ISLAMABAD: Pakistan needs joint ventures (JVs) in the aviation sector, as these have become increasingly common and proven successful worldwide, reports WealthPK.
The Pakistan International Airlines (PIA), regarded as the large ‘sleeping giant’ of Pakistan’s aviation sector, needs joint ventures to operate on professional lines and come out of the list of top 10 loss-making state-owned enterprises (SOEs), said a research economist from the Pakistan Institute of Development Economics (PIDE).
The JVs can contribute significantly towards improving the quality of human capital, knowledge transfer, and development of local talent, bringing international expertise, experience and training standards into the local market, Saddam Hussein said.
According to WealthPK research, in a typical joint venture, the parent company holds minority shares, while the local owners hold the majority stake, thus combining local knowledge with world-class aviation expertise. It is common for almost all countries in the world to follow the same foreign direct investment (FDI) policy in aviation, allowing up to 49% foreign ownership.
The National Aviation Policy 2019 of Pakistan states that to promote the participation of Pakistani nationals in the aviation sector, the airlines will be encouraged to be owned by Pakistani citizens.
The foreign equity partnership in domestic commercial air transport carriers shall not exceed 49 percent or to the extent where controlling interest remains in the local hands. At the same time, Pakistani nationals will be encouraged to invest in the aircraft manufacturing industry. However, the FDI and JV will also be permitted and encouraged.
In March this year, Air Arabia and Lakson Group JV revealed their brand identity as ‘FJ’ (Fly Jinnah) incorporated in Pakistan as a company owned primarily by Pakistani citizens that sponsors one of Pakistan’s most diversified and leading companies. It was established to create new jobs and support the core sectors such as tourism and hospitality and also contribute to the growth of the economy.
Chief of Asia-Pacific & Africa Investments at Qatar Investment Authority (QIA) Sheikh Faisal Bin Thani Al Thani has also shown keen interest in investment in different sectors of Pakistan, especially in the airport infrastructure and energy sectors.
Many factors have contributed positively to Pakistan’s aviation sector, including the high proportion of young people (63 percent of the total population), the growing middle class, the GDP growth of 5.97 percent in the fiscal year 2021-22, and the government’s increasing awareness of the importance of aviation to the country.
While there are still bottlenecks, the ease of doing business in the country has improved in recent years. Looking at the current macro-environment of Pakistan’s aviation sector, structural reforms and economic policy adjustments are necessary to uplift the sector.
The Qatar Investment Authority has also expressed keen interest in the aviation sector due to the country’s investment climate. Moreover, the recent joint venture between Air Arabia and the conglomerate Lakson Group is paving the way for a better and more sustainable future for the country’s aviation industry.