he project for exploration of gold and copper deposits in Reko Diq, Balochistan, has turned a new leaf. The parliament has enacted a new law giving the control of the revived Reko Diq contract and other foreign investments to the federal government. Groups concerned about provincial autonomy, including some represented in the government coalition, have objected to this development.

Progress on the Reko Diq project has been at a standstill since 2011. After an international arbitration court ordered Pakistan to pay an $11 billion penalty to the investing companies, the government of Pakistan, then led by Pakistan Tehreek-i-Insaf, renegotiate the deal. The matter was then referred to the Supreme Court. The SC cleared the new deal last week. This was followed by the hurried legislation.

The original agreement for the Reko Diq mining project was signed in 2006. It gave 37.5 percent of the income each to Canada’s Barrick Gold and Chile’s Antofagasta and the remaining 25 percent to Balochistan government. Halting the work in 2011, the Supreme Court of Pakistan had declared the agreement void. The investing companies had then sought international arbitration and in 2019, a World Bank arbitration tribunal had imposed the penalty on Pakistan for unlawful denial of mining rights.

In March 2022, the government of Pakistan revived the project and entered a new deal. The new agreement spared Pakistan the penalty liability and allowed Antofagasta an exit. Under the new deal, Barrick Gold is a 50 percent partner in the project with the governments of Pakistan and Balochistan and three state-owned entities. The Chilean firm is to receive $900 million from the Pakistani shareholders. Pakistan will also have to pay $100 million to the other complainant. Barrick and its partners will invest the remaining $10 billion in the project. The government of Balochistan has a 25pc stake in the project. The remaining 25pc shares are controlled equally (8.33 percent each) by three state-owned enterprises.

Importantly, under the law, eligible investors may be allowed commercial secrecy and exempted from many duties.

Following the no objection ruling by the Supreme Court, the parliament last week passed the Foreign Investment (Protection and Promotion) Bill 2022. The new law aims to protect investors from unnecessary court proceedings and other hiccups. Under the law, the federal government will also notify additional investments, sectors, industries and projects as eligible investments and protect them accordingly. Importantly, under the law, the eligible investors may be allowed commercial secrecy and exempted from many duties.

The statement of objectives says that the law will promote and protect “certain qualified foreign investments and for matters incidental thereto… is expedient and in the national interest” to attract, encourage and protect, large-scale foreign investments into Pakistan. It states the investment climate in Pakistan needs to be improved through incentives like tax breaks and facilitated transfer and repatriation of foreign investments to promote sustainable economic growth.

The government has claimed that it was very important for the country to pass the law before December 15. Else, there would be a $4 million per day interest payment on the $5.9 billion penalty imposed by the International Centre for Settlement of Investment Disputes (ICSID).

According to the statement of objectives, Pakistan is taking action to attract, encourage and protect large-scale foreign investment, in order to improve the country’s investment climate and ensure a sustainable economy. As part of this effort, the government is offering incentives in the form of direct and indirect taxes and facilitating the transfer and repatriation of foreign investments to large-scale investors. These incentives will be protected from withdrawal, ensuring that foreign investors can continue to benefit from them.

The Balochistan National Party-Mengal and some members of Balochistan Awami Party have criticised the new legislation and publicly opposed it. They have said that there was no proper deliberations and debate on the law in the parliament and that it was passed without taking all the stakeholders into confidence. The BNP-M has since called a party meeting to reconsider its support for the government. Sardar Akhtar Mengal has argued that the law will deprive Balochistan and its people of their rights. He warned that the law being passed in a hurry will prove harmful for the country.

Balochistan, the largest province in terms of area and a resource-rich region, borders Iran and Afghanistan and has been a proxy-war zone for many years.

The writer is a staff reporter. He can be reached at vaqargillani@gmail.com