The Economic Coordination Committee on Thursday will decide to outsource the operation of major airports (Islamabad, Karachi, and Lahore).
Sources said that ECC on Thursday will deliberate on a nine-point agenda including outsourcing the operation of major airports in Islamabad, Karachi, and Lahore.
Sources said that the Federal government has been considering various options to outsource the operation of major airports in Pakistan with the aim of effecting an improvement in passenger services and optimizing the realization of their revenue potential in the last few years.
In this regard, the Federal Cabinet conveyed various decisions, and in compliance with these, inter all, Expression of Interest was also invited to hire an audit firm for preparing proposals for the corporatization of airports.
The Federal Cabinet also constituted a committee of Ministers to oversee the entire process however, the process could not attain finality.
During a meeting held on 30 December 2022, the PM directed the outsourcing of the operation of three airports. Karachi, Lahore, and Islamabad shall be completed expeditiously by engaging a leading International Financial Institution (IFI) under the Public-Private Partnership Authority Act, 2017.
Section 31 of the same Act along with regulation 5(2) of the Public-Private Partnership Authority (Direct Contracting of IFIs as Transaction Advisers) Regulations, 2023, permits hiring an IFI as a transaction advisor through direct contracting provided it has the approval of Public-Private Partnership Authority Board.
Pakistan Civil Aviation Authority (PCAA) requested the Public-Private Partnership Authority Board to allow them to engage an IFI as a transaction advisor for outsourcing the operation of the mentioned airports, which was considered and approved by the board on 11 January 2023.
After the approval, PCAA reached out to all eligible IFIs for direct engagement as transaction advisors as per the above regulations. However, only the IFC, a part of the World Bank Group, expressed their interest.
They were requested to provide details of their experience and qualifications which were then assessed against the selection criteria approved by the PCAA Board. They were found to be qualified to work as transaction advisors. According to regulations 6 and 7 of the aforementioned Regulations, the PCAA Board permitted the PCAA to negotiate with the IFC in order to finalize the terms of their engagement.
After long and detailed negotiations and taking into account the opinions of the Ministry of Finance, Federal Board of Revenue, and Ministry of Foreign Affairs, a draft Transaction Advisory Agreement (TASA) was finalized with the IFC. The agreement was then presented to the PCAA Board during a meeting held on 2 March 2023.
The PCAA Board approved the presented draft TASA subject to legal vetting by the Ministry of Law and Justice. At the same time PCAA Board observed that since the TASA is based on a success fee model with penalties for failure to proceed with the transaction on the part of the client, there is a need for strong political commitment to the outsourcing of the operation of three target airports from our side.
In view of the past experience briefly mentioned in the first paragraph of this Summary, a clear demonstration of such a commitment will also be crucial not only for the completion of this process but more importantly, for promoting good competition and thus fetching the true monetary benefits from outsourcing of the airports. At the same time, it will also help in building the confidence of the IFC as to our adherence to the terms and conditions of TASA and payment of their fee, etc. in dollar terms.
For these reasons, the PCAA Board directed that the draft TASA shall be placed before the Economic Coordination Committee of the Cabinet for their information and concurrence.