Mining contracts: Pakistan must study global models to court investors

Country possesses rich deposits of gold and copper that await exploration.


Zafar Bhutta July 13, 2014

ISLAMABAD:


After facing a legal battle with Tethyan Copper Company (TCC) Pakistan – a joint venture between Canadian and Chilean giants – in the international court, Pakistan must make endeavours to study mining deals around the world in a bid to frame a model agreement for awarding gold and copper mining contracts.


Pakistan has already lost a major opportunity to search for gold and copper reserves in Balochistan because of a poor framework that sparked controversy with TCC over the grant of contract and dented investor confidence.

Balochistan, the largest province in terms of area but the most under-developed, not only boasts of a large number of mines containing deposits of precious and other metals, it has also huge reserves of oil and gas. The northern areas too hold big deposits of gold and copper that await exploration and could give a boost to the country’s faltering economy.

Around the world, business tycoons are involved in tricky games to win contracts, but they spoil things when they lose. Moreover, the countries rich in natural resources have been facing poor law and order situation as is happening in many Middle Eastern states.

Balochistan, blessed with huge reserves of mineral and other natural resources, has also been grappling with insecurity and violence since long due to alleged involvement of external forces.

However, according to experts, the poor law and order conditions appear to be a blessing in disguise for international investors, who are promised a lucrative package of incentives in an attempt to win their support.

The province has a 16km long belt of gold and copper reserves that passes through Iran and Turkey and then enters Afghanistan. Only a Chinese company is working on the Saindak gold and copper project in the province.

Though TCC tried to break the monopoly by undertaking exploration of metals, different lobbies came in the company’s way and it was forced to pack up after spending over $400 million. It also approached the International Court of Arbitration to seek compensation.

The rift between the government and TCC started in 2009 when Pakistan’s ambassador in Chile wrote a letter, suggesting that a Chinese company should be awarded another area for exploration rather than Reko Diq. As a result, the government turned down the demand of the Chinese firm to grant rights for Reko Diq.

Policy revision

The present government of Pakistan Muslim League-Nawaz has blamed the previous administration of Pakistan Peoples Party for corruption and kickbacks. Now is the time for the new government to demonstrate transparency and good governance and try to reach a settlement with TCC. This will set a precedent and encourage investors to pour money into Balochistan.

The government should revamp the Mineral Policy of 2013, framed by the PPP-led coalition government, to remove bottlenecks, if any, and provide a level-playing field for all investors.

The policy should not favour investors from only one country that discourages other potential investors. Incentives should also be put in place for those willing to set up gold and copper refining units. This will stop export of unprocessed metal and lead to shipment of finished goods, fetching better prices.

The inflow of investment will also create significant job opportunities for the locals in the insurgency-plagued region.

TCC had also been planning to invest $5 billion in Reko Diq over a period of five years with creation of jobs for 3,000 people and another 4,000 for daily-wage workers, who would assist in infrastructure work at construction sites.

Apart from these, the government should make efforts to appoint independent experts on key posts in an attempt to instill confidence in investors. Any hiring on political grounds could spark controversy and disrupt a smooth flow of investment.

In a recent case, the Balochistan government appointed a son of former chief justice of Pakistan as vice chairman of the provincial Board of Investment, which triggered a row and calls for his resignation. Eventually, he stepped down from the post.

Published in The Express Tribune, July 14th, 2014.

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COMMENTS (12)

hoor khan | 6 years ago | Reply Strongly agreed with OBSERVER and SHAHRABI
sharabi | 6 years ago | Reply

@observer @Shuaib I am not the person which can be easily influenced by emotions & sentiments. As an Industrial Automation & Robotic Material Handling system engineer my self, i can tell you Pakistan can not start large scale mining even in next 15 years. Last year i have read many articles about proposal of Huge multi Billion $$ investment in coal mining by Arcelormittal (World No. 1 Steel producer). He was keen to invest in infrastructure thus that would generate approx. 17000 Direct & Indirect jobs. He have planned Coal mining & export of coal to his Indian & European plants but Government of Pakistan refused his proposal & basis of rejection was that owner of Arcelormittal is Laxminivas mittal An Indian. Even though Pakistan have huge potential but this step prevented the other proposals of Relience & Tata in different sectors of Pakistani Economy.Sad but true Dear Business, Infrastructure, Finance, Development must be isolated from cheap sentiments. By the grace of God our PM is known for such quality. Best of luck for Future

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