Reko Diq — Pakistan’s Achilles’ heel?
Pakistan is already not a ‘destination favourable’ for foreign investors
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The recent ruling against Pakistan by the arbitration tribunal of the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) for denying the mining lease of the Reko Diq project to Tethyan Copper Company (TCC) has put the federal government and the Balochistan government in a tight spot. Mired in terrorism and economic troubles, Pakistan is already not a ‘destination favourable’ for foreign investors. So the international arbitration body’s decision is not going to be exactly a confidence booster for foreign investors.
TCC was poised to bring over $5 billion of foreign investment in the most impoverished province of Pakistan and now, instead it is potentially poised to take away billions of dollars in damages! How did we come to this? The flight of the biggest-ever foreign investment in the country’s mining sector was orchestrated by several actors and really is symptomatic of the malaise that plagues our governance, judiciary, media and bureaucracy.
These days ‘fake news’ has a huge impact on issues. In the Reko Diq project’s case, there were many examples of irresponsible reporting. Banner headlines with inaccurate facts about the size and worth of the deposit; the anchor of a popular TV channel promoted one version by inviting TCC’s opposing counsel when the matter was sub judice in the Supreme Court and failed to give TCC’s side of the story are just to name a few.
Pakistan does not have any significant mining industry and there are hardly any experienced reporters who understand the workings of large-scale copper mining. Hence most of the reporting on the Reko Diq project, which was the first of its scale and sophistication in Pakistan’s mining history, displayed a lack of comprehension about the facts surrounding the project.
Just to cite one example of how media created “alternative facts”: it was time and again reported that TCC is under-reporting the real worth of the Reko Diq reserve and it is actually $260 billion. There is not a single copper mine in the world that is worth that much. (According to https://www.mining.com , all together reserves at the global top 10 copper mining projects are worth around $360 billion). It must be pointed out that when projects are developed in the mining industry, the value is not assessed on current or spot prices; it is calculated on long-term prices to ensure sustainability. But our news media constantly used as a benchmark the all-time high 2011 copper prices.
Unfortunately, the Reko Diq case was being heard in the Supreme Court at a time when suo-motu notices were being taken up on news reports. This was the time when the honorable Supreme Court was even taking suo-motu notice of a TV artist’s alleged attempt to carry liquor with her on a PIA flight! This way many frivolous and baseless news stories were given credence.
The bureaucracy and the government of Balochistan failed to grasp the social, business and economic impact of the project which would have changed the mining industry’s profile in the province. In an age of specialists, we can find only generalists in our bureaucracy. Moreover, the politicisation of bureaucracy undermines its ability to stand up for the right cause and give proper advice to the political leadership. As a result, Aslam Raisani, the then chief minister of Balochistan, denied the mining licence with impunity and decided to do mining indigenously. This attempt failed miserably.
The ICSID proceedings are not over yet. Pakistan’s legal team will have to do a much better job than what they did in the merits phase of the proceedings, because the tribunal would not have proceeded to the damages/quantum phase if liability had not been established against Pakistan. The damages phase of the ICSID proceedings is already under way and the quantum of damages would be determined by 2018. It’s not just about the financial loss. It’s also about further damaging the reputation of Pakistan as a desirable destination for foreign investment.
Published in The Express Tribune, March 29th, 2017.
TCC was poised to bring over $5 billion of foreign investment in the most impoverished province of Pakistan and now, instead it is potentially poised to take away billions of dollars in damages! How did we come to this? The flight of the biggest-ever foreign investment in the country’s mining sector was orchestrated by several actors and really is symptomatic of the malaise that plagues our governance, judiciary, media and bureaucracy.
These days ‘fake news’ has a huge impact on issues. In the Reko Diq project’s case, there were many examples of irresponsible reporting. Banner headlines with inaccurate facts about the size and worth of the deposit; the anchor of a popular TV channel promoted one version by inviting TCC’s opposing counsel when the matter was sub judice in the Supreme Court and failed to give TCC’s side of the story are just to name a few.
Pakistan does not have any significant mining industry and there are hardly any experienced reporters who understand the workings of large-scale copper mining. Hence most of the reporting on the Reko Diq project, which was the first of its scale and sophistication in Pakistan’s mining history, displayed a lack of comprehension about the facts surrounding the project.
Just to cite one example of how media created “alternative facts”: it was time and again reported that TCC is under-reporting the real worth of the Reko Diq reserve and it is actually $260 billion. There is not a single copper mine in the world that is worth that much. (According to https://www.mining.com , all together reserves at the global top 10 copper mining projects are worth around $360 billion). It must be pointed out that when projects are developed in the mining industry, the value is not assessed on current or spot prices; it is calculated on long-term prices to ensure sustainability. But our news media constantly used as a benchmark the all-time high 2011 copper prices.
Unfortunately, the Reko Diq case was being heard in the Supreme Court at a time when suo-motu notices were being taken up on news reports. This was the time when the honorable Supreme Court was even taking suo-motu notice of a TV artist’s alleged attempt to carry liquor with her on a PIA flight! This way many frivolous and baseless news stories were given credence.
The bureaucracy and the government of Balochistan failed to grasp the social, business and economic impact of the project which would have changed the mining industry’s profile in the province. In an age of specialists, we can find only generalists in our bureaucracy. Moreover, the politicisation of bureaucracy undermines its ability to stand up for the right cause and give proper advice to the political leadership. As a result, Aslam Raisani, the then chief minister of Balochistan, denied the mining licence with impunity and decided to do mining indigenously. This attempt failed miserably.
The ICSID proceedings are not over yet. Pakistan’s legal team will have to do a much better job than what they did in the merits phase of the proceedings, because the tribunal would not have proceeded to the damages/quantum phase if liability had not been established against Pakistan. The damages phase of the ICSID proceedings is already under way and the quantum of damages would be determined by 2018. It’s not just about the financial loss. It’s also about further damaging the reputation of Pakistan as a desirable destination for foreign investment.
Published in The Express Tribune, March 29th, 2017.