One of Pakistans top corporate magnates stated in a private conversation that the challenges confronting Pakistans economy were by far less serious than those which Europe faced. When asked to elaborate, he said he would give just one example from Europe, its aging population. Analysts at the International Monetary Fund projected in 2006 that by the year 2050, Europe will have one retiree for every two workers. In the current year, the 55 to 64 year old age bracket is estimated to have overtaken the 15 to 24 year old bracket. The Economic Policy Committee and the European Commission issued a report in 2006 estimating that by 2050, the elderly population of Europe will increase by 58 million, a gain of 77%. The mind boggles in the face of such alarming statistics. What can you do to fix the problem? Obviously, the answer is very little. So the segment of the population that consumes and does not produce will keep increasing while the productive population decreases. This obviously, is a big daddy of a problem.
On the contrary, the problems which we face in Pakistan are on account of confused and wayward policy, an attitude which protects and fosters vested interests and lack of a focused approach towards economics problems.
A close look at just one State Owned Enterprises (SOE) out of the long list of incompetently and dishonestly run SOEs, which reportedly eat up Rs 600 billion every year, will illustrate the point. Our choice of the SOE to put under the microscope is none other than Pakistan International Airlines. And the reason for this selection is to prevent, if possible, another great plane robbery from being foisted upon the long suffering awam of this country.
PIA readies revival plan declares the PIA press release inspired headline in a section of the print media. We are told, and I will quote extensively from the press release, that PIA plans to induct 16 new aircrafts, lay off over 4000 non-essential employees and double its revenue through aggressive marketing in the next five years.
Now all this sounds less like a business plan and more like a pipe dream. But the pathetic group entrusted with providing leadership to the national carrier does not stop at trying to pass off wishful thinking as a serious strategy. They go further, and make their brand of restructuring conditional upon the government agreeing to cancel their debt of nearly Rs 150 billion in liabilities and Rs 80 billion in accumulated losses.
We want to reform the airline. If the government helps us by taking on our previous losses and loans, we will be able to revamp the company for the future, says Sultan Hassan, the PIA spokesman. Stripped of the pious hypocrisy evident in this statement, it translates into, We want to continue bleeding the exchequer. If the taxpayer helps us by paying for our incompetence and corruption, we will secure billions more to play with during our tenures and leave a new mess for our successors to cope with.
What is the credibility of PIAs pious intentions expressed in their business plan. They say they will lay off 4000 non-essential employees. Immediately after Ch Ahmed Mukhtar, the Defence Minister assumed the office of Chairman PIA, the company restored the services of 6000 employees removed from service over the years. And they did this in an airline where the employees to aircraft ratio was already the highest in the industry, Nevertheless, one could be forgiven for asking that if 4000 employees are non-essential today, why wait for a Rs 230 billion debt and loss to be written off before you dispense with their services? If you can double your revenue through aggressive marketing, what are you waiting for? What stops you from aggressive marketing today?
The truth of the matter is that every successive management in PIA has secured a new life line by promising cost cutting and route rationalization and every time, the result has been incompetence, corruption at all levels, sifarish driven postings and a regular down slide towards eventual bankruptcy. Today, the company lives off debt secured by sovereign guarantees which will inevitably be called and the loser will be the national exchequer.
But didnt we start with the hypothesis that Pakistans problems are easy to fix? And didnt we pick PIA as an example to illustrate this? Of course we did, and of course it is easy.
In 2008, a new chairman was appointed in PIA. He immediately put together a Committee headed by a member Board of Directors of the Civil Aviation Authority who also happened to be an eminently successful private sector entrepreneur. The committee had the Vice Chief of Air Staff and a couple of Professors from LUMS among its members. The Committee was tasked to propose the way forward for PIA. After intense deliberations, the committee came to the conclusion that in essence, PIAs problem was mismanagement and lack of professionalism. The committee was of the view that a turnaround is impossible if the management continues in the hands of a government controlled company. The committee recommended:
a) Cleaning up PIAs balance sheet by off-setting PIAs debt against PIA owned prime hotel properties in New York and Paris namely the Roosevelt and Scribe Hotels.
b) Selling a strategic stake in PIA to a foreign airline and transferring management to the buyer.
But the enlightened Chairman lasted just two months, and Mr Ahmed Mukhtar, the Minister for Defence was appointed Chairman while a jiyala who was a Captain in PIA, became the Managing Director. The plan to privatize was swiftly scuttled, with the result that losses are mounting while cronyism thrives.
Giving PIA the bail out it is seeking will be a criminal waste of public money, particularly since nothing except the fortunes of PIAs top management will change. There is still time to pull out the privatisation proposals from the archives, dust and update them, and do this nation a favour by taking a decision which will be good for the airline and good for the travelling public.
