Pakistan shares FTA draft with GCC to pave way for Reko Diq accord

ISLAMABAD: Saudi Arabia is likely to finalise a multibillion-dollar procurement of stakes in Reko Diq and investment in other projects after the signing of Free Trade Agreement (FTA) by the Gulf Cooperation Council (GCC).

The caretaker government had ratified the draft of FTA, including the Bilateral Investment Treaty (BIT), and shared it with the Gulf Cooperation Council (GCC) for signing. Top official sources in the Special Investment Facilitation Council (SIFC) confirmed to The News on Thursday that there were some positive developments on the sale of stakes in Reko Diq but still many steps were required to be undertaken to materialize such important G2G (government to government) deals with Saudi Arabia.

For instance, Barrick Gold is willing to involve Saudi Arabia in Reko Diq but how it will be done is yet to be worked out. Initially, they were reluctant to sell out their shares but the Pakistani side made it clear to them that both the parties will have to move in tandem by selling their stakes equally. The consultant hired for this transaction has submitted its report, so Pakistan and Saudi Arabia are negotiating different models to find out a win-win situation for all the parties concerned. “Pakistan desires the Saudi involvement without turning into a minority shareholder. So, it is our desire that both Pakistan and Barrick Gold equally offload their shares in order to keep the management control in their hands,” said an official.

During the negotiation process, Saudi Arabia might be offered 10 to 30 percent shares depending on the price of negotiated deal out of which both Pakistan and Barrick Gold will offer equal shares, said the official adding that if a maximum 30 percent shares were offered to Saudi Arabia, then Pakistan and Barrick Gold could hold 35 percent shares each, having the management control rights.

The signing of the FTA with the GCC will play a critical role because BIT is one of its components under which Islamabad had provided the right of international arbitration. “The federal cabinet during the tenure of the caretaker regime had approved and ratified the FTA and BIT with the GCC and now awaits their ratification for signing it,” said the official adding that Chief of Army Staff General Syed Asim Munir had recently visited Saudi Arabia and then a Saudi minister also visited Pakistan, so exchanges of such high-level interactions helped push these multibillion-dollar investments.

Now PM Shehbaz Sharif or the Saudi Crown Prince Muhammad Ben Salman might visit each other’s country in the coming months to speed up the finalization of Reko Diq and other projects. Under the ratification of FTA and part of it in the shape of BIT, Pakistan accepted demands for allowing to approach the Permanent Court of Arbitration (PCA) or International Centre for Settlement of Investment Disputes (ICSID) in case of any disputes on multibillion-dollar investment projects.

Saudi Arabia has been negotiating the finalisation of the term sheet and valuation. The Manara Minerals Investment Company is a new venture between the Saudi Arabian Mining Company (Ma’aden) and the Public Investment Fund (PIF) to invest in mining assets globally and support the development of resilient global supply chains. The Reko Diq Mining Company (RMDC) has been assigned to hire levies and payment mechanisms defined for Balochistan.

Pakistan has negotiated to include a graduated approach for the settlement of investment disputes between the state and investors. Through this arrangement, there will be a mandatory period of eight months to get the dispute resolved at the domestic forums. In the case of non-resolution of disputes, it was agreed that recourse could be made to PCA or ICSID as international forums of arbitration.

The investment chapter can be annexed with the FTA to be signed with the GCC countries, including the process of investor and state dispute settlement through the ICSID as agreed with Saudi Arabia and Qatar, which was also shared with the GCC Secretariat. The GCC side also said that the legally cleansed draft will be shared with the Pakistani side in due course of time.