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    Pakistan Post Violates Rules By Awarding Contract Worth Rs118bn To HBL

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    Pakistan Post has violated Public Procurement Rules and Public-Private Partnership Act in awarding a contract worth Rs118 billion to Habib Bank Limited (HBL) for the digitisation of its services.

    Meanwhile, senior officials of the Pakistan Post have expressed reservations over the agreement, fearing it would slash the revenues considerably and lead to layoffs.

    Khawaja Imran Raza, deputy director General Special Initiatives and focal person for the project, rubbished allegations that HBL was favoured, saying several proposals by different banks were submitted and the Pakistan Post chose HBL after thorough evaluation and risk assessment.

    In a comment on allegation violation of rules, he said the advertisement was given in newspaper which was why there was no need to inform Public-Private Authority (PPA) or PPRA (Public Procurement Regulatory Authority).

    About the investment figure, he said that PPOD will not blindly accept the figure of Rs118 billion and would demand a breakdown from the bank. He further claimed that HBL will get its share on the profit not on the revenue as claimed by the officials, so there’d no increase in the deficit.

    But the agreement contradicted the claim made by the focal person, as it reads ‘Pakistan Post and HBL agree to share the revenue generated under this strategic alliance’.

    Officials say that PPOD will act as an agent for HBL and will pay the bank for its services, such as ATM machines at PPOD locations, cash handling, and security. Similarly, PPOD will act as super-agent and will do Konnect services for HBL.

    They said that the most important thing is that PPOD had floated an expression of interest (EOI) from financial institutions/banks in newspapers and uploaded it on the PPRA website. The standard procedure is that after scrutiny of the EOI documents, Request For Proposals (RFP)/tender notice is required to be advertised in newspapers/uploaded on the PPRA website for the invitation of bids/proposals.

    When this correspondent checked the PPRA website and spoke to an official concerned, this correspondent found out that EOI was advertised and uploaded on the PPRA website, but RFE/Invitation of Bids from the interested parties/financial institutions were missing. The EOI is meant to be advertised and uploaded when the Public Procurement Rules 2004 is invoked. PPOD initially invoked PPR 2004 but intentionally skipped the second part which is to invite bids from the interested financial institutions. 

    Raza, while defending the agreement, said that PPOD is a partner in the agreement under the ambit of agency functions. According to the nature of the principal/agent relationship, it is the agent that acts on behalf of the principal. PPOD has entered into a number of agreements with government departments such as military pensions, saving bank, renewal of arms/driving licenses, vehicle tax authorities etc. In such kind of arrangement, PPOD serves as an agent on behalf of the above departments against commission/fees.

    The receipts from the agency function stand approximately 50 percent of the total revenue of PPOD. On the contrary, this agreement stipulates that PPOD has to share its own revenue (25 to 50%) with HBL. It is evident that PPOD is principal and HBL is serving as an agent. This arrangement nullifies the basic principles of the principle-agent relationship.

    He further said that PPOD would not accept blindly the figure that the bank claims to invest and will seek breakdown from the bank.

    This seems to be an afterthought after signing the agreement and which renders this entire agreement suspicious. It is shocking to know that feasibility of the project had not been carried out prior to the agreement and a ‘bloated figure of Rs118 billion’ was mentioned in the agreement.

    The PPOD used the term ‘strategic alliance’ for the agreement with HBL which is a private entity. The standard procedure in such a kind of alliance or partnership is termed as Public-Private Partnership. Rule 4 (2) of such a partnership makes it mandatory that Public-Private Partnership be forwarded to Public-Private Partnership Authority for assessment of fiscal risks and evaluation of value for money.

    The focal person confirmed that the agreement with HBL comes under the ambit of the agency function rules, therefore, it was not required to send the agreement copy to the relevant authority. Since PPOD is a public entity and whereas HBL is a private firm, any kind of financial arrangement has to be forwarded to Public-Private Partnership Authority for assessment of fiscal risks and evaluation of value for money.

    Despite multiple attempts, Naya Daur failed to get HBL’s version regarding the allegations made by the Pakistan Post employees. Also, it may be noted here that HBL has been fined several times in the past by the State Bank of Pakistan and the US government for violation of rules and regulations.


    The PPOD employees fear that the HBL will take over their agency functions– a major source of revenue– that would make their jobs redundant, especially in the backdrop of decreasing revenue.

    “The initiative will result in a net outflow of resources so the deficit will increase. It is expected that in 3 years, HBL will be able to take over all agency functions and do them better than PPOD on its own. In that case, HBL may happily opt for termination of the project as the agreement is well protective of HBL interests,” they added.

    According to the officials, at the loss of 70% of its revenue, the mail business will not be able to absorb the wage bill. “Most of the staff will be removed. Even then it is expected that the business will be run at a loss so it would likely be outsourced to the private sector.”

    They further said that the PPOD will lose its major sources of revenue (military pensions and saving banks), adding that the Finance Division and State Bank of Pakistan should have been taken on board before signing of this agreement.

    They said the department failed to conduct a feasibility study of the investment that the HBL has claimed it would make. The bank also didn’t share the breakdown of the Rs118 billion investment before signing the agreement, they added.

    The officials also raised questions over the Pakistan Post’s failure to call for bids, alleging this showed that personal interests were given precedence over the interests of the department.


    Sources at the PPOD told Naya Daur that the agreement was the brainchild of Minister for Communications Murad Saeed, which he implemented through Additional Director General Ijaz Minhas. Saeed recently defended this project on the floor of the House, saying that it will turn the post offices across Pakistan into banks.

    However, officials at PPOD are sceptic about the fruits of this project. They claimed that Rs118 billion investment by the bank is a bloated figure, which needed to be checked before the agreement was signed.

    “The maximum amount the bank will spend is about Rs1bn on hardware and capacity enhancement, against which it will be netting Rs4 billion a year (guaranteed revenue),” they said while requesting anonymity. As per the officials, the bank will also make money off of the transactions at 3,600 post offices across Pakistan which roughly stand at Rs3bn daily.

    “Instead of spending Rs1bn on computerisation,  the ministry brought in the HBL without due process and giving away its revenue share of 25-50 per cent (Rs4bn a year) over the 20 years,” a high-level official at the PPOD told Naya Daur.

    According to the officials, the bank will own the software and hardware and PPOD will just be a client. “Saving Bank of PPOD and pensions will be moved to the HBL system; consequently, it will be easier for the agency to continue with HBL rather than PPOD.”


    The project was initiated by PPOD to upgrade its financial services by fully automating its operations and computerization of 3,600 post offices during the tenure of the PML-N government.

    An understanding was reached with the Korea government in 2014 which agreed to give loans worth $20m for 30 years— with a grace period of 10 years— at an interest rate of 0.5%. Three detailed feasibility studies were conducted by the Korean government officials and the project got approval from the Central Development Working Party (CDWP).

    The Korean Exim Bank approved the loan in 2018 and the project was to be executed by Korean firm in collaboration with the Pakistan Post. However, the incumbent minister shelved it.

    “Korean project was better in the sense that it was going to give us state of the art technology and PPOD would have the ownership of the project. But vested interests prevailed and that is why NAB must investigate it,” a senior officer at the PPOD claimed on a request that his name would be kept anonymous.

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    1 Comment

    1. KBS July 21, 2020

      This has been going on in Pakistan Post for the past few years. First the Technology vendors were kicked out. Then the EDCF korean project that was approved from CDWP and ECNEC was shelved and finally Pakistan post was sold to HBL.


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