Reko Diq fiasco

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Kanwar Muhammad Dilshad
PM Imran Khan is forming a high level Commission to fix responsibility in the Reko Diq case. It
is hoped that the Commission will fix responsibility in all the other financial disasters listed below. Verdict has been announced by an International tribunal, imposing huge penalties on Pakistan. Iftikhar Chaudhry cancelled the contract of Reko Diq mining exploration in 2011. This was challenged in an international court. The verdict in the case has been announced against us. Pakistan has been asked to pay 5.8 billion dollars in penalties. This is solely because of incompetence and gross overreach in matters of trade, Industry and business. Prior to this, cancellation of the Privatization of Steel Mills caused a loss of 325 million dollars in 2006 when IC cancelled the bid of Pakistan Steel at the behest of political leaders and their front men notably Lt Gen Qayyum, the then Chairman, Pakistan Steel. Our economy has nosedived because of multiple reasons, foremost excessive borrowing for subsidies and inefficiencies. Where will Pakistan pay this huge penalty from?
We borrowed 6 billion dollars from IMF after agreeing to strict conditions which are painful for the people. In early 2019, PM Imran Khan managed with great difficulty to get 9 billion dollars from friendly countries to stave off bankruptcy. This amount helped Pakistan to pay the loans Installments due in 2019, accumulated by the previous Government. In one stroke a penalty as big as the IMF Loan has been imposed. The whole country has been penalized because of the Judiciary through ex-CJP Iftikhar Chaudhry. These disastrous actions need a comprehensive investigation from all angles. Mr. Zardari had a major role to play in this. There was no provision in the exploration agreement for the Company to take the case to arbitration. They asked special permission from the Government for it. Giving permission for arbitration after the Supreme Court decision was real sabotage by Zardari & Co to the country’s interest.
A reference can be sent against Iftikhar Chaudhry, his colleagues and political leaders who have caused these humongous losses to the country: Steel Mills losses running in trillion rupees, Reko Diq penalty of 5,8 billion dollars, Penalty imposed on the Rental Power Karkaray Project, 800 million dollars reportedly. Due to unusual and prolonged hearings of the Swiss cases ; the Swiss case of recovery of millions of dollars became time barred. IC focused on writing a letter and eventually dismissed YRG. What was achieved? We cannot take up the Swiss case and recover millions of dollars. Zardari and Iftikhar Chaudhry need to be made answerable for this lapse. All of this appears to be very badly motivated and malafide.
If Reko Diq indeed stands on the remains of a volcano, then it is perhaps apt that the controversial mining project in the area continues to erupt every now and then, reminding Pakistanis that they have to pay a fortune just to keep their treasure hidden. (For a background on the Reko Diq Copper and Gold Mines Project, read: “What next for Reko Diq,” published March 30, 2017). However, beyond the emotions of resource nationalism lie the stone cold economic truths. So let’s get to them. So what has happened this time was entirely expected. After seven years of trial, the World Bank’s investment tribunal has awarded damages to the aggrieved party, Tethyan Copper Company (TCC). Pakistan, which had in 2017 failed to establish its case on why TCC was denied the mining lease in 2011, has a $6 billion penalty to pay. This sum is lower than the TCC demand, but it should be happy. What happens next is probably not as alarming as some people fear. Firstly, Pakistan, which is already struggling to patch up financing for its external needs this year, is not expected to pay up immediately. Although there is limited room on which Pakistan can challenge this ruling, Pakistan can still choose to litigate the amount awarded. That will give the country at least one year before the award attains finality. Secondly, and perhaps most critically, the two parties may end up striking a deal and move on. What that compromise will look like is premature to say, but the fact that the TCC bosses have come out publicly in favour of reaching a bargain suggests that some progress has already been made on this matter behind the scenes. For its part, the Federal Government has welcomed the Company’s openness to negotiate.
Reports in the recent past have suggested that Pakistan may involve another country – Saudi Arabia or China – to develop the Reko Diq mines. Perhaps if a stake is offered to the TCC in place of its awarded billions, all parties can call it a win-win and go about developing the mines happily. That still leaves some uncomfortable questions. Though the latest ICSID ruling is not a catastrophic event, its magnitude should spark some introspection at home in the interest of attracting FDI to this country. For instance, why did the apex court at the time nullify the contract between TCC and Balochistan Government without regards to international consequences? Perhaps go back a bit earlier into the nineties and examine why bureaucrats having no area expertise settled for pittance? Dig a little deeper and ask why the Federal Government didn’t care much when the project’s foreign interest changed twice, leading to different jurisdictions for future disputes?
Lessons must be learnt, and in that context, one hopes that the Premier’s Commission on the matter will help in identifying flaws in Pakistan’s policy and institutional landscape for mineral development. Pakistan possesses several metallic minerals’ reserves, mining of which can feed export markets and reduce the import bill. (For more on this issue, read: “Mining metallic minerals,” published March 31, 2017). Overseas, mining giants will rejoice this ruling, knowing well that such steep penalties can bankrupt a low-income country and send millions more into poverty. As for platforms like ICSID that adjudicated this matter, letting a global mining giant go scot-free on a shady deal it willingly struck and perpetuated puts an unfair and enormous burden on honest taxpayers that had no role or say in such matters.
—The writer is former Federal Secretary Election Commission of Pakistan and currently Chairman National Democratic Foundation.

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