ISLAMABAD: The federal cabinet has constituted a committee, headed by Prime Minister Advisor on Commerce and Investment, Abdul Razak Dawood to segregate regulatory and operational functions of major airports by June 30, 2020, as Qatar has shown interest in shareholding instead of airport operations, well informed sources told Business Recorder. Aviation Division stated that the Federal Cabinet in case No.889/40/2019, dated 29th October 2019, directed inter-alia, as follows: The Cabinet further directed the Aviation Division to share the "expression of interest" invited by them in the recent past, with the Board of Investment, with a view to see whether the proposed incentive structure was appropriately attractive for foreign investors. The task shall be completed within two weeks' time. In compliance with the above Cabinet Decision, the expression of interest for the grant of concession i.e., "Operation Management and Development Agreement" (OMDA) and "Airport Services License" (ASL) were shared and discussed by the Minister for Aviation with Chairman Board of Investment (Bol) on 21st November, 2019. It was informed that during February, 2017 to February, 2018 the same were advertised four times. Several reputed international airport operators had showed their interest, however, main concern raised by bidders was on the issuance of a "Sovereign Guarantee from the Government of Pakistan, in lieu of payment obligations of M/s Pakistan International Airlines Corporation Limited". Due to this reason, none of the bids could be materialized. A Joint Working Group (JWG) was subsequently constituted, consisting of representatives from BOI & Aviation Division, to re-examine the process and mechanism of outsourcing of airport services of Major Airports of Pakistan. The JWG in its initial meeting discussed the following benefits of outsourcing: (i) international experience and expertise to fully exploit commercial potential of the Islamabad International Airport Pakistan. Accordingly, the commercial concession of airport; (ii) the good will of international operator will ensure operation and management of aeronautical and non-aeronautical assets;, airline operations etc. in accordance with best industry practices; duty free shops, restaurants, commercial outlets and all allied non-aeronautical services will also become comparable to any other leading international airport and ;(iii) investment in aviation sector will restore the confidence of private investors in related commercial ventures; and generate number of job opportunities for qualified unemployed youth. After deliberations, the JWG decided to proceed as follows: (i) prepare RFP to outsource the CM Airport Services functions at Passenger Terminal Building (at JIAP, AIIAP, IIAP) to world-class airport operators under a license;(ii) RFP to include utilization of land for aeronautical and non-aeronautical purposes as per CAA land lease policy 2019 and in line with PPRA rules;(iii) CM to get RFP vetted from a reputed Financial Consultancy Firm;(iv) summary to be submitted to the Prime Minister / Cabinet for approval before advertising in press for award of concessions in CAA revenue interest;(v) Islamabad airport has the potential to double its existing annual passenger, traffic to 09 million which is sizeable traffic to attract investment, therefore, Islamabad airport shall be considered as the model airport. The commercial concessions at Lahore and Karachi airports are already outsourced for a period of up to 5 years. It was informed that the RFP was accordingly developed and was got vetted through M/s PricewaterhouseCoopers (pwc) and M/s ABS (financial and legal consultants respectively). After several meetings, the following was agreed upon by the JWG: (i) Airport Services License (ASL) of airports owned and operated by PCAA is mainly dependent upon a viable plan for realization of PIA receivables and loss of business opportunity. Due to this reason, all earlier attempts in this regard had failed. At IIAP Islamabad, AIIAP Lahore and JIAP Karachi, PIA contributes approximately 24% of PCAA's aeronautical revenues and 7.5% of non-aeronautical revenues. The contribution in total revenue share of PIA at the three airports is 21%. PCAA's total loss of revenue with respect to PIA at these airports is Rs 14.6 billion per annum; (ii) Master Retailer (MR) & Master Advertiser (MA) is considered as appropriate option to commercially exploit in Terminal Concession at Islamabad Airport;(iii) exploitation of land parcels at Islamabad as per CM Land Lease Policy 2019 is also recommended, keeping in view the current ground realities;(iv) Potential of MR and MA has a reserve price of Rs 13.75 billion for 10 years, while for initial land parcel is Rs 16.82 billion for 50 years. During discussion, the Prime Minister enquired about the fate of the offer made by Government of Qatar for participating in outsourcing effort. It was explained that Qatari side was not interested in airport operations and instead desired shareholding in all of the three major airports. So far no serious offer had been made by the Qatari side. One of the members pointed out that during Prime Minister's visit to Qatar, the hosts had expressed genuine investment interest in Pakistan's major airports, however, necessary efforts were not made in that direction. Mere commercial concessions and that too of a single airport would naturally not rope; in bigger investors. It was also opined that large investments were usually accompanied by credible expert operators. This would be more in line with the spirit of the Cabinet's decision to modernize the airport services at par with international standards and not just generate revenues through outsourcing commercial areas. On the query that how regulatory and operational functions of the government were to be segregated by December 2019, it was informed that the process had been delayed and the exercise would now be completed by end of June 2020. However, the necessary legislation might take a year or more. The members were of the view that the timeframe being given was highly unreasonable and fretted that the CAA was not willing to let go of the operatorship of the airports. The members desired that the process of segregation of regulatory and operational function must be completed, along the two draft legislations, by 30th June, 2020, positively. Furthermore, a Committee, comprising Adviser to the Prime Minister on Commerce and Investment, Minister for Aviation, Adviser to the Prime Minister on Parliamentary Affairs, Special Assistant to the Prime Minister on OP&HRD, Chairman Board of Investment, and Secretary Aviation Division, be constituted to evaluate available options and recommend a way forward. After detailed discussion, the Cabinet directed Aviation Division that the segregation of regulatory and operational functions of the CAA should be completed, along the two draft legislations, by June 30, 2020, positively. ' The Cabinet constituted the following Committee to evaluate various available options, while keeping in view segregation of regulatory and operational functions of the government, for outsourcing the major airports and recommend the way forward: (i) Adviser to the Prime Minister on Commerce and Investment (Convener) ;(ii) Minister for Aviation; (iii) Adviser to the Prime Minister on Parliamentary Affairs; (iv) Special Assistant to the Prime Minister on OP&HRD; (v) Chairman Board of Investment and; (vi) Secretary, Aviation Division.
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