In the last few weeks, I have written to many political representatives of various political parties urging them to raise their voices against the privatisation of PIA and Pakistan steel Mills headed by a single man. It is extremely frustrating to read statements that are later retracted and have no plan of action in one of the most critical matters – privatisation. Though all of these representatives responded, they all had extremely varying opinions on the matter. Some are in support of privatisation, some are in complete opposition and others abstaining from comment.
Former Prime Minister Nawaz Sharif is extremely fond of privatisation, given the history that began with the Privatisation Commission in 1991 with three main objectives; to promote free-market economic principles, promote private ownership and lastly attract foreign investment.
I have always supported sensible privatisation, in the footsteps of the Chinese philosophy of “letting the small go,” meaning relinquishing control over smaller state-owned enterprises. However, given the current state of the economy, I am going to highlight a few case studies of privatisation by Turkey and China that may serve as potential solutions to the nonsensical approach the current political representatives may be taking.
China’s airport ownership landscape has undergone a significant transformatio, driven by a steady influx of domestic and foreign capital into the thriving airport industry.
Learning from the Chinese commercialisation of airports: In 1993, the Chinese Government initiated a fresh wave of commercialization by adopting a more lenient approach towards airport investment. In a significant development, the Civil Aviation Administration of China (CAAC) introduced a set of new mechanisms and implemented the “Interim Measures for Civil Aviation Operation Management”.
These measures paved the way for the transformation of airports into corporate entities and the subsequent commercialization of their services. Investments in the airport sector were notably streamlined, particularly in airlines. In a notable development, Hainan Airlines emerged as the pioneering air carrier to secure approval for its investment in Haikou Meilan International Airport. This groundbreaking move positions Hainan Airlines as a trailblazer in the aviation industry.
Meanwhile, in a significant move of its own, Beijing Capital Airport made its mark by being listed on the esteemed Hong Kong Stock Exchange back in 2000. These noteworthy milestones underscore the strategic and financial prowess of both Hainan Airlines and Beijing Capital Airport. In a remarkable shift, China’s airport ownership landscape has undergone a significant transformation, driven by a steady influx of both domestic and foreign capital into the thriving airport industry.
In a significant move, the Chinese government implemented a series of measures in 2003 that resulted in the transfer of airport management across the country. With the exception of Beijing Capital Airport and those situated in Tibet, all Chinese airports were handed over to either provincial or municipal governments.
The Government took steps to facilitate private investment in domestic airports, allowing for increased involvement in airport management and investment in airport facilities. The Air Traffic Management Bureau of the Civil Aviation Administration of China (CAAC) remains steadfast in its commitment to overseeing air traffic control, navigation services, aeronautical regulation, and communication and meteorology services, all aspects of the Air Navigation System (ANS). The responsibility of allocating all slots at every airport lies with the Air Traffic Management Bureau.
Learning From Turkish Airport Commercialisation: In the 1990s, a number of Turkish airports found themselves grappling with the looming threat of capacity issues. In a significant move back in 1994, the government made a decisive move by implementing Law No. 3996. This law, titled “Realisation of Certain Investments and Services in the Build-Operate-Transfer Model,” has since served as the fundamental legal framework for a wide range of infrastructure investments under the Build-Operate-Transfer (BOT) model. In 1997, the prestigious international terminal of Istanbul-Atatürk International Airport was awarded to TAV Airports, a prominent holding company formed through a collaboration between the esteemed Tepe and Akfen Groups.
Initially granted for three years and eight months, the agreement was later extended in 2001 for an additional 13.5 months. In a significant development back in 2005, TAV Airports emerged victorious in securing the highly sought-after concession agreement for the operation of Atatürk International Airport. This agreement, which spanned an impressive 15.5 years, was granted to TAV Airports through a meticulously crafted long-term lease agreement. In 2004, TAV Airports was awarded the rights to operate the domestic and international terminals of Ankara-Esenboga International Airport for 15 years and eight months. In a surprising turn of events, the provision of air navigation services has managed to avoid any form of corporatization, privatisation, or commercialization.
The success of Air India’s privatisation is also not a secret. In a year of its privatisation, the official figures claim that the average daily revenue has double by increasing aircraft capacity by 27% to 100, growing flights by 30% and flying 72% more passengers. All of this success comes from the sincere efforts made by the government of India to establish its airline services top class without exhausting national capital and attracting investment from one of the country’s giants.
Hence, there are multiple options that Pakistan’s political leadership can take on its road to privatisation by following in the footsteps of China gradually moving to a commercial model or Turkey following a BOT model to ensure the success of its airport management and services. I hope this piece can compel the current leadership to create a privatisation commission that devices an appropriate privatisation strategy, transparency and accountability while ensuring national interests are a high priority instead of simply gifting a national asset to the one the political leaders deem worthy.
The writer is Foreign Research Associate, Centre of Excellence, China Pakistan Economic Corridor, Islamabad