EDITORIAL: The two-day Pakistan Minerals Investment Forum attracted foreign as well as local investors with Prime Minister Shahbaz Sharif focusing on easing their legitimate economic concerns and the Chief of Army Staff (COAS) Gen. Asif Munir easing their legitimate security concerns.
The Prime Minister correctly pointed out to the massive mineral resources that exist in Balochistan and the COAS pledged robust security framework as well as proactive measures to safeguard the interests and confidence of investors – local and foreign.
The number of Memoranda of Understanding (MoUs) signed on the first day of the conference was reported though the exact amount of envisaged investment was not released
Reko Diq, known to be one of the largest untapped copper-gold reserves in the world, was singled out by the Prime Minister as a success and he praised Mark Bristow, President and Chief Executive Officer of Barrick Gold, for re-energizing the stalled project.
In this context, it is relevant to note that the contractually agreed ownership of Reko Diq was behind a flurry of litigation/opposition and the reason behind the project’s inordinately delayed implementation.
Today, the ownership as agreed is as follows: 50 percent by Barrick, 25 percent by three federal state-owned enterprises, 25 percent by the Government of Balochistan of which 15 percent is on a fully funded basis and 10 percent is on a free carried basis.
The mining company, on its website, acknowledges that “the reconstitution of the Reko Diq project was completed in December 2022 – a key step in progressing the development of Reko Diq into a world-class, long-life mine which would substantially expand Barrick’s strategically significant copper portfolio and benefit its Pakistani stakeholders for generations to come.”
The time-line indicates that several administrations failed to resolve issues pertaining to this key mineral project, issues ranging from legal, political as well as provincial versus federation challenges, and their resolution was a matter of priority for the past four to five years – a priority that culminated in the 2022 deal.
The lesson learned is obvious: administrations must proactively continue to implement projects undertaken by previous administrations in the national interest and ensure seamless transition of one administration with the next by ensuring implementation of agreed non-negotiable contracts.
In Pakistan, however, it bears considering that many contracts are signed without due process and without due diligence by the relevant ministry, which accounts for the proliferation of litigation in domestic courts with the aggrieved foreign investor compelled to take the matter to the international arbitration where Pakistan has lost many a case that cost the country hundreds of millions of dollars.
It is therefore critical that any deal extended to any investor, local or foreign, must be carefully vetted by a team of competent officials aware of all relevant provincial concerns as well as lawyers proficient in this aspect of the law.
It is important to note that there exists evidence that the country’s economy has yet to pick up with a stalled growth rate that is compromising its capacity to meet the revenue targets agreed with the International Monetary Fund (IMF) – a 703 billion-rupee shortfall in revenue has been acknowledged by the Federal Board of Revenue (FBR) for the first eight months of the year – an outcome of the severely contractionary monetary and fiscal policies in place as part of the ongoing IMF programme.
The element of existing foreign investors in the country being unable to repatriate their profits as contractually agreed, given that the rise in the foreign exchange reserves totals about as much as the agreed rollovers with the three friendly countries, has also been reported widely.
True that the first staff level agreement has been reached with the IMF yet reports indicate that the government has pledged to the Fund team higher existing taxes in the budget for next year, largely indirect taxes whose incidence on the poor is greater than on the rich, which would further contract the growth rate.
True that the discount rate has been halved since April last year and inflation is negligible but the discount rate even today is double that of our regional competitors and the benefit of low inflation has not improved the quality of life simply because incomes have remained static since 2020, except for the 7 percent of the total employed by the state whose salaries are paid by the taxpayers, which accounts for disturbingly high 44 percent poverty levels in the country today.
Last but not least, with terror attacks on the rise due to the recalcitrant Afghan Taliban coupled with serious law and order issues in Balochistan and the slow pace of economic structural reforms are factors that may impede the translation of the MoUs to contractually binding agreements.
One would hope that pledges be accompanied by a change in the ground realities that would play the key role in fueling foreign investment not only in the mineral sector but also in other sectors.
Copyright Business Recorder, 2025
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