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Authorities in Quetta, and might be in Islamabad, must be scrambling now-a-day to arrange millions of dollars to pay in penalty for dishonoring a deal about a project that was supposed to raise billions of dollars for the country.
An arbitration tribunal of the World Bank’s International Center for Settlement of Investment Disputes (ICSID) this month rejected Pakistan’s case for denying mining license to the Tethyan Copper Company Limited (TCC) for exploiting Reko Diq gold and copper mine in Baluchistan.
The Tethyan Copper Company Limited (TCC), a joint venture between Antofagasta of Chile and Canada’s Barrick, had filed an arbitration claim with the ICSID after Supreme Court in 2013 scrapped the Reko Diq deal.
The three-judge bench led by then chief justice Iftikhar Chaudhry ruled the agreement “invalid” on the grounds that it ran counter to the mineral and development laws and mining concession rules of the country.
The entire Reko Diq saga smacks of mismanagement and incompetence of Pakistani authorities to handle a highly significant project that could have changed the fate of the poverty-stricken Baluchistan.
“Everyone messed up this project – be it government, politicians, bureaucracy, media or others,” said an official, who was involved with the project before it was shelved.
Reko Diq lying at the foot of an extinct volcano in Chagai desert of Baluchistan is estimated to hold an estimated 5.9 billion tons of minerals of fabulous quality with an average copper grade of 0.41 percent and an average gold of 0.22 grams per ton. According to experts, Reko Diq deposits are fifth largest deposits of gold and copper in the world.
If exploited properly, the project is estimated to yield revenues of at least $60 billion in a span of nearly 60 years.
The Baluchistan government had first signed the exploration contract, Chagai Hills Exploration Joint Venture Agreement (CHEJVA), with Australia’s BHP Billion in 1993.
Fingers were pointed out at the time over many lacunas in the deal but those were largely ignored and generous concessions were given to BHP to let it start work at the project.
A deed of waiver and consent was signed between the provincial government and the BHP in 2000 under which a joint venture was set up that envisaged 75 percent interests for BHP and the remaining 25 percent for Baluchistan. The Australian Mincor Resources bought out BHP stakes the same year.
In 2006, TCC, a subsidiary of Mincor Resources, took over all rights and obligations of BHP under CHEJVA.
It is strange that the project has changed many hands since its inception but there has hardly been any objection from the Baluchistan government.
The authorities should have sought renegotiation of the deal and sought more favors for it when was transferred from one company to another but no such effort was made.
After losing a golden opportunity to seek a more favorable deal, the Baluchistan government tried to scrap the deal by denying mining license to the TTC.
“Everywhere in the world, the company that carries out exploration also gets the mining license but it is strange that they were refusing to issue that license to the TTC,” the official said.
The official said the TTC successfully pleaded this point in its case with the arbitration court and won the case.
The mishandling of the Reko Diq case not only resulted in the loss of millions of dollars to the national kitty but has also shattered confidence of foreign investors in Pakistan.
Moreover, it also exposed lack of capacity and expertise by Pakistan to exploit such major projects on its own.
The Baluchistan government officials made tall claims of exploiting those minerals by using local expertise. A steering committee led by nuclear scientist Dr. Samar Mobarakmand was set up to run the project but unfortunately nothing has happened so far.
“Basically, they don’t have any clue how to run this project,” the official added.
The official said had Pakistani authorities had handled this project properly it would have fetched largest foreign investment in Pakistan in the mining sector.
Industry officials cite the example of Chile which opened up its mining sector to the foreign investors nearly 25 years ago and it is now one of the biggest exporters of copper in the world.
They say some security issues might be involved in the project in view of the geo-strategic location of Baluchistan but these concerns should have been adequately and timely addressed at the time of leasing it out to a foreign firm.
After arbitration court’s adverse decision, the Baluchistan government is seeking an out of court settlement with the TCC.
Though the media reports suggest that TTC has invested $400 to $450 million in exploration process, Baluchistan government spokesman Jan Achakzai says the actual amount is around $200 to $220 million.
Speaking to the students of Cadet College, Mastung, on a tour to Lahore, Punjab Chief Minister Shahbaz Sharif said those responsible for the Reko Diqo fiasco must be brought to book.
But how these people will be pinned down and how they will be made accountable for their mischief is anybody’s guess.
If Reko Diq and other mega projects are properly executed, the people of Baluchistan are genuinely involved in the execution of these projects and given their due share, they would go a long way in mitigating the sense of deprivation in Pakistan’s resource-rich but financially bankrupt province.
“Reko Diq is a definitely a big asset for Pakistan and for Baluchistan. The people of Baluchistan have the first right (to benefit from Reko Diq) for it is situation there. Many years have passed but it is unfortunate that now we fear that we may have to pay a big amount of money in penalty,” Shahbaz Sharif said. “But it has become victim of incompetence, corruption and greed….those responsible this crime must be held accountable.”
Time is ripe for the political and military leadership of Pakistan to put their heads together and genuinely address the concerns of people of Baluchistan to end their sense of alienation.
The writer is a senior journalist based in Islamabad
