $ 6.64 billion package signed with the IMF. He also revealed that the accumulated losses of PIA had reached Rs 180 billion and the airline was losing Rs 3 billion per month. Privatisation Secretary Amjad Ali Khan however, told the same meeting that the IMF benchmarks regarding dates and the number of shares to be sold were not sacrosanct, depended on the report of the financial adviser, and would only be firmed up after he submitted his report. Further, the same report would determine whether privatisation could be carried out in 2014 or may be delayed 2-3 years after a restructuring process to make the entity viable for sale at the best possible price. When questioned by the senators about the sale of strategic assets such as PIA, Amjad Ali Khan defended the proposal by arguing that 65 state-owned units had been approved for privatisation by the Council of Common Interests. If the Secretary Finance is correct, and there is no reason to believe he is not, it would come as a surprise to most folks. There are also reports in the media that the current PIA management is equally in the dark as the public regarding the commitment the Finance Secretary claims was made to the IMF as part of the conditionalities of the loan. Additionally, reports speak of the Finance Ministry under Mr Ishaq Dar embarking on a solo flight on PIA’s privatisation without taking stakeholders such as the privatisation wing of the same ministry and the PIA management on board. Some of the Senate committee members were critical of the idea of privatisation per se, others of the specific privatisation of PIA. The former held that once the received wisdom of privatisation was accepted, all state-owned units would suffer the same fate. Instead, they argued, profitable units should be taken off the privatisation list and the loss making ones restructured to turn them around. On PIA, some senators pointed to the strategic importance of communications and particularly the state-owned airline in the event of war or a national emergency. They too argued for restructuring PIA to make it a profitable operation instead of throwing away the family silver. The revelation by the secretary finance of this conditionality of the IMF loan points to an often suspected and usually hidden set of conditions the multilateral finance institutions impose on borrowers. By no stretch of the imagination could it be argued that the fate of PIA had anything to do with the IMF loan. However, international multilateral financial institutions such as the IMF are irretrievably wedded to the free market paradigm and see the private sector as the only engine of all economies. Hence the shibboleth that all state-owned entities should be privatised. When ab initio questions have come to the fore about transparency regarding the Finance Ministry’s ‘discreet’ agreement with the IMF to privatise PIA, what hope is there that transparency would be maintained during privatisation and would not go the way of most if not all privatisation deals in the past, which were, to put it mildly, opaque and did not always result in the desired outcomes? Concern about PIA’s employees in case of privatisation presents a mixed picture since the airline has been used by successive governments to provide sinecures for its supporters. As a result the 19,000 employees of PIA are said to represent the highest seat-employee ratio of any airline in the world. The Senators’ suggestion that only incompetent employees should be removed has weight. Nevertheless, staffing levels will have to be looked at no matter what the eventual fate of the airline. PIA’s captive market of Pakistanis is arguably strong enough to sustain it, provided that the mismanagement of the past is rectified at the level of fleet renewal, paring staffing in as humane a manner as possible, and reopening some of the lucrative routes closed down as misplaced austerity measures. For strategic and economic philosophy reasons, PIA should be turned around without handing over to yet another ‘strategic investor’, as part of the recognition of the need for a mixed economy for countries like Pakistan.