Pakistan’s credibility at stake after scrapping business deals

Pakistan has lost credibility in the eyes of many international investors following its failure to honour business deals with some multinational companies.

Some of the deals, like that for Reko Diq copper and gold mining project, were struck during the tenure of Pervez Musharraf’s government and some during the rule of Pakistan Peoples Party (PPP)-led government. These agreements were revoked on the grounds of alleged involvement of omission and commission as well as kickbacks. These cases were also taken up by the National Accountability Bureau (NAB) and the apex court.

However, many disgruntled investors went to the international court to seek damages where Pakistan lost several cases. The new elected government of Pakistan Tehreek-e-Insaf (PTI) is facing an uphill task as it needs to devise ways on how to avert payment of millions of dollars in damages.

Apart from these, new Petroleum Minister Ghulam Sarwar Khan announced at a recent press conference that the PTI administration would examine all contracts awarded by the previous Pakistan Muslim League-Nawaz (PML-N) government including a 15-year liquefied natural gas (LNG) supply deal with Qatar. He vowed to make all of them public on official website of the petroleum ministry.

The PML-N government struck two major multibillion-dollar agreements which included the LNG contract and China-Pakistan Economic Corridor (CPEC) projects. These deals were reached under a government-to-government arrangement without going into the bidding process.

However, many allege Pakistan is compelled to pay higher prices under the two agreements.

The petroleum minister indicated that these projects could be taken to NAB after their examination by the ministry. Will the government scrap the projects in which some kind of omission and commission is found is a big question. If it does, then Pakistan may face more cases in the international court. During the 2008-13 tenure of PPP government, Pakistan signed the Mashal LNG contract, but it landed in the apex court and was later abandoned.

French firm GDF was the designated LNG supplier and reports emerged later that the company sold the LNG allocated for Pakistan to some other consumer at a price that was higher by $2 per million British thermal units (mmbtu).

Flaws

In the LNG deal with Qatar, according to some officials, the PML-N government ignored an SRO. According to that order, the government needs to declare emergency in the country for signing a state-to-state deal with any other country. However, there was no emergency situation at that time. The order also contained a necessity clause. Apart from these, Pakistan LNG Limited (PLL) secured LNG contracts at low prices by inviting tenders.