Pakistan privatization hits snag as airline workers walk out

ISLAMABAD, Dec 15 --  Employees of Pakistan's ailing national airline on Tuesday walked out in protest over its planned privatization, disrupting flights and undermining a central plank of reforms promised by Prime Minister Nawaz Sharif in return for an IMF bailout.

In September 2013, the International Monetary Fund saved Pakistan from a possible default by agreeing to lend it $6.7 billion over three years.

In return, Pakistan said it would broaden its tax base, cut electricity subsidies and privatize failing state companies that lose taxpayers around $5 billion a year.

Soliciting buyer interest in Pakistan International Airlines , whose accumulated losses stand at $2.29 billion, by Dec. 31 is one of the major steps Islamabad needs to take for the program to continue.

But the government is struggling to meet that deadline after a delay of many months in amending a 1956 law that bars PIA from being privately owned. On Dec. 5, the government issued a presidential decree to turn the national flag carrier into a limited company.

PIA workers are demanding that the ordinance be retracted. Political opponents accuse the government of bypassing parliament by opting for a decree over an amendment that would require lawmakers to vote.

PIA spokesman Daniyal Gilani said airline offices, including reservation booths, remained closed through Tuesday and pilots had joined the strike.

"The employees have a right to strike, but management has requested them not to disrupt flights," he said.

Chairman of the privatization commission, Mohammad Zubair, told Reuters the government had informed union representatives that advertisements for PIA's sale would be published on Dec. 31 "no matter what".

"Despite some delays, the authorities' privatization and restructuring program continues to move forward," IMF's Mission Chief for Pakistan, Harald Finger, told Reuters.

"DELICATE TIGHTROPE"

Once a source of pride for Pakistan, PIA flights are now regularly cancelled and many of its aircraft have been cannibalized to keep others flying.

The government has sought to address fears that its sale would lead to big redundancies.

"No employee of PIA will be laid off during privatization," Finance Minister Ishaq Dar told reporters last week, a promise economists consider unrealistic given that at least two-thirds of the airline's staff are surplus to requirements, according to the privatization commission.

In 2013, Zubair told Reuters that Pakistan would fetch up to $5 billion in privatization revenue in two years to raise capital for an economy crippled by years of power shortages, corruption and militant violence.

Two years later, his commission has managed to raise $1.7 billion.

Technically, privatization falls under the privatization commission, but officials and analysts say Dar exerts tight control over all finance-related decisions.

"On the one hand, there is privatization which is an exceedingly delicate tightrope to walk, and on the other, you have clumsy, indelicate people like Dar doing the walking," said leading business columnist Khurram Husain.

Dar declined requests for an interview to discuss the privatization program.

Fierce resistance to privatization by opposition parties and labour unions has made the program politically sensitive, as the case of Pakistan Steel Mills, a behemoth with reported losses of $1.42 billion, shows.

In November, after being informed by officials that the bleeding enterprise would barely fetch $100 million against an expected $900 million, Dar decided to hand it over to the provincial government in Sindh where it is headquartered.

"This is such an adhoc manner to deal with a problematic entity, without any sense of the big picture," Husain said. "You can't have major economic decision-making colored by political considerations like this."

But the government says the strikes against PIA's privatization mean it has finally succeeded in doing what previous governments have for decades failed to.

"Government after government has talked about finally taking care of this (PIA) problem and now we are doing it. This shows our political will," Zubair said. "Let's not make this process unnecessarily controversial." 

Source:  http://www.reuters.com