ECC rejects Roosevelt’s $17.6m bailout | The Express Tribune

ISLAMABAD:

The government on Thursday did not approve a request by Roosevelt Hotel, New York, for a $17.6 million bailout for six months, while the Privatisation Commission continues to sit on another proposal for reopening the hotel for the past three months.

Indecision on part of the government and the Roosevelt Hotel’s management’s failure to take timely business decisions has now exposed the hotel to the risk of an arbitration award in a case filed by the hotel union.

A meeting of the Economic Coordination Committee (ECC) of the Cabinet was held under the chairmanship of Finance Minister Senator Muhammad Aurangzeb. The Ministry of Defence presented a summary before the ECC seeking its approval for a $17.6 million bailout and permission to reopen the closed facility.

“The Committee expressed support for addressing the most urgent financial requirements of the hotel and directed the ministry to revisit and reconfirm its estimates and resubmit the matter to the ECC,” according to a statement issued by the Ministry of Finance.

The statement added that the ECC considered the summary submitted by the Ministry of Defence regarding financial support in the form of a supplementary grant to Roosevelt Hotel, New York, following the termination of its lease agreement with New York City.

The defence ministry, which is now dealing with the subject of aviation, had proposed $17.6 million worth financial support to cover outstanding liabilities and costs for the July-December period. The facility was closed in June this year after the New York City government terminated a three-year contract after a year and a half, following the agreed procedure.

Initially, the management had requested a $28.6 million bailout, which the finance ministry refused due to lack of funds. Subsequently, the defence ministry sought $16.7 million, which too was not approved by the ECC on the grounds that there was a need to work out actual requirements.

The ECC was told some funds were available with the Scribe Hotel, Paris, but transfer costs were too high. Interestingly, the PIA Investment Limited (PIAIL) board decided to hire a financial advisor to suggest a tax-efficient transfer method – a job normally performed by a chief financial officer.

Both hotels are owned by Pakistan International Airlines (PIA) and run through PIAIL.

The cabinet body was further told that closure of the Roosevelt Hotel would require $131 million to settle liabilities over a period of three years. Reopening the facility, however, would still need $61 million for refurbishment.

The pricey hotel, located at one of the world’s most expensive locations, is part of the government’s privatisation programme. The facility, however, has long been mismanaged and continues to run on cash dole outs.

The ECC was told that, since July, proceeds from the sale of the Central Hotel, Abu Dhabi, which is also a PIAIL-run facility, are being used to keep Roosevelt afloat.

The ECC was further informed that PIAIL had negotiated reopening terms, but the proposal remains pending with the Privatisation Commission. The proposal was sent three months ago.

“We are not sitting on this decision. We have informed the PIAIL that their numbers need to be revisited and their proposals need to be more realistic. This is what the ECC also decided,” said a senior Commission official.

Meanwhile, the hotel now faces arbitration after the union filed a case. The arbitrator has asked the management to decide on reopening or else face an award based on union claims.

Other decisions

The ECC also discussed a summary from the defence ministry requesting funds to compensate residents of land acquired for the construction of the Defence Complex in Islamabad. It approved Rs4 billion, to be arranged by the Finance Division, while the remaining requirement will be met by the Capital Development Authority, stated the Ministry of Finance.

The ECC also considered a proposal from the Ministry of Interior and Narcotics Control seeking a Rs20 billion supplementary grant for the maintenance of law and order. The Committee approved the proposal with funds to be released in phases by the Finance Division in consultation with the Interior Division.

Another Rs174.8 million supplementary grant was sanctioned by the ECC for the Interior Division’s law and enforcement efforts carried out by the HQ Frontier Corps KP (N) Peshawar.

It also approved a draft Statutory Regulatory Order (SRO) proposed by the Ministry of Commerce to amend the Business-to-Business (B2B) Barter Trade Mechanism governing trade with Afghanistan, Iran, and Russia.