Pakistan Shelves Privatization of National Airline With New Law

Pakistan International Airlines shall not be privatized. REUTERS/Faisal Mahmood

By Mehreen Zahra-Malik

ISLAMABAD, April 12  – Pakistan‘s parliament has adopted a law that will convert the cash-strapped national airline into a limited company but bar the government from giving up its management control, officials said on Tuesday.

The passage of the law, which blocks selling off a majority share in Pakistan International Airlines (PIA), late on Monday, was a major setback for Prime Minister Nawaz Sharif who made the privatization of the company a top goal when he came to power in 2013.

The privatization of 68 state-owned companies, which include loss-making enterprises like PIA and Pakistan Steel Mills, is also a major element in a $6.7 billion IMF package that helped Pakistan stave off a default in 2013.

The government had struggled to meet its deadline to sell PIA, which has accumulated losses of more than $3 billion, after a delay of many months in amending a 1956 law that barred it from being privately owned.

After months of legal wrangling between government and opposition representatives, a joint session of the upper and lower houses of parliament unanimously passed a bill that blocks the privatization of the airline.

“Management control of the company and any of its subsidiary companies … shall continue to vest in majority shareholders, which shall be the federal government and whose share shall not be less than 51 per cent,” the law reads.

The IMF did not respond to emails and calls seeking comment.

Privatization Commission Chairman Mohammad Zubair, who is a member of Sharif’s ruling party, said the government would remain the major shareholder.

“We have agreed with the opposition parties that PIA will not be privatized,” he told Reuters. “It is only being converted into a private entity to ensure more efficient running.”

He said the bill was a compromise because resistance from unions and opposition parties was “too strong”.

The government has struggled to restructure loss-making companies, which cost it an estimated $5 billion a year, and which include power distribution companies and steel giant Pakistan Steel Mills.

In February, the government shelved plans to privatize power supply companies. It has, however, made some progress, including raising more than $1 billion by selling its stake in Habib Bank Ltd.

But while the loss-making firms are a drain on resources – about an eighth of the government’s fiscal revenue last year – few fear Pakistan will slide into crisis.

The IMF has released installments of its package despite the missed targets, and the government is exploring other sources of support, like ally China, which plans to invest $46 billion in an economic corridor through Pakistan.

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