On Sunday, the government added a massive achievement to its scorecard as it was announced that a breakthrough was made in the long-standing Reko Diq case. The federal and Balochistan governments and two international firms—Antofagasta PLC and Barrick Gold Corporation—have reached an agreement in principle on a framework to reconstitute the Reko Diq project, and a pathway for Antofagasta to exit the project. This news comes as a great relief considering that Pakistan has escaped paying a $11 billion penalty for reneging on the deal.
Successive governments have attempted to resolve the dispute and considering how this dispute has lingered on since 2011 when the Supreme Court struck down the agreement raising questions regarding the legality of the licensing process. Once this agreement clears the legal checks, including approvals from the Cabinet and the Supreme Court, it would be Pakistan’s biggest foreign investment. The government and its legal team should be commended for seeing this through and optimism is abundant given the immense potential of the project.
Reports reveal that about $10 billion will be invested as part of the project, which will create 8,000 new jobs for the locals. The total worth of the project is estimated to be over $100 billion and should reap benefits for the province and its residents for decades to come as it will result in skills development, local procurement, infrastructure upgrades and improved medical and education systems.
Barrick Gold Corporation is expected to initiate an update of the previous feasibility and expansion studies, and once all that is done, the company is hopeful that Reko Diq could be in production within five to six years.
Another positive is the manner in which this deal has worked out, placing Pakistan in a better position than it would have been according to the original plan. It is encouraging to know that Pakistan is seeking to reach a settlement with the Tethyan Copper Company (TCC). TCC and Pakistan would have found it hard to work together again given their history, and it is perhaps for the best that the company will not be involved in the project anymore. In fact, with Antofagasta also seeking an exit from the project, 50 percent of the share will now remain in Pakistan (split equally between the Balochistan government and three SOEs)—under the 2006 deal only 25 percent would have gone to the Balochistan government. This has turned out to be an ideal scenario for Pakistan and it should now seek to ensure that everything goes smoothly. A lesson must also be learnt here when it comes to reneging on deals with foreign companies as we cannot expect to be bailed out every time when the stakes are so high.
Successive governments have attempted to resolve the dispute and considering how this dispute has lingered on since 2011 when the Supreme Court struck down the agreement raising questions regarding the legality of the licensing process. Once this agreement clears the legal checks, including approvals from the Cabinet and the Supreme Court, it would be Pakistan’s biggest foreign investment. The government and its legal team should be commended for seeing this through and optimism is abundant given the immense potential of the project.
Reports reveal that about $10 billion will be invested as part of the project, which will create 8,000 new jobs for the locals. The total worth of the project is estimated to be over $100 billion and should reap benefits for the province and its residents for decades to come as it will result in skills development, local procurement, infrastructure upgrades and improved medical and education systems.
Barrick Gold Corporation is expected to initiate an update of the previous feasibility and expansion studies, and once all that is done, the company is hopeful that Reko Diq could be in production within five to six years.
Another positive is the manner in which this deal has worked out, placing Pakistan in a better position than it would have been according to the original plan. It is encouraging to know that Pakistan is seeking to reach a settlement with the Tethyan Copper Company (TCC). TCC and Pakistan would have found it hard to work together again given their history, and it is perhaps for the best that the company will not be involved in the project anymore. In fact, with Antofagasta also seeking an exit from the project, 50 percent of the share will now remain in Pakistan (split equally between the Balochistan government and three SOEs)—under the 2006 deal only 25 percent would have gone to the Balochistan government. This has turned out to be an ideal scenario for Pakistan and it should now seek to ensure that everything goes smoothly. A lesson must also be learnt here when it comes to reneging on deals with foreign companies as we cannot expect to be bailed out every time when the stakes are so high.
