January 10, 2025
ISLAMABAD: The National Assembly's Standing Committee on Privatisation was briefed on Thursday that the privatisation process for Pakistan International Airlines (PIA) has been resumed, with recommendations for the sale of the Roosevelt Hotel in New York now finalised.
Additionally, , The News reported, the privatisation of the House Building Finance Corporation is nearing completion.
The committee, chaired by MNA Farooq Sattar, was briefed by Privatisation Commission Secretary Usman Bajwa. He revealed that the earlier privatisation efforts for PIA were stalled due to two unresolved investor demands.
Prospective buyers had requested GST relief for new aircraft to compete globally and the resolution of negative equity. However, these demands could not be met due to International Monetary Fund (IMF) conditions.
“Following negotiations with the IMF, these conditions have now been waived. Additionally, the European ban on PIA has been lifted, paving the way for renewed privatisation efforts,” Bajwa said.
He added that the government has approved the issuance of an Expression of Interest (EOI), and applications will be invited by the end of this month.
Regarding the Roosevelt Hotel, the committee was informed that a subcommittee has prepared new recommendations for its privatisation. The next steps will be taken after approval from the Cabinet Committee on Privatisation (CCoP).
He added that revenue from the hotel’s privatisation is expected to be lower than a joint venture but could still generate significant income. “The final decision will rest with the government,” he clarified.
The secretary noted that a joint venture approach would delay the privatisation process, whereas a direct sale could expedite proceedings.
On the House Building Finance Corporation, Bajwa stated that the process has reached its final phase. “A company interested in the privatisation has accepted the final terms and conditions, and bidding will be held soon,” he assured the committee.
The agreement on key terms has been reached with the interested party. The next step is to seek approval from the Privatisation Board and the Cabinet Committee on Privatisation,” the secretary stated.
Once approved, the government will instruct the buyer to determine the price of the HBFC. The secretary also noted that with a reduction in interest rates, there is potential for an increase in housing finance availability in the future.
However, lawmakers expressed doubts over the government’s commitment to privatisation, highlighting issues in the privatisation process of PIA and the House Building Finance Corporation (HBFC).
“Why does only one bidder remain in privatisation deals?” asked Khawaja Shiraz Mahmood, pointing to the ongoing concerns after the PIA Privatisation debacle. “After the humiliation of PIA’s privatisation, now only one bidder is left for HBFC,” he added.
The Secretary of the Privatisation Commission explained that while strict conditions in the HBFC privatisation process led to only one bidder remaining, “two bidders remained until the end, but one failed to meet the conditions set by the State Bank,” he said.
Mahmood questioned if the government is genuinely serious about privatisation or merely showcasing superficial efforts. He also raised concerns about the privatisation process, suggesting flaws that are hindering progress.
Sahar Kamran, another committee member, questioned the costs involved in the PIA privatisation, demanding accountability for the expenses. “Who is responsible for the expenses incurred in PIA’s privatisation?” she asked, emphasising the need to address accountability.
Sattar, addressing the committee, remarked, “We will take time to find the right solution; only then can the right price be set.” He also suggested that the performance of PIA’s financial advisor, Ernst & Young, should be reviewed.
The committee is awaiting further details on the expenditures of the PIA privatisation, with the secretary of the Privatisation Commission assuring that complete information will be provided later.
“Why did other parties not come forward for the bid?” questioned Sattar, pointing to the core issue. Mahmood expressed dissatisfaction, asking, “Why did the Privatisation Commission fail to convince other parties?”
The Secretary of the Privatisation Commission explained that all interested parties were given a comprehensive briefing, with discussions held on 11 key points during the final meeting before the bid. However, only two points remained unresolved, leading to complications.
One bidder requested management control instead of participating in the bidding process, another demanded the dismissal of all employees, and a third sought GST relief for new aircraft to improve international competitiveness. Furthermore, a bidder proposed adjusting PIA’s Rs191 billion liabilities against Rs141 billion assets.
“The main issue was the adjustment of negative capital of Rs45 billion,” the Secretary explained, adding that the government rejected relief due to the conditions of the IMF program.
Following negotiations, the IMF allowed the removal of two key conditions, and Europe lifted its ban.
“The government has approved issuing a fresh Expression of Interest (EOI), and work on the privatisation process is moving forward swiftly,” the secretary confirmed, adding that the government is continuing talks with investors.