TLDR:
• Blue World City sole bidder for PIA
• Potential bidders concerned about policy stability
• Power contract renegotiations raise investment risks
KARACHI (The Thursday Times) — The final bidding process for the privatisation of Pakistan International Airlines (PIA) opened in Islamabad on Thursday, revealing just one contender, Blue World City, vying for a significant stake in the struggling national carrier.
Saad Nazir, chairman of the property development group Blue World City, confirmed in a text message to Reuters that his company submitted the bid at a formal event held in a local hotel. Pakistan, grappling with financial difficulties, is eager to sell a controlling stake in PIA, offering between 51-100% ownership as part of broader reform initiatives required by a $7 billion International Monetary Fund (IMF) programme aimed at turning around loss-making state-owned enterprises.
Instability at the apex
Despite an initial pool of six pre-qualified groups announced in June, Blue World City emerged as the sole contender after meeting the government’s document submission deadline. Industry insiders from three major groups that opted out raised alarm over Pakistan’s unpredictable policy environment, warning that any agreement secured under the current administration may be undermined by subsequent governments. The coalition led by Prime Minister Shehbaz Sharif comprises a mix of political entities, intensifying fears about policy inconsistency and governance stability.
One corporate executive underscored the fragility of policy commitments, especially as Pakistan nears potential leadership transitions. “We simply cannot be sure that promises made today will be upheld tomorrow,” he stated, pointing to the complexities of investing in a politically fragmented and financially strained nation.
Broken promises and renegotiated contracts
Exacerbating these doubts are recent government decisions to cancel power purchase agreements with several private companies. The abrupt termination, followed by efforts to renegotiate sovereign-backed contracts with independent power producers (IPPs), has sent shockwaves through investor circles. With many of these projects financed by foreign lenders and underwritten by sovereign guarantees, renegotiations have stoked fears that even legally binding commitments are vulnerable to political shifts and economic exigencies.
Sakib Sherani, head of Macro Economic Insights, provided a sobering analysis of the risks involved. “Adjustments to longstanding contracts, especially those crucial to addressing Pakistan’s energy crisis, highlight a distressing reality: even sovereign guarantees offer little assurance in this environment,” Sherani explained. The deteriorating investment climate has deterred foreign and domestic entities alike, casting doubt on the viability of large-scale projects, such as the privatisation of PIA.
Legacy problems and PIA’s baggage
Additionally, prospective investors cited a myriad of problems afflicting the airline, including tax burdens, unattractive terms, and the carrier’s deeply ingrained reputation issues. PIA’s historical mismanagement and operational inefficiencies, coupled with the broader economic uncertainty, presented a daunting risk profile for any serious bidder. The potential for widespread layoffs has compounded the unpopularity of privatisation efforts, adding a social dimension to an already complex economic challenge.
The Privatisation Ministry announced that the single bid would be publicly opened at 6:30 p.m. local time, and whether this effort marks a genuine turnaround or another setback for Pakistan’s beleaguered aviation industry remains to be seen.
