Governance woes in Balochistan and K-P

Two poorer provinces have rich endowments that could relieve them of backwardness, but it requires good governance.

If any evidence was needed to demonstrate that Pakistan’s two relatively backward provinces — Balochistan and Khyber-Pakhtunkhwa (K-P) — were in that situation on account of poor governance, it came on January 13. On that day, President Asif Ali Zardari exercising “the powers conferred on him by Article 234 of the Constitution” imposed governor’s rule in Balochistan. Only time will tell whether that action will bring stability and good governance to that province. Deprived of both for decades, Balochistan and K-P, the former’s neighbour, have not been able to exploit their enormous mineral endowment for the benefit of their deprived citizenry.

While some of the mineral wealth, such as the large natural gas deposits found in Balochistan’s Sui fields, has already contributed significantly to Pakistan’s economic growth, several other remain on the books of geologists. A couple of years ago, America estimated the value of Afghanistan’s mineral wealth at more than a trillion dollars. This has relevance for Pakistan since mineral seams don’t stop at political borders. Moreover, the Chinese have been involved in the exploitation of extensive copper deposits in Balochistan. However, in early January, the Supreme Court stepped in to void a major foreign contract aimed at exploiting the Balochistan’s rich copper and gold deposits. The Court said that the contracts were drawn up in total disregard of the Constitution. This was one other evidence of poor governance blocking economic development in this part of Pakistan.

Present in K-P is another kind of mineral wealth. In a report, prepared by the Asian Development Bank a few years ago, it was suggested that the tribal belt straddling Afghanistan and Pakistan has large deposits of marble and other semi-precious stones. Some of these are being exploited but not in the most productive way.

It will, of course, take a great amount of investment to reach these resources. An extensive communication and transport infrastructure will have to be built to access them and to take them to the processing and consumption centres. In most cases, these types of investments are made by the state, which then attempts to recover some of what it has invested by selling leases to the areas where minerals are believed to be present. The Pakistani state, however, is financially weak and may not be able to make the needed investment. It may have to rely on external capital. However, a very difficult security situation may even prevent such an arrangement from materialising.

By intelligent strategising, the Pakistani state may be able to simultaneously address two problems it faces in these two provinces. One reason for the persistence of insurgency in Balochistan is the ability of the province’s tribal chiefs to satisfy their material ambitions while creating a deep resentment against the state. The bulk of the royalties paid by Islamabad for bringing gas out of the ground in Balochistan have gone into the pockets of a small group of people who have then used the control they have over the tribal people to convince them the state has indulged in predatory behaviour.

One way of dealing with this situation is to take out the tribal chiefs from these transactions. Agreements with the companies invited to work on the mineral deposits should be concluded in a totally transparent way. The proceeds from the sale of leases or the royalties paid by the firms should be deposited in a Fund for Future Generations (FFG). The FFG should be professionally managed and its proceeds should be used for developing the relatively backward human resource in these provinces.

In sum, the country’s two poorer provinces have rich endowments that could relieve them of their relative backwardness. But that would need good governance and state involvement. It will also require a significant improvement in security so that foreign capital and expertise can be used to fully exploit the immense wealth that lies below the surface in the two areas.

Published in The Express Tribune, January 21^st, 2013.