Thank you for this very timely, realistic, and useful analysis. I believe the core of the problem, the lack of intention to improve the business friendliness, is that the government is not willing to reduce its size. The 18th Amendment aimed to share resources and responsibilities with the provinces. Resources are flowing, yet the center refuses to adapt and lean up. And this creates that tendency to slow the progress on structural reforms.
1) "while about Rs125bn is injected into the airline as new equity to recapitalize the business" ..... Comment : not yet. In one year , he will invest ( probably by borrowing against PIA's assets).
2) "the government’s immediate “value” from the transaction is therefore about Rs55bn - roughly Rs10bn in cash and Rs45bn in equity''.....
Comment : Mr Arif Habib has the option to buy the remaining 25% in future, he is not bound to. So let us keep that Rs45 billion out of acknowledging for the moment. We will cross the bridge when we reach there.
3) "Without that ecosystem, privatization becomes a transaction, not a transformation" Comment : This is the best line of your article
And how do think our government /failed nervous system plans to recoup the staggering roughly Rs600.0bn or USD2.15bn loss by relying on its puny 25% of its share of profit of the operating airlines ?
And why did the Pak government did not carve up the much more consequential energy sector in a similar fashion thereby letting the poor public to foot the cost of its gross mismanagement ? Very unfair !
With the recent development of PIA privatization, let me reshare our Book on “Face of Privatization in Pakistan” published in 2024. This book on privatization in Pakistan stands out due to its comprehensive and multifaceted approach towards examining the process, impact, and implications of privatizing state-owned enterprises (SOEs). The book provides an in-depth discussion on privatization in Pakistan which revolves around the historical context, contemporary challenges, and opportunities. It mainly covers the discussion on the rationale behind privatization, evolution of privatization policies, case studies of major privatizations, legal frameworks, and the role of public-private partnerships (PPPs). Along with exploratory analysis, this book also includes the first detailed empirical analysis and case studies to provide evidence-based insights into the performance and efficiency of privatized SOEs. Through exploratory and empirical analysis, and examination of key privatization cases, readers gain valuable insights into the real-world outcomes of privatization efforts in Pakistan. This book will be of interest to scholars of Asian economics, development economics and the future of the Eurasian region. https://link.springer.com/book/10.1007/978-981-97-8385-4
What about the state keeping PIA assets such as hotels. Is that going to help in paying the 600 bn debt. In simple words what is the value of the assets kept by the government in the holding company.
Great analysis, as always. I would like to add that the Rs. 600+ debt is mainly owed to other government bodies i.e. Pakistan Airports Authority (250bn+), Civil Aviation, FBR, PSO and others. A majority of this debt is not interest bearing. Also, a significant part of this debt (owned by other government bodies) can be written off with just an administrative approval.
Thank you for explaining the PIA privatization in a simple way. It really helps to see both the positive side and the challenges. Separating old debts makes sense, but the government still has a big financial burden to deal with. I also agree that changing ownership alone won’t fix everything. Real improvement will need wider reforms, better management, and a supportive environment so this becomes a long-term solution and not just a short-term deal.
Sir, given Pakistan’s highly charged socio-political environment, this was undoubtedly a difficult yet significant transaction. As you rightly observed, at least the financial bleeding of PIA is expected to stop. Going forward, however, this transaction will act as a litmus test for the government’s privatization policy—particularly its ability to generate investor interest and build confidence in the overall process.
In my view, the success of this initiative depends more on political stability than on economic fundamentals alone. Political opposition and criticism of this transaction have already intensified across social and electronic media, which may discourage prospective investors from participating in the privatization of other entities in the pipeline. On a broader level, such agitation could also slow down ongoing structural reforms under the IMF program. Resistance to these reforms is already evident through media narratives and strikes by pressure groups opposing the government’s efforts to rationalize subsidies enjoyed by certain sectors.
In this context, does this not put the “facilitating ecosystem” for privatization at risk? I would appreciate your views on how these challenges can be managed to protect and sustain an effective privatization ecosystem.
What will happen is that the airline will close in a couple of years. The land will developed and sold of as housing. Real estate bubble is real. Just think professor where is Pakistan going to find talent to run an efficient airline. Both the CEOs of indigo and Air India are foreigners. Which foreigner is an idiot to come and live in Pakistan.
Best analysis I have read out there. Thank you Atif for still caring for Pakistan.
This was so easy to understand. Thank you for writing it down.
Thank you for this very timely, realistic, and useful analysis. I believe the core of the problem, the lack of intention to improve the business friendliness, is that the government is not willing to reduce its size. The 18th Amendment aimed to share resources and responsibilities with the provinces. Resources are flowing, yet the center refuses to adapt and lean up. And this creates that tendency to slow the progress on structural reforms.
Thank you Dr. Atif Mian, Best analysis I have read out there for PIA.
1) "while about Rs125bn is injected into the airline as new equity to recapitalize the business" ..... Comment : not yet. In one year , he will invest ( probably by borrowing against PIA's assets).
2) "the government’s immediate “value” from the transaction is therefore about Rs55bn - roughly Rs10bn in cash and Rs45bn in equity''.....
Comment : Mr Arif Habib has the option to buy the remaining 25% in future, he is not bound to. So let us keep that Rs45 billion out of acknowledging for the moment. We will cross the bridge when we reach there.
3) "Without that ecosystem, privatization becomes a transaction, not a transformation" Comment : This is the best line of your article
Dear Atif Mian ,
I like your simple analysis of PIA .
And how do think our government /failed nervous system plans to recoup the staggering roughly Rs600.0bn or USD2.15bn loss by relying on its puny 25% of its share of profit of the operating airlines ?
And why did the Pak government did not carve up the much more consequential energy sector in a similar fashion thereby letting the poor public to foot the cost of its gross mismanagement ? Very unfair !
Kind regards
Credible and sustainable structural reforms are essential to revive the market confidence.
With the recent development of PIA privatization, let me reshare our Book on “Face of Privatization in Pakistan” published in 2024. This book on privatization in Pakistan stands out due to its comprehensive and multifaceted approach towards examining the process, impact, and implications of privatizing state-owned enterprises (SOEs). The book provides an in-depth discussion on privatization in Pakistan which revolves around the historical context, contemporary challenges, and opportunities. It mainly covers the discussion on the rationale behind privatization, evolution of privatization policies, case studies of major privatizations, legal frameworks, and the role of public-private partnerships (PPPs). Along with exploratory analysis, this book also includes the first detailed empirical analysis and case studies to provide evidence-based insights into the performance and efficiency of privatized SOEs. Through exploratory and empirical analysis, and examination of key privatization cases, readers gain valuable insights into the real-world outcomes of privatization efforts in Pakistan. This book will be of interest to scholars of Asian economics, development economics and the future of the Eurasian region. https://link.springer.com/book/10.1007/978-981-97-8385-4
https://link.springer.com/book/10.1007/978-981-97-8385-4
What about the state keeping PIA assets such as hotels. Is that going to help in paying the 600 bn debt. In simple words what is the value of the assets kept by the government in the holding company.
Great article for a lay person like me…the question I have is will the new management be allowed to deliver without interference…
Great analysis, as always. I would like to add that the Rs. 600+ debt is mainly owed to other government bodies i.e. Pakistan Airports Authority (250bn+), Civil Aviation, FBR, PSO and others. A majority of this debt is not interest bearing. Also, a significant part of this debt (owned by other government bodies) can be written off with just an administrative approval.
Great analysis, very easy to understand.
Thank you for explaining the PIA privatization in a simple way. It really helps to see both the positive side and the challenges. Separating old debts makes sense, but the government still has a big financial burden to deal with. I also agree that changing ownership alone won’t fix everything. Real improvement will need wider reforms, better management, and a supportive environment so this becomes a long-term solution and not just a short-term deal.
Sir, given Pakistan’s highly charged socio-political environment, this was undoubtedly a difficult yet significant transaction. As you rightly observed, at least the financial bleeding of PIA is expected to stop. Going forward, however, this transaction will act as a litmus test for the government’s privatization policy—particularly its ability to generate investor interest and build confidence in the overall process.
In my view, the success of this initiative depends more on political stability than on economic fundamentals alone. Political opposition and criticism of this transaction have already intensified across social and electronic media, which may discourage prospective investors from participating in the privatization of other entities in the pipeline. On a broader level, such agitation could also slow down ongoing structural reforms under the IMF program. Resistance to these reforms is already evident through media narratives and strikes by pressure groups opposing the government’s efforts to rationalize subsidies enjoyed by certain sectors.
In this context, does this not put the “facilitating ecosystem” for privatization at risk? I would appreciate your views on how these challenges can be managed to protect and sustain an effective privatization ecosystem.
What will happen is that the airline will close in a couple of years. The land will developed and sold of as housing. Real estate bubble is real. Just think professor where is Pakistan going to find talent to run an efficient airline. Both the CEOs of indigo and Air India are foreigners. Which foreigner is an idiot to come and live in Pakistan.
I think a good decision by the government.
Good write up Atif.
The real culprit behind PIAs losses was the damning Quota system policy invented by Bhutto to shove PPP workers in every Govt. Organization.