PakAlumni Worldwide: The Global Social Network
Subsidies to Public Sector Units Hurt Education in Pakistan
"...under 1.5% of GDP [is] going to public schools that are on the front line of Pakistan's education emergency, or less than the subsidy for PIA, Pakistan Steel, and Pepco." Pakistan Education Task Force Report 2011
Pakistan has ordered 5 Boeing 777s and 75 train engines for its state-owned companies in a bid to catch up with rising passenger and cargo service demands, according to media reports.
Boeing, the American aerospace giant, has announced the $1.5 billion deal with Pakistan International Airline (PIA) which includes a firm order of five 777-300ER (extended range) jets as well as the purchase rights for an additional five, according to Fox News.
Separately, The News is reporting that Pakistan Railway is purchasing 75 Chinese-made train engines for $105 million.
Highways have now become the most important segment of transport sector in the country, according to the Economic Survey of Pakistan. At the time of Pakistan's independence in 1947, transportation by roads accounted for only 8% of all traffic. Today, it accounts for 92% of national passenger traffic and 96% of freight.
The last decade has seen major competition coming from first-class private bus services now operated on modern motorways in all parts of Pakistan. The best known of these is Daewoo bus service with its comfortable luxury coaches and stewardesses offering meal services. With the construction and expansion of national highways and motorways, the trucking industry has also grown by leaps and bounds in the last few decades.
In mid-90s, Pakistan Railway had 10.45% share of passenger traffic and 5.17% of freight traffic, which has declined to 9.95% and 4.72% respectively by the year 2006-07, according to Economic Survey of Pakistan.
Pakistan Railway has been weighed down by heavy expenses of payroll and rising corruption and incompetence. As a result, a large number of engines are no longer operational and there have been big cuts in service.
After gaining domestic and international traffic market share for several decades after independence, Pakistan International airline has been losing it in recent decades because of serious problems of corruption and mismanagement by the cronies of the ruling politicians. PIA is now losing hundreds of millions of dollars a year while being hit by lean and mean domestic private airlines and international competition from rising Gulf giants like Emirates, Etihad and Qatar Airways.
Today, PIA's employee to aircraft ratio of 450 is more than twice as much as some of its competitors. "Politically motivated inductions have been the major cause of the significant increase in human resource burden in this organization," the State Bank of Pakistan said recently.
Pakistani taxpayers are heavily subsidizing the national airline at the expense of much more crucial public sectors like education. Last year, a Pakistani government commission on education found that public funding for education has been cut from 2.5% of GDP in 2007 to just 1.5% - less than the annual subsidy given to the various PSUs including PIA, the national airline that continues to sustain huge losses.
The latest example of the use of public funds to buy support for the government is Rs 366 million given in "discretionary development funds" as reward to senators for passing the 20th Constitutional Amendment with more than two-third majority, according to Pakistani media reports.
The crux of the issue for the bloated public sector units like PIA, Pakistan Steel Mills and Pakistan Railways is the reprehensible system of political patronage which puts the wrong people in charge of them. The sooner PIA, PR and other PSUs become privatized, the easier it will be to revive them for better service and improved profitability. It will turn them into a source of much needed revenue for the public treasury, just as the denationalization of banks did in the last decade.
From an after-tax loss of Rs. 9.77 billion in 2001 (when MCB, Habib, UBL and Allied were government owned) the earnings of these privatized banks rose to a profit after-tax of Rs. 73.115 billion in 2007. Higher earnings meant increased tax contribution by these banks to the government from Rs 10.8 billion in 2001 to Rs. 33.8 billion in 2007, according to data provided by former State Bank governor Mr. Shahid Kardar.
Even if privatization of the heavily subsidized public sector units does not yield higher tax revenue from them, it will at least free up public funds for more pressing needs like education, health care, energy, water and public infrastructure development.
Related Links:
British Aid for Pakistani Schools
Pakistan's Twin Energy Shortages
Resilient Pakistan Defies Doomsayers
Political Patronage Trumps Public Policy in Pakistan
Pakistan's Tax Evasion Fosters Aid Dependence
Finance Minister Shaukat Tarin Resigns
Musharraf's Legacy
US Fears Aid Will Feed Graft in Pakistan
Pakistan Swallows IMF's Bitter Medicine
Shaukat Aziz's Economic Legacy
Riaz Haq
Pakistan plans to privatise its loss-making national carrier Pakistan International Airlines (PIAa.PSX), the government said on Monday, as the country also seeks to outsource its airport operations in line with an IMF deal.
https://www.reuters.com/business/aerospace-defense/pakistan-privati...
The privatisation decision was taken at a meeting of the Cabinet Committee of Privatisation chaired by Finance Minister Ishaq Dar.
The committee "after deliberation decided to include Pakistan International Airlines Co. Ltd in the list of active privatisation projects of the ongoing privatisation programme, following an amendment in the law by the Parliament," a finance ministry statement said.
The committee also backed the hiring of a financial adviser to process the transaction of Roosevelt Hotel, New York, an asset of the PIAInvestment Limited, it added.
Pakistan hopes to resume PIA flights to Britain in the next three months after services were suspended following a fake pilot scandal.
The PIA flights to Europe and the UK have been suspended since 2020 after the European Union's Aviation Safety Agency revoked the national carrier's authorisation to fly to the bloc following the pilot licence scandal.
The privatisation of a state-owned enterprise, the PIA, which has accumulated hundreds of billions of rupee in losses and arrears, comes after Pakistan agreed to fiscal discipline plans with the International Monetary Fund.
Pakistan secured a $3 billion IMF bailout in June.
Reporting by Asif Shahzad in Islamabad and Baranjot Kaur in Bengaluru Editing by David Goodman, Mark Potter and Alistair Bell
Aug 7, 2023
Riaz Haq
Pakistan, China agree on $7bn ML-1 financing consortium - World - DAWN.COM
https://www.dawn.com/news/1940653
https://youtu.be/Amw9o9rVRgs
ISLAMABAD: The government announced on Monday that Pakistan and China had agreed to form a consortium of bilateral and multilateral partners to finance the $7 billion Mainline-1 (ML-1) railway project, along with a four-year action plan (2025-29) for the second phase of the China-Pakistan Economic Corridor (CPEC).
Speaking at a news conference, Planning and Development Minister Ahsan Iqbal said that during Prime Minister Shehbaz Sharif’s recent visit to China, the two sides had agreed to constitute a consortium of financiers, including the Asian Development Bank (ADB), Asian Infrastructure Investment Bank (AIIB), China and Pakistan, for the 1,700-km Karachi-Peshawar railway line.
He said China had assured financing not only for ML-1 but also for the Karakoram Highway. Negotiations with multiple financiers would be concluded within a month. He added that ML-1 and the Sukkur-Hyderabad Motorway would already have been completed, had it not been for the 2018 political change, alleging that the subsequent PTI government “destroyed the process”.
The minister said Pakistan and China had agreed to develop and implement a four-year action plan to build, between 2025 and 2029, a “China-Pakistan community with a shared future” with stronger political trust, closer trade ties, deeper security cooperation and stronger people-to-people links. Agriculture modernisation and industrial development would be prioritised under CPEC’s second phase, with space for third-party participation.
The next meeting of the Joint Cooperation Council (JCC) of CPEC will be held on Sept 26 in Beijing. Both sides also agreed to advance industrial park development in line with local needs, support enterprise investment in special economic zones (SEZs) — particularly in Karachi and Islamabad — and offer preferential policies and a supportive business environment.
Mr Iqbal said the action plan was a “solid development” of leadership-level meetings aimed at deepening strategic cooperation and advancing the shared vision of an even closer partnership in the new era between two “time-tested, friendly countries.”
The two sides agreed to make full use of the Framework Agreement on Industrial Cooperation to accelerate industrialisation, support exports and encourage Chinese firms to invest in Pakistan, including in the mining sector and building mining industrial parks.
They also agreed to promote cooperation in crop cultivation, animal husbandry, epidemic control for plants and animals, aquaculture, agro-processing, agricultural mechanisation and capacity building in seed technology and drip irrigation.
The plan includes aligning the Belt and Road Initiative (BRI) with Pakistan’s 5Es Framework, implementing both large-scale landmark projects and “small and beautiful” livelihood projects, while ensuring both high-quality development and robust security.
on Thursday
Riaz Haq
Pakistan seeks $2 billion Chinese funding for CPEC
The federal government has finalised the agenda for the upcoming Joint Coordination Committee (JCC) meeting with China, seeking financing of over $2 billion for major infrastructure projects under the China-Pakistan Economic Corridor (CPEC).
https://tribune.com.pk/story/2566723/pakistan-seeks-2-billion-chine...
According to sources, the agenda includes the Karakoram Highway (KKH) Phase II, the Main Line-1 (ML-1) railway project, and the East Bay Expressway.
Pakistan has requested $1.5 billion in financing for KKH Phase II and the East Bay Expressway, while an additional $500 million has been proposed for the Rohri-Multan section of the ML-1 track.
The realignment of KKH Phase II alone is estimated to cost around Rs500 billion, while the 14-kilometre East Bay Expressway is projected to require over Rs30 billion.
Sources added that China will cover 85 per cent of the expenses for both the KKH Phase II and the East Bay Expressway projects.
yesterday