THOUGH the pre-bid meetings to finalise the outsourcing of Karachi, Lahore and Islamabad airports is in progress at the Pakistan Civil Aviation Authority (PCAA) headquarters, the decision to outsource breadwinner airports, after investing huge amounts of money in building them, seems preposterous.
An organisation rich enough to finance such big projects is not in need of any kind of help from the private sector. The efficiency of the private sector cannot be questioned, but its involvement in such a profitable organisation will only benefit investors at the cost of an organisation like the PCAA.
On the other hand, outsourcing may result in massive retrenchment of employees. Giving jobs to its citizens is also the responsibility of the government, and such profitable organisations must therefore remain in the public sector.
The government should sell off white elephants like Pakistan Steel Mills and Pakistan International Airlines instead of profitable airports
Moreover, outsourcing or privatising airports is not at all advisable, as they are sensitive premises. Their outsourcing would amount to risking national security. Keeping in view the deadly attack on the Karachi airport in 2014, the PCAA cannot afford to compromise on the safety and security of the airports.
A petition has also been filed in the Lahore High Court to restrain the government from outsourcing airports.
Privatising an organisation which earns over Rs70 billion a year and provides employment to over 12,000 families, at a time when the country’s economy is still unable to absorb the swelling number of job-seekers, is like killing the goose that lays the golden eggs.
The unemployment rate in Pakistan is on the rise and there is a need to retain such rich organisations.
In fact, it is time to immediately privatise white elephants like Pakistan Steel Mills and Pakistan International Airlines. These organisations, instead of generating enough revenue to pay their employees’ salaries, are surviving on government grants.
According to the latest short-term forecast by the International Monetary Fund, Pakistan’s economy will grow at 5.2 per cent in fiscal year 2017-18.
The Fund also projects a slight increase in unemployment ratio from the current six per cent to 6.1pc in the next fiscal year. This ratio was 5.9pc in 2014-15, much higher than the five per cent considered by economists as ‘full employment’.
Foreign economists say that Pakistan needs a sustained growth rate of 7-8pc to absorb the increasing jobless and clear the backlog.
Therefore, there is a need to revisit the decision of outsourcing the three most profitable airports as the prevailing uncertainty is adversely affecting employees’ efficiency.
It’s true that positive changes are taking place in the aviation industry — the airlines are constantly raising the number of fleet, exploring new destinations and accordingly opening new routes every year.
To accommodate this increasing demand, airports need expansion and modernisation. The challenges for contemporary airports are therefore big, but opportunities are even bigger.
The situation has resulted in a major shift in the age-old concept of airports. Airports were usually owned, managed and operated by governments in a limited budget, but with expansion and to cope with the growing demand and expected flow of income, the trend is fast changing and airport authorities in some countries are going for privatisation or switching over to public-private partnership models.
Pakistan is also facing the same challenges as the rest of the world. In Pakistan, aircraft movements grew by 5.2pc and passenger traffic by 4.5pc on average in the last five years, and it is expected that air traffic will grow even more in view of economic stability.
But at the same time, the situation in Pakistan is different from the rest of the world, both politically and culturally. Moreover, an organisation which now generates revenue of about Rs50bn a year can meet the forthcoming challenges on its own.
According to reports, Indian government’s attempts to get private developers to run showcase airports have not been successful as there was widespread criticism of Delhi and Mumbai airport privatisation leading to high user tariffs.
A fear of another round of steep hikes in user tariffs by private developers at these four airports forced the government to shelve the privatisation of other airports, including that of Kolkata, for the time being.
Coming back to Pakistan, the decision to privatise highly profitable airports seems incomprehensible. Instead, small and medium-sized airports like Gilgit, Skardu and Chitral — which are running in loss due to insufficient passenger traffic and commercial activity — seem to be fit cases for public-private partnership, especially because economic activity and passenger traffic are expected to grow manifold under the China-Pakistan Economic Corridor.
“I believe it would be a huge mistake to privatise such an important government function,” says a former Federal Aviation Administration (FAA) senior executive with more than 30 years of experience in air traffic control.
“The air carrier industry has been and always will be the biggest player and have the greatest influence on FAA’s operational matters. Giving this authority to the airlines would undermine the integrity of the air traffic control system.”
Public-service organisations like the CAA are natural monopolies, similar to the railroad or water distribution. It is always better to keep those services public.
The writer is a freelance contributor and a former CAA employee
Published in Dawn, The Business and Finance Weekly, November 13th, 2017