Ernst & Young (E&Y) rehired to assist in PIA privatization
The government has decided to rehire
Ernst & Young (E&Y) advisory firm for a second attempt at the
privatization of Pakistan International Airlines (PIA), just two months after
Privatization Minister Abdul Aleem Khan criticized the firm for its poor
handling of the first bidding process.
In a briefing to the National
Assembly Standing Committee on Privatization, Secretary Privatization Usman
Bajwa announced that the government had decided to re-engage E&Y. He also
revealed that a new advertisement would soon be issued to invite parties to
participate in the privatization process.
This move comes in contrast to the
minister’s strong criticism in November 2024, when he called out the financial
advisor’s performance, stating that its cooperation and feedback were “below
expectations.” At the time, the government had hired E&Y at a cost of
nearly Rs2 billion, with only 27% of the fee payable after the bidding process.
In October 2024, the government had
attempted to sell PIA to a single bidder— a real estate developer—who offered
only Rs10 billion against the minimum reserve price of Rs85.03 billion,
ultimately failing. No foreign company emerged as a lead consortium to acquire
PIA.
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chosen for privatization of PIA
During Thursday's meeting, the
Muttahida Qaumi Movement’s Muhammad Farooq Sattar chaired the standing
committee, which sought an update on ongoing privatization transactions,
including the sale of the Roosevelt Hotel in New York.
The privatization secretary
explained that PIA's privatization prospects have improved after the reopening
of European routes. He confirmed The Express Tribune’s report that the
International Monetary Fund (IMF) has given the green light to waive taxes on
aircraft leases and inject an additional Rs45 billion into PIA’s holding
company, boosting the airline’s market value for this round of bidding.
To capitalize on these developments,
the government plans to issue a fresh expression of interest, said Bajwa.
Previously, bidders had requested
exemptions from an 18% sales tax on aircraft leases and the removal of
additional liabilities worth Rs45 billion. However, two serious bidders walked
away after these demands were denied. One bidder even sought full management
control without purchasing shares, while another proposed laying off all
permanent employees and rehiring them on a contractual basis.
Pushback in the Standing Committee
The standing committee did not
approve several proposed legal amendments to the Privatization Commission
Ordinance. They rejected a proposal to grant the prime minister the authority
to determine the number of Privatization Commission board members, which
currently rests with the federal cabinet.
Read More PIA’s
privatization: Single bid of Rs. 10b ($36 million) received from a real estate
firm
Khawaja Sheraz Mehmood argued that
this proposal went against the principles of transparency and participatory
democracy. Additionally, the committee contested another proposal that sought
to grant the prime minister the authority to determine the remunerations for
the chairman of the privatization commission, the secretary privatization, and
board members.
MNA Sehar Kamran stated, “The
Parliament cannot give a free hand to any prime minister to determine
remunerations based on personal whims.”
However, Jam Aslam, the senior
draftsman from the Ministry of Law, opined that since the authority to appoint
board members and the chairman rests with the prime minister, the power to fix
remunerations should also be granted to the prime minister.
Roosevelt Hotel Sale
The privatization secretary informed
the committee that the financial advisory firm hired for the sale of the
Roosevelt Hotel has presented three options: an outright sale, a joint venture,
or leasing the hotel on a 99-year lease.
Under the proposed models, an
outright sale would take around three years, while a joint venture would be completed
in nine years. The chairman of the committee suggested that the government may
opt for an outright sale to avoid potential complications involved in a joint
venture in the public sector.
Source: Express Tribune