PIA bidder proposes reinvestment of proceeds

Says it will help fix airline’s issues, make profit in future

Salman Siddiqui June 06, 2024


In an attempt to expand footprint into new sectors of the economy including aviation and corporate farming, renowned businessman Arif Habib has proposed that the government should reinvest the proceeds from the privatisation of Pakistan International Airlines (PIA) back into the national carrier, as the state will continue to hold a 49% stake.

Arif Habib Corporation is part of one of the six consortiums which have been pre-qualified for offering bids for the airline sometime in August 2024.

Addressing media about his company’s plans to further diversify the Arif Habib Group’s business portfolio, Group Chairman Habib said PIA was carrying a negative equity of Rs50-55 billion and liabilities of Rs200 billion.

The government should reinvest the privatisation proceeds in the airline instead of using them for other purposes. “This will help fix the airline’s issues soon and earn profit in future.”

He said the government should also give a sound plan to the potential bidders before the submission of bids, carrying timelines to repay the outstanding dues to entities like the Civil Aviation Authority (CAA) and Pakistan State Oil (PSO).

He emphasised that the authorities concerned should give enough time to the new partner to address the airline’s challenges and pay dues. “Repaying the dues immediately after buying the stake may not work well.”

He said the Privatisation Commission should give enough time of about four to six weeks for due diligence and evaluation the airline.

Earlier, Arif Habib was also part of a consortium which expressed interest in acquiring Pakistan Steel Mills (PSM) during General Pervez Musharraf’s government. A top court, however, suspended the potential deal after finding that the privatisation process violated some mandatory laws.

Habib said they had recently acquired 50,000 acres of land in Punjab for corporate farming, as the SIFC was striving to attract foreign and local investment in the agriculture sector to increase production by using modern technology and techniques.

Referring to his mega real estate project, Naya Nazimabad, in Karachi, the business tycoon said they are going to introduce the global business practice of selling tokens for the residency project, enabling small investors to buy stakes in flats and apartments instead of acquiring full ownership due to the lack of financing. Later, the investors may sell the tokens or buy more. The purchase of 10 tokens will enable the investors to become the owner of an apartment or a flat.

He said his fertiliser business is performing well these days. However, cement and steel making is still under stress amid economic slowdown.

Interest rate, payment

He anticipated that the State Bank of Pakistan (SBP) would cut the key policy rate by two percentage points to 20% in the monetary policy meeting scheduled for June 10, believing the significant deceleration in inflation reading to a two-and-a-half-year low at 11.8% in May has given a strong call to the central bank for the rate cut.

He projected that the interest rate would be cumulatively reduced by seven percentage points over the next one year to 15%. It will cut interest payments by a huge Rs3 trillion and create fiscal space for the government to expedite economic activities.

He said the volume of interest payments has grown to Rs9 trillion this fiscal year compared to a mere Rs1.5 trillion some three years ago.

He said interest payments against the mounting debt spiked due to the jacking up of interest rate by a cumulative 15 percentage points in the past three years to 22% from 7%.

Published in The Express Tribune, June 6th, 2024.

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