Unnecessary litigation scaring foreign investors
Corporate courts need to be set up to deal with cases .
ISLAMABAD:
Foreign investors, discouraged by sometimes unnecessary litigation, are gradually losing interest in Pakistan, putting future capital flows into the country at stake. To avert the trend and woo investors, the government needs to mull over establishing audit or corporate courts in order to swiftly address the issues faced by local and foreign companies.
Many international oil and gas companies have pulled out by winding up their operation in the wake of dispute with the government over different issues. Most of them are fighting tax cases in courts.
The country has lost an opportunity to bring cheaper liquefied natural gas (LNG) supplies at $11 per million British thermal units (mmbtu) under the Mashal project while in copper and gold mining Tethyan Copper Company (TCC) has approached an international court.
In the area of liquefied petroleum gas (LPG), Progas filed a case in the international court, claiming damages of $500 million and blaming its losses on a shift in government’s policy.
In this scenario, experts suggest the government should dissolve the National Accountability Bureau (NAB) and strengthen the Auditor General of Pakistan in matters pertaining to investigation into business deals. The time is ripe to set up audit and banking courts so that the auditor general could pursue cases as NAB has been used and influenced by different governments for victimisation.
Present courts have no expertise in dealing with business disputes as happened in the case of Mashal LNG project where the apex court asked the Ministry of Petroleum and Natural Resources to take it up for reconsideration before the Economic Coordination Committee (ECC) of the cabinet.
In a case relating to a scam in the Oil and Gas Regulatory Authority (Ogra), NAB was coming up with different stories as initially it claimed a Rs82-billion scandal in the decision on increasing the unaccounted-for-gas (UFG) ceiling from 5% to 7%.
However, in a fresh reference, it said the size of the scam was Rs26 billion, leading people to raise questions over the probe conducted by the bureau.
It also filed two different investigation reports which were challenged in court. In the first report, which took two and a half years, there was no allegation on a big brokerage house. However, in the second report which took only a few days, its name was included while some big names were removed. This came despite the fact that the Securities and Exchange Commission of Pakistan ruled out in May 2013 any insider trading by stock brokers in shares of gas companies and a report in this regard was presented to the policy board. However, the report was later dumped.
Investor concerns
Some major foreign investors like the US and UK also questioned the legal system in Pakistan, in particular they objected to court cases against foreign firms in the Mashal LNG project. In their view, things like these send bad signals to foreign investors.
Officials say the US authorities took up the Mashal case with the Pakistan government and asked it to come up with sustainable policies in order to protect the interest of investors.
With the Mashal episode in investors’ minds, the previous government conducted roadshows in an effort to attract investors to bid for hydrocarbon exploration licences, but no new foreign company expressed interest in the auction of exploration blocks held in March 2013.
International donors are also concerned about court cases. Top officials of the Asian Development Bank once told journalists that they were against the setting up of rental power plants, but the government should have honoured the agreements once they were made with the investors.
The investors are already shy of making investment in the country over law and order concerns and to encourage them the government should dissolve NAB, strengthen the auditor general and establish audit or corporate courts.
Published in The Express Tribune, July 28th, 2014.
Foreign investors, discouraged by sometimes unnecessary litigation, are gradually losing interest in Pakistan, putting future capital flows into the country at stake. To avert the trend and woo investors, the government needs to mull over establishing audit or corporate courts in order to swiftly address the issues faced by local and foreign companies.
Many international oil and gas companies have pulled out by winding up their operation in the wake of dispute with the government over different issues. Most of them are fighting tax cases in courts.
The country has lost an opportunity to bring cheaper liquefied natural gas (LNG) supplies at $11 per million British thermal units (mmbtu) under the Mashal project while in copper and gold mining Tethyan Copper Company (TCC) has approached an international court.
In the area of liquefied petroleum gas (LPG), Progas filed a case in the international court, claiming damages of $500 million and blaming its losses on a shift in government’s policy.
In this scenario, experts suggest the government should dissolve the National Accountability Bureau (NAB) and strengthen the Auditor General of Pakistan in matters pertaining to investigation into business deals. The time is ripe to set up audit and banking courts so that the auditor general could pursue cases as NAB has been used and influenced by different governments for victimisation.
Present courts have no expertise in dealing with business disputes as happened in the case of Mashal LNG project where the apex court asked the Ministry of Petroleum and Natural Resources to take it up for reconsideration before the Economic Coordination Committee (ECC) of the cabinet.
In a case relating to a scam in the Oil and Gas Regulatory Authority (Ogra), NAB was coming up with different stories as initially it claimed a Rs82-billion scandal in the decision on increasing the unaccounted-for-gas (UFG) ceiling from 5% to 7%.
However, in a fresh reference, it said the size of the scam was Rs26 billion, leading people to raise questions over the probe conducted by the bureau.
It also filed two different investigation reports which were challenged in court. In the first report, which took two and a half years, there was no allegation on a big brokerage house. However, in the second report which took only a few days, its name was included while some big names were removed. This came despite the fact that the Securities and Exchange Commission of Pakistan ruled out in May 2013 any insider trading by stock brokers in shares of gas companies and a report in this regard was presented to the policy board. However, the report was later dumped.
Investor concerns
Some major foreign investors like the US and UK also questioned the legal system in Pakistan, in particular they objected to court cases against foreign firms in the Mashal LNG project. In their view, things like these send bad signals to foreign investors.
Officials say the US authorities took up the Mashal case with the Pakistan government and asked it to come up with sustainable policies in order to protect the interest of investors.
With the Mashal episode in investors’ minds, the previous government conducted roadshows in an effort to attract investors to bid for hydrocarbon exploration licences, but no new foreign company expressed interest in the auction of exploration blocks held in March 2013.
International donors are also concerned about court cases. Top officials of the Asian Development Bank once told journalists that they were against the setting up of rental power plants, but the government should have honoured the agreements once they were made with the investors.
The investors are already shy of making investment in the country over law and order concerns and to encourage them the government should dissolve NAB, strengthen the auditor general and establish audit or corporate courts.
Published in The Express Tribune, July 28th, 2014.