ISLAMABAD: The final bidding process for the privatization of Pakistan International Airlines (PIA) drew only one offer of 10 billion Pakistani rupees ($36 million) for a 60% stake, as announced by the Privatisation Ministry on Thursday.
While the government had pre-qualified six groups in June, only the real estate development firm Blue World City submitted a bid, which fell below the government’s minimum price of 85 billion rupees.
Pakistan, under a $7 billion IMF program, is aiming to sell a 51-100% stake in debt-laden PIA to generate funds and restructure state-owned enterprises.
The Privatisation Commission has requested Blue World City to match the minimum price, but Chairman Saad Nazir stood firm on the current offer. “If they don’t accept our bid, we wish them well,” he said at the ceremony, adding that raising the bid wouldn’t make financial sense.
Nazir told an international news agency that the government’s minimum price was not based on an accurate financial assessment, citing PIA’s “significant leakages.”
Economic experts noted that the disparity between the bid and the reference price means the government may need to consider alternative strategies for the airline’s privatization. Executives from three groups that did not participate in the bid anonymously expressed concerns about the government’s ability to uphold agreements, especially given potential policy shifts with a new administration.
The government has faced difficulties in selling PIA previously, as privatization is often controversial due to anticipated layoffs. Recent government actions, such as the termination and renegotiation of power purchase contracts with private companies, have intensified concerns over Pakistan’s commitment to honoring contracts.
The experts pointed out that altering decade-old agreements with private power projects heightens investment risks, even with sovereign guarantees.
The head of Pakistan’s power ministry commented last month that the government would uphold investor contracts, both foreign and local, with any revisions made “by mutual consent.” Further obstacles for potential PIA buyers included inconsistent government communication, unfavorable terms, and PIA’s legacy issues and reputation.
