Given the government’s apparent determination to fix the troubles at the state-owned Pakistan International Airlines (PIA), we hope that the Rs7 billion bailout of the national carrier is the last one the struggling airline needs. The country can ill-afford to keep sending good money after bad investments.
To its credit, the government appears to be taking significant measures to try to improve the national airline. The newly-constituted board of directors, all titans of industry from the private sector, appear to have been empowered to make tough decisions and force through meaningful reforms in the company.
But there are also some causes for concern about the current board, most notably the fact that it includes many figures who have built entire conglomerates by buying companies from the government in privatisation transactions. The government faces a real dilemma: on the one hand, these people are clearly equipped to deal with the sort of issues that a company goes through when it is transitioning from state ownership to functioning more like a private business, but on the other hand, these people are also likely to be interested buyers, raising serious conflicts of interest.
The problem is not an insurmountable one, but the federal government needs to take steps to ensure that these potential conflicts of interest are managed. The current board members, for instance, should be required to declare at the outset that any companies in which they are significant shareholders or directors will not place any bids in the eventual privatisation auction of the national airline.
Given the fact that PIA has haemorrhaged over Rs100 billion in the last four years in losses, we most certainly welcome its restructuring and privatisation. But the process must be made more transparent and fair. Otherwise, we will only have traded one form of economic inefficiency for another
Published in The Express Tribune, July 16th, 2013.
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