PIA: ready for take-off |
THE deal under which Pakistan International Airlines (PIA) has just been privatised is good news and imparts much-needed momentum onto the structural reform efforts of the government, that were largely absent up till this point. It also signals a restart of the privatisation programme after nearly 20 years in the wilderness, since the Supreme Court halted sale of the steel mills back in 2005.
There are two important questions to raise in connection with this deal. The less-important question is the one that asks whether the government fetched the best deal that it could under the circumstances. The answer here is yes. People who are asking after the “sale price” are missing the point. This is not a kilo of tomatoes or a plot of land that has just been sold. This is a business enterprise whose auditors said more than a decade ago that it is “no longer a going concern.”
The company ran losses year after year, averaging around Rs50 billion per year and rising to as high as Rs105bn in recent years. By now its total accumulated losses have grown to beyond Rs650bn. Pakistan could have built a large dam or refurbished a large part of our railway network with this kind of money. There was no sense whatsoever in carrying this enterprise forward any longer. It should have been dumped over a decade ago when its losses were around half this level.
But in privatising it there was a problem. Nobody wants to buy the losses. I had occasion to sit down and speak with former CEOs........