The truth about Reko Diq

The legendary wealth of Balochistan will remain buried beneath the sands of misery that haunt the Baloch people.


Farooq Tirmizi January 26, 2011

How valuable is one’s wealth if it is buried underground and one has no way of getting it out? And what would one say to somebody who came along and volunteered to extract this wealth, providing all of the technical expertise and putting up the entire investment costs, and letting you keep half of the profits? Would it be fair to say that this person was indulging in exploitative behaviour? Or would we say that a fair deal was on offer?

The above scenario is not hypothetical. It is exactly what is currently going on in the case of the Reko Diq mining project in Balochistan. The Tethyan Copper Company, a joint venture between Canada's Barrick Gold and Chile's Antofagasta, has spent $220 million to explore the Reko Diq area and, having discovered a feasible reserve of minerals, is now willing to spend the further $3.3 billion it would take to extract the minerals. And yet it is being treated like a neo-imperialist villain out to pillage Pakistan's national treasures.

Here are the facts: The Balochistan government gets a 25 per cent stake in the profits of the company for doing absolutely nothing besides being lucky enough to have jurisdiction over Reko Diq. It also gets a royalty fee on every penny of revenue earned by the Tethyan Copper Company. In addition, the company will pay the full 35 per cent of its income in corporate income taxes to the federal government. When all is said and done, the provincial and federal governments walk away with 52 per cent of the net cash flows of the project, while putting up none of the investment. By what standard is that a bad deal?

Yet if one were to pay attention to all of the populist screeching emanating from every corner of the print and electronic media, and now from 19-odd senators who have filed a petition in the Supreme Court on the matter, and also from people who have absolutely no expertise in resource economics, one could be forgiven for thinking that a great crime is about to occur. The truth, however, is that the crime is being committed right now, with the people of Pakistan being used as accessories to one of the biggest highway robberies in history.

The populist frenzy currently being whipped up on television and in newspapers is no accident. You see, a field is worth almost nothing when it has no proven reserves. Yet it can suddenly become worth billions the minute it is announced that there are significant quantities of minerals buried underneath. And that is when the vultures start to circle, smelling a fortune to be made by crooked means.

Here is how it will happen: The government officials who gave away the licences to the Tethyan Copper Company before it discovered anything at Reko Diq were unable to extort any bribes when the field was worth nothing. Now that it is worth billions, however, they can either extort bribes from Tethyan or from another mining company (and at least two Chinese companies have shown interest). Yet in order to get those bribes from Tethyan, the threat of losing the contract needs to be real enough. Hence the creation of a popular hysteria to give these officials the political cover they need for their banditry.

The other option is to actually kick out Tethyan (for which the popular hysteria is still useful) and then quietly give away the contract to the company willing to offer the highest kickbacks. Either way, the national interest, in the truest sense of the word, will have been cast aside since no company in its right mind will want to do business in a country that kicks an investor out the minute the latter finds something worth mining. The legendary wealth of Balochistan will remain buried beneath the sands of misery that currently haunt the Baloch people.

But, of course, the chest-thumping politicians will have made their cut and the journalists who helped them drum up the smokescreen of patriotic fervour will have unwittingly destroyed the nation's interests. I do not know about you, but I do not like being used in this manner.

Published in The Express Tribune, January 26th, 2011.

COMMENTS (54)

Awais | 13 years ago | Reply I beg to differ.. I heard Dr. Samar Mubarak Mand the other day saying that we can extract these resources on our own and purify the copper and hence separate the gold.. so if we can do it and some corrupt lunatics in our past did not realized that or even bothered asking if we could, before giving away the contract.. i say we take back the land and cancel the contract and do it ourself.. and pay back whatever the canadians have invested on it till this moment.. Doesnt that seem a fair deal? that we we get the whole 100% of the chunk ourselves and atleast that we deserve..
Saalik Siddikki | 13 years ago | Reply Well explained point of view. Now someone from the government should also express its stance on the subject. Nevertheless, it is yet to be determined just how much bribe was received by the authorities for allowing The Tethyan Copper Company to exploring and mining the area. To me, 52 percent revenue without exerting any efforts is not a bad option provided it does not find its clandestine route to Swiss accounts!
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