Prosperity or peril?

Wealth that should uplift nations can become a curse and mineral wealth without transparency and accountability can be a ‘game wrecker’.

The Extractive Industries Transparency Initiative (EITI) offers Pakistan a way forward to achieve the potential of its mineral wealth.

Pakistan's mining and energy sectors lack transparency. Contracts are not openly awarded or publicly disclosed, together with the revenues generated. Yet such transparency is crucial so that provinces, and especially local communities in Balochistan and Khyber Pakhtunkhwa (KP) receive a fair share of the revenues generated. The Reko Diq case, which resulted in a substantial arbitral award costing the nation billions, exemplifies the risks associated with unregulated discretion in resource governance.

Secrecy not only fosters corruption but also deters investment. Credible mining companies avoid countries where agreements are unreliable and revenue flows lack transparency. It is often overlooked that transparent legal frameworks give investors protection against corrupt officials and politicians.

The EITI is a global gold standard for transparency in oil, gas and mining. By joining, Pakistan would commit to publishing all payments between extractive companies and the government, disclosing contracts and allowing independent oversight of revenue flows. Apart from accountability, the EITI helps build trust, both with investors and with Pakistan’s own citizens.

EITI adoption has shown proven benefits: Nigeria identified over $6 billion in uncollected revenues, Mongolia attracted $13 billion in mining investment, and foreign direct investment rose by 50 per cent in countries implementing the EITI, as joining EITI signals a commitment to economic reform.

Pakistan could achieve similar outcomes by implementing transparent tracking of mineral revenues. Public audits of projects would ensure an equitable distribution and prevent legal disputes. Standardised protocols for international investors, supported by modern blockchain technology for the disclosure of vital data, would minimise leakages and enhance public confidence by ensuring fair resource allocation.

Resistance will come from those benefiting from opacity – bureaucrats, politicians and corporations that prefer secretive negotiations. They will argue that EITI is unnecessary, burdensome, or even a threat to national sovereignty.

The claim that the EITI is ‘too difficult’ to implement is baseless. Countries with fewer resources, like Afghanistan before its collapse, have successfully adopted the EITI with technical assistance. Similarly, far from threatening sovereignty, transparency strengthens it by combating instability, underinvestment and recurring crises caused by opacity.

EITI implementation in Pakistan requires a structured approach, beginning with a formal application that typically takes less than a year. The next step involves establishing a multi-stakeholder group, including government representatives, industry participants and civil society organisations, to oversee implementation and ensure that all relevant perspectives are considered.

The disclosure process should begin with major projects like Reko Diq, providing detailed information about extraction volumes, revenues generated, and taxes and royalties paid. This information should be published regularly in accessible formats allowing public scrutiny and analysis.

EITI adoption benefits would be immediate and long-term. Pakistan's creditworthiness would improve as international lenders view EITI compliance as evidence of fiscal responsibility. The IMF and World Bank should integrate extractive sector transparency requirements into their arrangements to reinforce these positive incentives. It is perplexing that they have not done so.

Pakistan’s estimated $6-8 trillion mineral wealth could transform the economy, fund essential services and create jobs, yet corruption and inefficiency keep these resources untapped or mismanaged. EITI adoption is critical to break this cycle and foster trust, transparency and efficient resource management. Immediate action is necessary to avoid further revenue losses, investor scepticism and local grievances.

Pending federal EITI membership, provincial legislatures in Balochistan and KP retain the authority to incorporate EITI principles into provincial legislation. The KP Assembly could integrate these standards into legislation currently under consideration, while the Balochistan Assembly has the capacity to amend recently enacted legislation passed under questionable circumstances.

The federal government must play its role in this transformation and should be seen as part of the solution rather than the problem. Pakistan’s resources should serve its people, not its corrupt elites. Joining the EITI is the way to make that happen.

The writer is a senior adviser, Safer Communities Foundation and senior partner at the law firm Samdani Qureshi Aqlaal. He has held senior positions at the Asian Development Bank.