ECC approves outsourcing operations of three airports

ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet approved outsourcing the operation of major airports including Lahore, Karachi and Islamabad today. 

Federal Minister for Finance and Revenue Senator Mohammad Ishaq Dar presided over the meeting of the ECC of the Cabinet. 

According to Profit’s unnamed sources, the government had been considering various options to outsource the operation of major airports in Pakistan to improve passenger services and fully optimise the revenue potential since the last few years.

In this regard, the federal cabinet conveyed various decisions, and expressed interest to hire an audit firm to prepare proposals for corporatisation of airports.

The cabinet also constituted a committee of ministers to oversee the entire process. However, the process has not been finalised. 

The Prime Minister during a meeting held on December 30, 2022 directed the outsourcing of the operation of three airports in Karachi, Lahore and Islamabad. The process will be completed expeditiously by engaging a leading International Financial Institution (IFI) under the Public-Private Partnership Authority Act, 2017.

Sources said that the Pakistan Civil Aviation Authority (PCAA) engaged with IFI for direct engagement as transaction advisors under the regulations.  However, only the International Finance Corporation (IFC), a part of the World Bank Group, indicated interest. In response, the PCAA’s board allowed PCAA to negotiate with the IFC for settling the terms of their engagement.

After protracted negotiations and giving due consideration to the views of the ministry of finance, Federal Board of Revenue (FBR) and Ministry of Foreign Affairs, a draft Transaction Advisory Agreement (TASA) was reached with the IFC which was presented before the PCAA board in a meeting held on March 2, 2023.

The 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 for the outsourcing of the operation of three target airports from. In view of the past experience briefly mentioned at the first paragraph of this summary, a clear demonstration of such a commitment will also be crucial not only for the completion of the process but also for promoting a good competition. At the same time, it will also help in building confidence of the IFC as to adhere to the terms and conditions of TASA and payment of the fee in dollar terms. For these reasons, the PCAA Board directed that the draft TASA will be placed before the ECC of the cabinet for information and concurrence.