| ISLAMABAD:
We are hearing a lot nowadays about the potential investment of $100 billion in Pakistan. A dedicated parliamentary act was instituted on August 4, 2023 vide which the Special Investment Facilitation Council (SIFC) has also been constituted.
Although investment proposals are yet to become public in addition to details of the associated execution framework, however, vide this article, I have still attempted to identify a few major areas, which need immediate attention to make the initiative successful.
For instance, the investment would need world-class contractors and project managers and above all experienced corporate leaders capable of leading such ambitious investment programmes. Balance sheets of the ever-sinking PSEs sufficiently highlight that this role cannot be assigned to bureaucrats.
Similarly, the investment can also entail contractual disputes requiring expeditious resolutions. Our associated history regarding Reko Diq, Karkey, Hubco, Tuwairqi Steel Mills, etc speaks volumes.
Even trivial contractual disputes take ages in our courts. This reminds me of an energy project, hardly a few months away from completion, which is stalled due to similar factors since long.
Historical background
Experience has proven that nothing else except our institutional capacity gaps have hampered investment so far. This includes our failure in building upon past achievements. Eg; OGDCL and PSM could help forge a long-term relationship with Russia, but they did not.
Of course, we are to blame; otherwise, they still keep on trying. During the visit of their foreign minister in 2012, a number of investment-related MoUs were signed, followed by one with Gazprom in 2017 for an investment of $4 billion and then another in 2018 for a 1,500km offshore gas pipeline.
Recently in December 2019, their trade minister visited us with a delegation of 64 businessmen and corporate leaders.
The failure of IP pipeline, signed in 2012 for gas imports from Iran, is another example. We keep on blaming US sanctions for its delay, however, we never attempted to engage the US in this regard. If India could get an exemption for Chabahar Port, then we could also at least try.
We all know that a major initiative was made in 2019 by the Saudis when MBS visited us and signed MoUs of $20 billion. The visit was followed in September 2019 by a delegation of 19 senior corporate leaders and professionals.
However, they were met by negligible homework and hollow sloganeering about the common religious bond by those in the lead from our side. Even a question from their side about site selection for the much talked about $10 billion refinery elicited only a hazy and evasive response, reflecting our poor preparedness. No wonder that the Saudis never came back.
Tuwairqi Steel beats them all. It’s an asset developed by a foreign investor on our soil with an investment of $350 million, who intended to invest $0.9 billion more in the second phase.
However, over a frivolous issue of gas pricing, whose resolution needs a problem-solving approach and required commercial knowhow, the mill is shut since long. This is despite the fact that the mill is a viable potential customer for the indigenous iron ore too.
Any other country would have bent over backwards to accommodate the venture owned by Tuwairqi and Posco, the Korean steel giant.
Similarly, we used to have several foreign E&P companies in Pakistan till the mid-2000s. Taking their advantage, we could forge mutual strategic synergies and secure hydrocarbon reserves abroad. However, we failed to add any reserves to the pertaining inventory through that source.
Human capital
As to the required human capital, a number of developing countries in such situations have utilised their diaspora in the developed world, especially for leadership positions. In our case, the lethal and deep-rooted nexus of cronyism, incompetence and corruption has given birth to well-entrenched vested interests in the public sector.
This hydra-headed monster mostly succeeds in creating an example of any upright professional if he, despite all of their antics, still assumes a critical management position and refuses to do their bidding. The tool frequently used is maligning the professional’s reputation and making him controversial by initiating FIA and NAB cases against them.
This is achieved by creating dummies and decoys, who lodge concocted complaints supported with fabricated evidence whose nullification takes years in our legal system, thereby making many of the most honourable professionals going through horrible experiences including incarceration.
Of course, the capacity gaps of the concerned agencies come handy to the monster in all such cases. I am aware of a similar case in which an ex-CEO is facing criminal charges. He awarded a project to the lowest bidder at a price less than half of a similar project awarded before him.
Fearing that the completion of the project he awarded would raise questions about the previous one, it was terminated, when his tenure was over, followed by embroiling him in the above case while using an absolutely absurd premise.
The SIFC Act
Although the act is aimed at cutting down the red tape, however, after going through its contents I understand that the pertaining delivery structure needs further clarity. If ignored, then the same rotten system of bureaucracy may emerge at the driving helm, thereby jeopardising the entire purpose of the initiative.
The latest World Bank report titled “Pakistan Federal Public Expenditure Review 2023”, talking about the public sector which is operated by our bureaucracy, states “Pakistan’s federal SOEs have been found to be the least profitable in the South Asia region”.
It further says that “… the federal government has been incurring losses on its investment in SOEs since 2016. The annual aggregate loss has averaged 0.5% of gross domestic product (GDP) annually…”. This should be sufficient to compel us to avoid repeating the same mistake again.
What is to be done
In view of the above analysis, the authorities may consider undertaking the following steps; 1) Launch a campaign of attracting required professionals in the Pakistani diaspora in the developed world for leadership positions; provided we are prepared to shield them from the shenanigans of the vested interests; 2) All import substitution opportunities or those which can fetch foreign exchange and which are currently stalled, though can be completed and realised in a short period, need to be pursued on priority; 3) Marshall Plan was able to cause so much difference because it was led by corporate leaders and entrepreneurs. Therefore, professionals need to be given due primacy; 4) Create dispute resolution institutions, such as Procurement Ombudsman, tribunals and courts, for expeditiously resolving contractual disputes.
Hence, the opportunity can only prove to be a turning point for our economy if we are prepared to correct our path in the light of our past experiences.
The writer is a petroleum engineer and an oil and gas management professional
Published in The Express Tribune, September 18th, 2023. |
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