ISLAMABAD: The government announced on Thursday that it will rehire Ernst & Young (E&Y) as the advisory firm for its second attempt at selling Pakistan International Airlines (PIA), just two months after Privatisation Minister Abdul Aleem Khan criticized the company for mishandling the initial privatization bid.
During a briefing to the National Assembly Standing Committee on Privatisation, Secretary Privatisation Usman Bajwa revealed the decision to re-engage E&Y. He also confirmed that a new advertisement would soon be issued to invite parties to participate in the privatization process.
This announcement marks a shift from statements made in November 2024, when the privatisation minister expressed dissatisfaction with E&Y’s performance, describing their cooperation and feedback as underwhelming. The government had paid nearly Rs2 billion to the consultant, with only 27% of the fee due after the bidding process.
Bajwa did not provide an explanation for the change in approach, especially after the government had previously criticized the advisor. In October of the previous year, the government attempted to sell PIA to a real estate developer who offered Rs10 billion, far below the minimum reserve price of Rs85.03 billion. No foreign company came forward as the lead consortium to acquire PIA.
The Muttahida Qaumi Movement (MQM)’s Muhammad Farooq Sattar chaired the meeting, which focused on updates on ongoing privatisation efforts, including the sale of the Roosevelt Hotel in New York.
Bajwa further stated that PIA’s privatization prospects have improved with the opening of European routes. He confirmed The Express Tribune‘s report that the International Monetary Fund (IMF) has approved waiving taxes on aircraft leases and injecting Rs45 billion into the holding company, increasing the airline’s market value for the next round of bidding. The government plans to issue a new expression of interest to take advantage of these developments.
Bidders had previously requested exemptions from the 18% sales tax on aircraft leases and the write-off of Rs45 billion in additional liabilities. Bajwa noted that two serious bidders withdrew after the government rejected these demands. One bidder sought full management control without purchasing shares, while another proposed laying off permanent employees and rehiring them on a contractual basis.
In terms of legal matters, the standing committee did not approve certain proposed amendments to the Privatisation Commission Ordinance. A proposal to give the prime minister the authority to determine the number of board members for the Privatisation Commission was rejected, as it was deemed contrary to principles of transparency and participatory democracy. The committee also opposed a proposal that would allow the prime minister to determine the remuneration of the commission’s chairman, secretary, and board members, with MNA Sehar Kamran arguing that such decisions should not be made at the prime minister’s discretion.
On the Roosevelt Hotel, the privatisation secretary informed the committee that the financial advisory firm handling the sale had presented three options: an outright sale, a joint venture, or a 99-year lease. The outright sale would take three years, while the joint venture process would take nine years. The committee’s chairman suggested that the government might prefer an outright sale to avoid complications from a public sector joint venture.
Regarding the House Building Finance Corporation (HBFC), Bajwa said that the sole bidder had submitted terms for acquiring the corporation, which will be presented to a cabinet body for negotiation. The privatisation commission gave an unconfirmed deadline for the sale, which may occur by the end of this month or in the first week of the next month.
Committee members raised concerns about the privatisation process, noting that in the cases of PIA and HBFC, only sole bidders had been attracted. Bajwa argued that while procedures play a role, the country’s economic conditions significantly influence the success or failure of privatization efforts.
