The Reko Diq case

The cancellation of the privatisation of the Pakistan Steel Mills and voiding of the Reko Diq mine contract between the government of Balochistan and the Tethyan Copper Company has proven to be counterproductive to our economy. The PSM was being sold for Rs21 billion in 2005 which at the time seemed a very low price to the CJ of the time who cancelled the privatisation of the mill. Since then, Pakistan Steel has suffered a loss of Rs100 billion and is presently not in production. If the privatisation had gone through, the party to whom it was being sold would have gotten it running and it would have grown and created more jobs. This would have also encouraged others to come forward and buy other state-owned enterprises. Instead the people of Pakistan are burdened with Rs500 billion per year of losses incurred by SOEs. If the Reko Diq mine contract had not be voided by the then chief justice, today it would have been in production and the people of Balochistan, as well as Pakistan as a whole would have benefited from jobs and our share of the profit.

If our share of the profits was not equivalent to projects of similar nature in other parts of the world, the authorities could have revised the terms and conditions of future contracts with mining companies that would have come to Pakistan seeing the Reko Diq mine in production. One of the lessons learnt here should be that huge projects, especially those located in isolated areas, should have more than one party negotiating with the mining company. If the chairman of the Tethyan Copper Company has shown a willingness to negotiate, we should agree to manageable terms without delay. I am sure the TCC would be willing to give up something in view of the greater profit they would make in the long term. We should try not to make the same mistake twice.

Syed H El-Edroos

Islamabad