PIA bidder calls for reinvestment of privatization proceeds M Haris

KARACHI: In a strategic move to diversify into new economic sectors such as aviation and corporate farming, businessman Arif Habib has suggested that the government reinvest the proceeds from the privatization of Pakistan International Airlines (PIA) back into the national carrier. Despite the privatization, the state will retain a 49% stake in PIA.

Arif Habib Corporation is among six consortiums pre-qualified to bid for PIA, with the bidding process set for August 2024. Addressing the media about the Arif Habib Group’s expansion plans, Group Chairman Arif Habib highlighted PIA’s financial challenges, noting its negative equity of Rs50-55 billion and liabilities of Rs200 billion.

Habib emphasized the importance of reinvesting the privatization proceeds into PIA to resolve its financial issues and ensure future profitability. He urged the government to present a comprehensive plan to potential bidders, including timelines for repaying outstanding dues to entities such as the Civil Aviation Authority (CAA) and Pakistan State Oil (PSO).

He also stressed the need for the new partner to be given sufficient time to address the airline’s challenges and pay off its debts. Immediate repayment upon acquiring the stake may not be feasible. Furthermore, Habib recommended that the Privatization Commission allow a four to six-week period for due diligence and evaluation of the airline.

Previously, Arif Habib was part of a consortium interested in acquiring Pakistan Steel Mills (PSM) during General Pervez Musharraf’s tenure. However, the Supreme Court halted the deal due to legal issues in the privatization process.

Recently, Habib’s group acquired 50,000 acres of land in Punjab for corporate farming, aiming to attract foreign and local investment in agriculture through modern technology and techniques, in line with the Special Investment Facilitation Council (SIFC) objectives.

Discussing his real estate project, Naya Nazimabad in Karachi, Habib announced plans to introduce token-based investments, allowing small investors to buy stakes in flats and apartments. This method enables investors to buy or sell tokens or accumulate enough to gain full ownership of a property.

Habib also mentioned that his fertilizer business is thriving, while the cement and steel sectors remain under stress due to the economic slowdown.

On the economic front, Habib predicted that the State Bank of Pakistan (SBP) would cut the key policy rate by two percentage points to 20% in the upcoming monetary policy meeting on June 10. This expectation is based on the significant decrease in inflation to a two-and-a-half-year low of 11.8% in May. He further projected a cumulative reduction of seven percentage points in the interest rate over the next year, bringing it down to 15%. This reduction would lower interest payments by Rs3 trillion, creating fiscal space for the government to boost economic activities.

He highlighted that interest payments have surged to Rs9 trillion this fiscal year from Rs1.5 trillion three years ago. This increase is attributed to a cumulative 15 percentage point hike in the interest rate over the past three years, raising it from 7% to 22%.