Islamabad International Airport, located in the capital city of Pakistan, serves as the entry point to the country’s northern regions. This airport was operationalized in 2018 and is the second busiest airport in Pakistan. The airport services a variety of Middle Eastern carriers in addition to Pakistan International Airlines (PIA), the country’s flag carrier. Recently the Pakistan Civil Aviation Authority (PCAA) has decided that outsourcing Islamabad airport to the private sector is necessary. This decision has been made under the recommendations of the International Monetary Fund (IMF) due to the new 7 billion dollar loan program.
Government’s Outsourcing Policy
The finance ministry stated, “The outsourcing of three airports has been initiated within the scope of public-private partnership…to engage private investor/airport operators through a competitive and transparent process to run the airports, develop appertaining land assets and enhance avenues for commercial activities and to garner full revenue potential.”
In the second week of April, the International Finance Corporation (IFC) and the Pakistan Civil Aviation Authority (PCAA) inked a transaction service agreement. This was followed by advising the technical teams visiting the three airports.
The Minister for Aviation, Khawaja Muhammad, stated that only the passenger terminal building, cargo apron, car parking, and some of the land parcels would be outsourced. At the same time, the other facilities such as airside infrastructure, taxiways, runways, navigational services, and surveillance facilities (air traffic, radars, control services, and rescue service) would still lie within the control of the PCAA.
Reasons behind the Outsourcing Islamabad Airport
The minister for aviation explained that the major reasons behind outsourcing Islamabad International Airport include improving the quality of services for the passengers, stakeholders, and the public. The minister has further asserted, “The whole world has done this. We must decide if we want to remain in the Stone Age. In our neighboring country India, there are around eight airports whose operations have been outsourced. Likewise, Istanbul’s airport is outsourced, and Madinah’s airport is outsourced. There are countless examples.”
Financial Implications of the Plan
The outsourcing’s financial structure is simple, yet it nonetheless holds all parties engaged to a high standard of accountability. The government guarantees that only capable and serious parties compete for the deal by requiring the third-party organization to pay $100 million in advance. This financial arrangement acts as a security measure and provides instant financial gains. The large upfront payment will be lost if the third party violates the terms of the contract.
Reassurance to the Employees
When organizations go through such changes, many people worry about what will happen to their staff. Job security has become a pressing concern. The aviation minister’s promises are quite important in this case. Employees at the airport should anticipate possible growth prospects rather than job losses. The establishment of a competitive environment may result in training, skill development, and even the creation of new work positions.
The Bidding Process
As airport outsourcing moves forward, the Public Private Partnership Authority (P3A) Act of 2017 is being closely adhered to. In compliance with the P3A Act and its regulations, the International Finance Corporation was first chosen to serve as a transaction advisor for airport outsourcing. In compliance with the Public Procurement Regulatory Authority (PPRA) rules, which P3A also abides by, the RFP (request for proposal) document and all of the bidding materials have been posted for international competitive bidding. An open bidding process was adopted in accordance with the PPRA rules to choose the most suitable company for outsourcing airports.
A significant development regarding the outsourcing of airports emerged recently when a Turkish company presented the bid and it was technically approved. Several bids have been submitted of which two were disqualified as well because of the late submissions. A committee headed by the secretary of aviation oversaw the tender procedure, and the Turkish company placed the highest bid for the project.
A thorough review of the Turkish company’s documentation is underway. The proposal will be submitted to the Board of Directors of the Pakistan Airports Authority for review after this assessment is finished. The business will be given the outsourcing contract if the board accepts the bid. The federal cabinet will also need to approve the tender’s final decision. The prime minister is set to receive an update on the status of the outsourcing initiative from the Secretary of Aviation Ahsan Mangi.
Challenges and Risks
The International Finance Corporation is the transaction adviser of Pakistan in outsourcing the three international airports – Lahore, Islamabad, and Karachi. In the inception report by IFC, it has highlighted various issues for PCAA which could possibly hinder the smooth execution of the outsourcing process. The main concerns were Pakistan International Airlines’ long-standing debts and liabilities, the unstable macroeconomic environment of the nation, the PCAA’s mechanisms for concession fees and tariff/user charge escalation and regulation, the fate of its outsourcing-affected employees, and current contractual agreements at the airports.
The IFC also recommended permission for the concessionaire and the PCAA to maintain a foreign currency account with the State Bank of Pakistan (SBP) to ensure that the government could fulfill its obligations to “ensure availability, convertibility and transferability of foreign currency and mitigate against the potential loss of revenue for the concessionaire due to foreign exchange volatility.”
Conclusion
An important step in modernizing Pakistan’s aviation industry and strengthening its economy may be the outsourcing of Islamabad International Airport. The airport may increase efficiency, improve passenger services, and draw more foreign traffic by handing over management to seasoned private companies. This initiative could match the airport with worldwide norms, so supporting more tourism and commercial connectivity, which are crucial for economic growth.
Additionally, the money made from such cooperation might give the government much-needed financial respite so it can concentrate on other important areas. Enhanced infrastructure and service quality could also improve Pakistan’s reputation internationally, making it a desirable place to visit and invest.
However, openness, sensible regulation, and close supervision are necessary for this project to succeed. Outsourcing runs the danger of undermining public confidence, jeopardizing sovereignty, or not producing the benefits that have been promised in the absence of strong frameworks. Finding the ideal balance between national objectives and economic pragmatism is essential to making sure that this choice actually advances Pakistan’s long-term success.
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Areej Ajmal is a lecturer at the University of Lahore. She possesses a robust academic background in political science from Punjab University, Lahore. Her expertise encompasses democratization, global and gender politics.