ISLAMABAD: The Privatisation Commission has nominated the Asian Development Bank as the financial advisor for the outsourcing of operations of Islamabad International Airport a major infrastructure deal that Pakistan has made in recent times. The appointment of the ADB as financial advisor to the Islamabad airport outsourcing deal was passed by the Privatisation Commission at its 255th meeting chaired by Muhammad Ali, Adviser to the Prime Minister on Privatisation and Chairman of the Privatisation Commission.
The Board has approved the signing of the Transaction Advisory Services Agreement with ADB, whereby the multilateral financial institution has been formally engaged to help structure, manage, and conclude the competitive bidding process to hand over the management of the airport to a private sector company on a concession basis.
ADB Mandate to do what
The Islamabad airport privatisation ADB advisor mandate will be for the whole transaction cycle right from structuring to execution. This is clear from the following PC Board mandate:
“The PC Board was confident that ADB, being an experienced agency, would be able to successfully carry out the important task of this transaction in a short span of time.”
Privatisation Commission statement
The involvement of ADB in the Transaction Advisory Services Agreement makes it an integral part of a process that is supposed to bring about credible international airport operators, create terms of the concession agreement that will be favorable for Pakistan, and carry out the bidding process in a fair manner.
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The Concession Model – What Does it Mean?
In this case, the decision by the Islamabad airport to outsource the ADB adviser will provide the structure of the deal as a long-term concession to a private sector operator through a bid process. The model is different from privatisation, whereby the government continues to own the airport property while a private operator runs it for a certain period of time.
“Islamabad International Airport will be outsourced to a qualified private sector operator under a long-term concession framework through a competitive bidding process.”
Privatisation Commission statement
The following objectives were stated in the outsourcing PC:
- Increased efficiency: incentive system for the private managers which is performance-related rather than target-related
- Better passenger service: quality service standards will be met due to the performance requirements of the concession agreement
- International best practice: making the IIAP meet international airport management standards
Why Does This Deal Matter to Pakistan
The Islamabad International Airport is amongst the busiest airport in Pakistan because there are millions of passengers who visit it annually. The Isalmbad International Airport functions as the main gateway for foreigners and businessmen to enter Pakistan and is also used by foreigners living abroad to return to Pakistan via Islamabad.
The efficiency of the airport influences the image of Pakistan in terms of destination and business environment. The deal by Islamabad airport of appointing an ADB adviser for privatization indicates that it is the start of a process, which may significantly improve the above image of Pakistan.
