The non-NFC agenda!

BR Research December 13, 2018

A host of recent media reports say that Balochistan is deeply concerned about its share of CPEC projects. Given the cloud of mystery that looms over the promised and actual CPEC spending across Pakistan, it is difficult to objectively assess whether or not those concerns are valid. Assuming if they are, the burden of blame lies on the previous ruling party – the PML-N. But the burden of fixing that lies on the incumbent – the PTI – that is soon expected to initiate talks on the long pending National Finance Award (NFC).

If the media reports are any guide, Balochistan’s share in the CPEC can be expected to become a part of the NFC meetings. But that’s not likely to be the only non-NFC agenda on the table.

Sources say that the province is also concerned about the provincial share of assets and employment in public sector enterprises (PSE). The argument being that while these PSEs may be loss making white elephants, they do generate at least some level of economic activity even if by way of employee salaries and that the province is deprived of economic activities.

Saindak and a few other mining projects are still a joint venture of the federal government and the mining company; whereas in light of the constitution, the provincial government has the exclusive right to all minerals, save for shared jurisdiction (with federal

government) over crude oil and natural gas, and no jurisdiction over nuclear minerals.

Another issue is going to be the location of corporate headquarters of CPEC related companies. Since the provinces started collecting the GST on services, there has been a row over jurisdictional issues. In the case of insurance, however, it is by and large settled among the provinces that the province from where insurance policy was commissioned would get the GST on services. So for instance, because Pakistan Petroleum Limited is headquartered in Sindh, it is Sindh that collects GST on insurance, even when the oil and gas fields being insured are in Balochistan.

Now consider the fact that the Chinese companies who are mainly operating in Balochistan – including arguably the biggest driver of CPEC, China Overseas Port Holding Company – are headquartered in other provinces. This is understandable given that the desired eco-system does not currently exist in Balochistan. But if some of these firms do not even register with Balochistan revenue authorities, it will have repercussions on provincial finances.

Besides, if these companies don’t ever make Balochistan their corporate headquarters, how do they expect the province to grow? Human capital, corporate services, health care and education for employees’ families and other amenities are mainly driven by the demand created by business. Remember, it was not too long ago when Karachi was merely a fishing town, and Islamabad a sleepy one! To that end, efforts need to be jointly made both by the centre and the province to ensure that further grounds of deprivation in the province don’t take roots.

One of the key reasons behind the success of the 7th NFC award was solving of the long-pending non-NFC issues through wisdom and deal making will of the then finance minister Shaukat Tarin.

The solving of those issues helped clear the air of mistrust among the parties.

The issues enlisted above may prove to be some of the key non-NFC concerns that will need to be addressed towards successfully passing a new award.

Copyright Business Recorder, 2018

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