Development Pakistan

Is there any taker of Land Reforms any more? By Akhtar Ali(akhtarali1949@gmail.com) Elections are approaching and political parties are preparing their manifestoes. All are unanimous that people got a raw deal both under dictatorship and democracy. Some leaders argue that corruption is the central issue which if solved would automatically improve the lot of the poor. This may be true but only partly .Some argues that more democracy and unthrottled democracy would, in the long run, eliminate poverty, as happened in the West. While this may be true, democratic societies are also doing some soul searching whether democracy has performed efficiently towards maximizing people’s welfare. There are strong anti-capitalist under currents bringing forth movements like Occupy the Stock-Exchanges .Democracy and a corruption free administration would certainly improve the lot of the poor in the long run. More than one-third of Pakistan’s populace is abject poor and the rest are only slightly better except for a tiny minority. The task of ameliorating if not eliminating poverty is too big. Trickling down effect may take too long, a time span that will endanger the integrity and solidarity of this country. What to do. There is worldwide recession. Economy has performed awfully badly for both domestic and international reasons. There is a misplaced even dangerous perception that things work out themselves and that no major initiatives are necessary, as has been the case with most military dictatorships. The entire cushion, unfortunately, has been eaten up. In our region, our adversary has been progressing faster than ever before. Economic disparity between India and Pakistan cannot be sustained for along time and would lead to the same kind of fissure that led to the dissolution of the Soviet system ; disparity and failure in economic and social performance .We will have to apply some direct tools and policy initiatives to improve the lot of the poor. But the government does not have money; it does have resources and the only transferable resource is Land. We will see in this space as to what can be done in this respect. There is a general thinking that the days of Land redistribution or reforms are over. It is outmoded or out of tune with times. Land redistribution leads to fragmentation which results in lower agricultural productivity. And that land redistribution may result in loss of agricultural production because the poor would not have the working capital to buy the inputs. Many religious scholars have also opposed land redistribution arguing that Islam respects private property. It is also true that most of these arguments have roots in the opposition to Communist ideology in the days of Cold war. There are equally convincing arguments to the contrary ;the Land belongs to Allah; private property rights only pertain to the cultivated land ;land gifted by infidel colonialists to their supporters has no moral or religious sanction or support ;hunger and poverty are enemies of Islam and Allah; feeding the hungry is the state’s responsibility in Islam; smaller tracts in Pakistan are more productive than the large tracts ;mechanization is easy, cheap and readily available even to the small farmer in the form of rentals; large tract s of lands leads to feudalism which militates against liberty, freedom and development and conspires with the forces of status-quo and militarism as has been demonstrated by the history of Japan and even here in Pakistan. And the biggest falsehood is that all land has been distributed under previous land reforms and there is nothing more left; all farms ownerships are less than 500 acres. It has been acknowledged that there are hundreds if not thousands of landlords who own tens of thousands of acres of land, violating the existing relevant laws. The biggest argument against the land reform is ; who will bell the cat ? The situation on ground is that the landlords are not prepared to even pay income tax on their huge incomes; and the majority of civil and military elite is feudal. Military middle classes are transformed into landed elites through awards and rewards and many other routes. It is argued that one has to either wait for a near catastrophe of the dimensions of 16th December 1971 and the emergence of a Marde-Khuda. Marde Khuda came in 1971, but he conspired with the feudal and launched an anti-industrialist agenda and even strengthened feudalism. And then several Mard or Namarde Khuda came in the form of military dictatorships who probably had the power and wherewithal l to take some drastic land reforms programme, but acted to the contrary finding ready friends among the land lords. However, short of catastrophe and civil war, and without the Marde-Khuda , there are some solutions that we are going to take up in the following. Among political parties, MQM does have anti-feudal agenda, but lacks a land reform commitment and suffers from narrow geographical support. It is possible that in future a political coalition may emerge that may be ready to act on some kind of land reforms programme and taxing the large agricultural incomes. Agriculture and Poverty Agriculture has a share of 26% in Pakistan’s GDP and employs % of the work-force. The sector has a potential of growing at rate of 5% p.a., as it did in 1960s earlier. Low growth rates in the economy in general and in agriculture has significantly contributed to poverty and unemployment. Poverty in Pakistan, as measured in 2007-08, was at 26%, which should have increased in the wake of floods and the economic crisis, and has reportedly returned to the previous high levels of 33-38 % of 2001-2002. Rural poverty has always been high in Pakistan at 40% plus. A major reason for it has been the landlessness and low employment. A good 10.36 % of the rural house-holds are landless peasants and another 57% (35.1 % of total population) are under-employed and under-paid non-farm laborers. Both of these groups could benefit from higher agricultural growth rates, land reforms and land redistribution. Higher growth rates would create employment in farm and non-farm sector and would increase wages and incomes. Both growth and equity policies can be mutually reinforcing. Our argument is that the Livestock sector in Pakistan has a contribution of 47 % in the agricultural output, which has been mostly contributed by small holders or the landless, having 2-5 Buffaloes. If 1-1.5 Acre plots are distributed to this group of the landless and the non-farm workers, under a land reforms scheme, it would contribute to both, output and equity. Similarly, the proposed beneficiary group could also participate in high value horticultural sector, which has been shown to have a growth potential of 5.0% p.a. A reasonable land reform component along with the distribution of state land to the rural and possibly urban poor could go a long way in reducing the endemic poverty in this country. Many recent writings have indicated the destabilizing potential of the rural and urban poverty and disparities. Even the Taliban issue is interpreted as having linkage to poverty and deprivation. This creates a new logic and rationale for land reforms which may not only be restricted to land distribution but should go well beyond towards improving upon the tenure issues. The author would strongly argue against the so-called market efficiency and growth-sans-equity policies for example as in Egypt which have worsened the poverty and inequity conditions. Land Ownership and Utilization in Pakistan __________________________________________________________ 1) Number of households / population increased by 25% during the two censuses (1990-2000). 2) Number of farms increased from 5.071 million to 6.6 million: 1.549 million farms added: an increase of 30.54%; total Farm area increased by only 6.15 %; 0.6% increase p.a. 3) Number of farms under 1 hectare (ha) remained almost the same; however, farm area under this category increased by 68.47 %, an addition of 483,000 ha. Percentage of these farms in the total number of farms increased from 27 % to 36%. 4) Number of largest farms, 60 ha and more, decreased from 15000 to 14000, a decrease of 1000 farms; area under these farms also decreased from 1.936 million ha to 1.683 million ha a decrease of 15% in area. 5) In 1990, 27% farms had 4% of total farm area, while the largest farms (60 ha and more and, less than 0.5 % of the total number of farms) had 10% of the total farm area .In 2000, 36% farms (under 1 ha) had 6% of the total farm area, while large farms had 8% of the total farm area. Has the skewed distribution decreased? In 1990, the large farms’ total area was 2.75 times higher than the total area of small farms( under 1 ha) area, the same ratio decreased to 1.42 times only ; skewed distribution and disparity still quite high ,but appears to have been reduced by almost 100%, under this indicator. 6) In Pakistan about, 6.6 Million farming families own 6.6 million farms, over a farm area of 50 million Acres (average size 8 Acres), of which 20% farm area remains uncultivated. 58% Farms or farm house- holds have only 10% of the total farm area, call them very small farmers( under 5 acres); 37% small farmers (5-25 acres) own 47% of the farm area; 5% larger farmers (25-100 acres) own 26% and 0.5% (30,000 families) of super land lords (100 acres plus) own 11% of the total farm areas. 7) Some 19% of the total farm area remains uncultivated. In small farms up to 93% of farm land remains cultivated. This percentage goes down with the increase in farm size. At 100 acres plus, roughly one-half (50%) of the land area remains uncultivated and unutilized. 8) About 2.6 million acres of farm area in large farm size category remains unutilized, which is under the control of 30,000 super land lord families. Another 1.5 million acres remain uncultivated in 50-100 Acres plot size. Potentially about 2.6-4 million acres (50%) of unutilized farm lands is “distributable”. Two million landless could benefit. Our Land Reforms experience; a review Although Muslim League Leadership was 'mostly feudal the latter felt and recognized the popular pressure for land and tenancy reform. Hari Report, Daultana Commission, MLR-54 and MLR-115 have been the major milestones in the land and tenancy reform history in Pakistan. The last move in this respect dates back to 1977, when PM Bhutto announced a new package of reforms including lower ceilings on land and allotment of government land to the poor tenants. Freedom movement and the ideological conflict between the East and the West created and sustained pressures for land reforms in the developing world. Ideological period having gone, the futility of the earlier reforms and the en-trenchment of feudal interest in Pakistan's body politic are possibly the reasons, why any such move does not get even mentioned these days. There is substantial postwar evidence that the societies which implemented meaningful land reforms, and put an end to feudalism, could transform themselves into the new dynamism required for scientific and industrial growth and development. Taiwan, Korea and Japan are classic exam¬ples. Taiwan and Korea utilized the opportunity created by the exit of Japanese landlords to launch deep and effective land reforms. Pakistan lost this opportunity which was available to it after independence, as many non-Muslim land owners fled the country. The economic rationale for earlier land reforms was based more on optimal considerations and hither-to under-utilization of the lands available with the big land lord. It appears that redistribution impact was much less of a consideration in the view of the planners and decision makers. The political objectives included acquisition of political legitimacy, and shaking and controlling the feudal class through carrot and stick approach and enhancing the political clientele and image among the masses. Ayub Khan's reforms (MLR 64) put the upper ceiling of irrigated land at 500 acres per family and un-irrigated at 1000 acres per family. Compensation is to be paid through inheritable bond which earned 4% p.a. interest and land was to be redistributed at a price. Bhutto's reforms (MLR 115) put the upper ceiling at 150 acres irrigated and 300 acres un-irrigated per member of a family. No compensation was to be paid to owners and the land was to be distributed free. Put together, the two land reforms affected about 4% of the land, only half of which was actually transferred to landless. Only about 100,000 farming households 8% of the total (and even much less if landlessness was included) benefitted. A New Land Reform Package In Pakistan, 28% of the total landmass is being under cultivation, and huge chunks of land remain unutilized. About 6.6 million households own 6.6 million farms over a total farm area of 50 million acres. Only some 80% of this farm area is actually cultivated. The remaining 20% of the farm area remains uncultivated. Small farms utilize up to 95% of the available farm land, while large farms owned by big and powerful landlords remain uncultivated to the extent of almost 50%.A total of 2.66 million acres of farm area remains uncultivated in the large farm category(100 acres plus). Some 30,000 landlord families could benefit one million plus landless families, if uncultivated land is given away to the latter under some Land Distribution Scheme, if not land reforms exactly. In Land Reforms, usually land is forcibly taken away under legislation or revolution without any compensation. There is also a case for bringing more land under agriculture. Perhaps ten million more acres could be added by new land expansion and development activity probably in the next ten years. This would mean one million acres per year of new land to be transferred to the landless. One would argue, where would the water come from? We are already short of water. We are currently wasting water under existing flood irrigation practices. The new land under the landless families would be from the very beginning on more efficient Drip Irrigation (D.I.), which may be cheap as well as efficient. The landless poor beneficiary would be more inclined and capable to introduce bucket and pipe drip irrigation. He would not have much choice. He does not have many choices in life either. Thus about 14 million acres of land (10 million new and 4 million existing unutilized) could be distributed among the landless over a period of some ten years, benefitting 5-6 million families, with a farm of 2.5 acres each, practically solving the issue of landlessness, if not of poverty totally. Even after getting 2.5 acres, he would not be totally out of the clutch of the grinding poverty. But he would get hope and the tools, to handle the economic problems of his family. Pakistan would need more land under cultivation to feed its ever increasing population, as productivity increases are too far and few in between. The diseconomy of scale, if any, of the small farms should be taken care of by an organized Cooperative movement that could take care of the credit and inputs. Land is the only thing that governments can afford to give free, may be charge some development cost in the long run under a concessionary credit scheme. Land remains on earth. It does not evaporate and does not disappear. It is excellent collateral for the poor. After all if a country belongs to its people, they should all own some piece of land, however, small it may be. Land has been distributed in Pakistan among the rich and powerful and literally given away at dirt prices. Some effort would have to be made to include the poor in this largesse. There is a mass appeal and appetite for land confiscation by the state without compensation. Hence the two attempts at land reforms, even though unsuccessful. Any new land distribution scheme should be careful and respect the federalism requirements and the local and regional rights. It should not import people from the outside, unless in special cases, where demand and supply gaps may exist. On the other hand the big landlords may be induced by the State to do away with their excess unutilized land by imposing a variety of taxes including the much dreaded and opposed Income Tax .Excess land can be acquired by provincial governments under a land bond scheme carrying a reasonable interest rate. The poor land allotee may also be required to pay off a part of the land price under a concessionary credit scheme. Similar schemes have been implemented in Japan, Korea and Germany immediately after the Second World War of 1945. Landless peasants can be given a 1-2 Acre farm each, at 50% of the purchase cost under 4% p.a. and 20 yrs repayment. Alternatively GOP and provincial governments could develop 2-4 million acres over a period of 7-10 yrs, possibly under budgetary outlay than the procurement of private land. Government of Sindh is already implementing such a programme at a modest scale by converting kutcha forest land but without forest, to agricultural land and distributing among landless. This can be done with much ease in Balochistan, where large tracts of land remain unutilized. For political and possibly good reasons, land in Balochistan can only go to Baloch and hence only 1.0 million families could benefit .Almost all the house holds in Balochistan could get a reasonably sized farm. In Punjab, the problem is difficult due to large population and in NWFP the land is limited, although in both the cases there are less populated areas tribal belt in NWFP and southern Punjab. Instead of giving lands to reward generals and bureaucrats and large real state investors, the scarce land should go to the landless poor. Land is the only thing governments, mostly provincial, have. Budgetary resources are limited and cannot almost always be enough, be it BISP or Zakat fund. The cultivable waste land There was a total of 8.22 million ha of cultivable waste land available to be cultivated, perhaps all of it government land, almost half of it (3.97 Million ha) is in Balochistan. There are only 1.163 million households in Balochistan. If this land is distributed, every house-hold in Balochistan gets 3.41 ha (8.5 acres), much more land than most of the household in Punjab. One doesn’t have to take it away from some one; The Government and the province of Balochistan have this with themselves. Likewise, KP has 1.21 million ha of cultivable waste land, and only 2.77 million house-holds. KP has a land area problem, and about 0.5 ha (1.25 acres) could be distributed to every family in KP. Some 1.29 million farms in the country are under 0.5 ha. It is better than being totally landless. Some of the allotted lands would be sold, because every one cannot enter into agriculture. Ultimately, if 50% of the house-holds end up selling the allotted land, the average farm size increases to 1 ha, which should be quite sufficient to produce food for a family or produce products of an equivalent value. Alternatively, GoKP could allot the available wasteland to 50% of the families, to get the same result. In Sindh and Punjab, landless are high in number and the available cultivable wasteland much less. Nevertheless, 1.6 million ha of this land available in Punjab could be distributed among 3 million households. Similarly, in Sindh, 1.44 million ha could go to another 2 million house holds. A total of 6 million households, out of a total of 14 million rural households can thus get land, without resorting to redistribution. There is a big if in it. The land may not have been grabbed already by the powerful. It has come to public light only after the floods that in Sindh; most of the sailabi land had been grabbed by the powerful landlords, and had been put to share-cropping. Times have changed. Today’s reports of World Bank and IMF and other western agencies read like communist manifesto. The kind of poverty and hunger eradication literature that is coming out now for more than two decades would have sent the writers and publishers of those writings to jail or severe marginalization, in 1950s, 60s and even 70s.Today the biggest enemy or adversary of the World powers is religious fundamentalism and extremism and has replaced the erstwhile Communism. Let me quote here from a report compiled under the aegis of USAID. Ironically, USAID and the World Bank have supported land reforms in the past in many strife prone regions. Taliban issue seems to have created a new rationale for land reforms among the donor agencies. It is being argued that Talibans may exploit the issue and would most probably be successful in drawing support from the landless poor farmers and enhance their appeal and domain. There is significant evidence that most of the Talibans and their supporters come from the landless class. There are other options and components of reform programme as well that extend to water rights and urban housing schemes. Under new irrigation schemes, whenever these come up, trade-able water rights could be awarded to the landless, which he could sell to the willing customer or use it as his collateral or share in the distribution of agricultural output and profits. In this way he becomes partner in place of surf. In urban land laws, provisions for high -rise building societies could be introduced, where virtual plots in the third dimensions are allot-able. Real state developers could be encouraged to develop multi-purpose projects, where in lieu of subsidized land or free land use conversion, a certain percentage of 3-D plots are allotted to the poor. Currently a lot of money changes hands on conversion of agricultural or residential land to the commercial one. Some fee does go to the local or provincial government but most of the surplus is siphoned away by the builders, landowners and the social and political elite. So the name of the game is to create policy or innovation surplus and divert it to the poor. There is a lot of government land that is available on the periphery of Karachi near Sohrab Goth (outside Karachi limits) and in district Thatta that could be allotted to the flood victims especially from the inundated towns of Jacobabad, Larkana and Thatta. If Sindh has to develop regional economies are to be established, as has happened around Lahore. Karachi itself would benefit from the regional economic development as Lahore has. Karachi's' economy has been stagnating for many years now. One of the reasons is lack of close geographical interactions and resource reservoirs. Every body would benefit. However the idea would fail if it is used for political and ethnic manipulation and advantage. I would like to add a caveat here. Last PML (N) government headed by Mr. Nawaz Sharif introduced an innovative housing policy and strategy for urban areas by transferring surplus government land and plots for low-cost public housing projects. A good innovative project was, however, reportedly marred by construction scams. There was no need of involving government in construction by a party which believes so much in private sector. That project perhaps is revived in one form or the other. Some residual land or assets may still be there. Musharraf government quietly put a lid on it. No NAB case has been filed with respect to this project apparently. May be, there is one or a few. I am not sure. These are excepts from the writers forthcoming book; Pakistan’s development :economy, resources and technology

Friday, July 15, 2011

Why Did We Not Develop Or Progress? Pakistan.

http://www.brecorder.com/articles-a-letters/single/626/0/1211237/?date=2011-07-13

Sunday, July 10, 2011

STRENGTHENING POLITICAL PARTIES

http://www.brecorder.com/articles-a-letters/single/626/0/1210088/?date=2011-07-10

Saturday, July 9, 2011

GOOD NEWS PAKISTAN..Where do we go from here.

http://www.brecorder.com/articles-a-letters/single/626/0/1209768/?date=2011-07-09

Thursday, July 7, 2011

Good News Pakistan..Reasons To Do More.

http://www.brecorder.com/articles-a-letters/single/626/0/1208792/?date=2011-07-06

Thursday, February 24, 2011

Rekodeq Copper and Gold Project

Abstract

There is a lot of controversy these days over the Rekodeq Copper and Gold project. A number of people have requested me to explain the rather complicated issue and hence this article. A foreign company Tethyan has completed exploration of the resource located in Chaghi, the famous place where Pakistan’s first nuclear explosion was carried out, and has prepared and submitted a feasibility study for consideration and approval of the government of Balochistan. The company claims, and perhaps rightly so that it has spent some 200 million US dollar on the project studies and exploration over the past several years. The company expects that it is given mining rights pursuant to its exploratory efforts and investments. The company proposes to bring a foreign investment of 3.2 billion USD and has provided for spending 50% of the investment on local procurement of goods and services. For seemingly archaic confidentiality reasons, the company has refrained from revealing its feasibility study, which has created doubts and controversy among the mind of general public. The project is being opposed by many quarters. This article takes account of the debate and the arguments, attempts to build a picture of the project in terms of real numbers, develops proposals on royalty issue based on international practices and in conclusion broadly supports the project, while advising Government of Balochistan to avail the services of third party experts in contract negotiations with the company.

Summary

1) Present mineral sector output in Pakistan is a paltry o.4% of GDP, way below its potential variously estimated at 2-3% of GDP, which would mean an annual output and exports of 5000 Million US dollars.

By comparison, IMF contribution to foreign exchange deficit is slightly more than 1000 million USD. However, mineral sector has been stagnating due to low technology and small scale mining and that mostly in non-metal sector. Except for Saindak with an output of 16000 tons of blister Copper, there is no sign of large scale mining, benefiting from foreign capital and technology.

2) TCC-Rekodeq is a good window of opportunity; Pakistan has been waiting for years. With a foreign investment of 3.2 Billion USD and an annual output of 220,000 tons of Copper and 16 tons Gold ,resulting in annual exports of more than one Billion USD, it is a project of international scale in every respect.

3)The project has been opposed on many counts, the most significant ones are as follows; a) the monetary terms offered by the foreign JV TCC are not adequate; b)we can do it on our own and make more money; c)there should be local processing done within the country instead of the export of raw concentrate. The alternative cited is a ECNEC approved project.

4) We have studied the international Copper industry and its workings including several large scale projects in the pipelines. We have examined the PC-1 of the ECNEC Copper Rekodeq project and other claims that have been made in this respect. We have also studied the data of Saindak Metals in so far it is publicly available. We have also examined the TCC project data, mostly based on the data and info available on the company website, and some press reports containing some useful data. We also had had an opportunity of examining the data from Aynak project in Afghanistan, which contract has been recently awarded to MCC of China.

5)The ECNEC project is very small with a daily ore output of just 5000 tons, as opposed to 110,000 tons per day of ore output of TCC proposal. It is even smaller than the existing Saindak. ECNEC proposal relies on small scale mining of the local mining companies. It is doubtful, if even 5000 tons of ore can be mined by the local sub-contractors. Understandably, its cash cost per ton are very high, i.e.3158 USD per ton, several times higher than international cost including those of TCC. It is widely known that small scale mining operations are uneconomic and the ECNEC project only supports that. There is a high probability that this project runs into snags, cost over-runs and lack of output. There may be a good chance of success, however, if the ECNEC project restricts itself to mineral processing, a point that we are going to take up later in these passages. ECNEC project does not make the kind of claims that have been attributed to the project. There is no possibility that it can give an output of 45000 tons per annum of finished Copper. The claims of the ability to give profits of 133 Billion USD can only be termed too exaggerated, unrealistic and grotesque, if not out rightly false. Apart from a poor economics, the premise of relying on local mining contractors to provide the raw materials output for such high through-put rates so as to generate 133 billion USD of Gross Profit , does not stand up to robust calculations and judgments. It cannot be done. Hence no profit or outputs in those scales are to be expected.

6) If there is a compulsive need for demonstrating capability, excellence and utilization of S&T manpower, it can be done on many unexplored and unexploited resources lying dormant in Kohistan, Waziristan and in Chagai itself. The ECNEC project, as small as it is, may be implemented on those resources. These areas badly need investment and employment opportunities. ROZ funds of the USAID could be mobilized there as well.

7) On the other hand, TCC proposal has been prepared by world renowned consultants and overseen by two big JV partners Antafagosta of Chile, where the latter operates several copper mines including Leach-Electro win operations. The other minority partner, Gold Barrick specializes in Gold project. The project structure and numbers are in broad conformity with similar international projects. t is quite likely that the proponents would make a success of the project and would be able to produce and export in the quantities planned.

8) This, however, does not mean that TCC proposal cannot be improved and altered, keeping in view some of the reasonable aspirations and requirements. Local processing component could be added, for a portion of the output. Local processing can be done by TCC itself based on its operations in Chile or give it to a local or foreign JV or to the proponents of ECNEC project. Other financial terms offered can be negotiated as well. It should be discussed in a business like setting in a transparent environment, avoiding legal battles and claims on both the sides.

9) ECNEC approval of a Copper project is rather strange in the wake of a consensus on FDI and privatization and in the light of a bad experience in Saindak. GOP has privatized many profitable ventures in the past and many strategic projects like HMC and KSEW have been put on privatization list. Some explaining of the rationale is in order.

10) TCC could have followed a better project politics and communication policy which would have prevented hostility and debate against the project. It has taken the classical view that the ore being Sulphide cannot permit the much economic and viable route of Leaching. There is abundant evidence to the contrary. Many projects have been launched recently by such big names like Phelps Dodge, BHP, Codelco etc. Infact earlier data available on the internet about Rekodeq as released by TCC included a leaching component for a percentage of output. We have included a table to substantiate this. Local processing is an important political issue, if not an economic one. It should have received much more serious attention. Secondly, it is the archaic attitude to secrecy contending that its feasibility studies contain technical secrets. This is untenable. TCC cannot possibly teach its competitors any thing new. A more open communication policy would have been in its own interest generating public confidence and support.

11) TCC project can be a start of a new chapter in Pakistan’s mineral sector offering technology, capital and exports and can be a good example to attract investments in other minerals. The reverse can also happen, if this opportunity is vitiated and wasted in hostility and delay.

12) No looting is involved in the project proposal, neither is the Reqodeq project out of this world and not certainly worth trillions of dollars. Infact, its Cu content is lower than elsewhere and matches only the US deposits which are generally considered inferior. Its on-surface valuation of 100 billion USD is realistic, and the proponent company may not be able to net over more than 3-4 billion USD over the entire project life cycle of 56 years, as is the case with other comparative projects.

13) A 50% share in gross profit is a good formula and matches with competitive offerings elsewhere. Contract framework must ensure that the promised terms actually result in the expected income. Contracting for such high value projects is a highly complicated business. Government of Balochistan should establish a transparent negotiating structure and process under the guidance of a transaction adviser seconded or selected by multi-lateral agencies and their processes.

14) Government of Pakistan may do well by launching an information campaign disseminating true and realistic data and information to correct public opinion and perceptions mired in conspiracy theories and unrealistic presumptions regarding uniqueness of mineral deposits in Balochistan and Pakistan. The reality is that there are abundant mineral resources in the world vying and competing for the investment of foreign capital and technology. The uniformed public opinion in Pakistan creates mistrust and unrealistic romanticism and folklore which in turn feeds separatist tendencies.

Conclusion and Recommendations

1) The proposed Rekodeq project is in national interest and it should be allowed without stalling it in unnecessary argumentation. It would bring in much needed foreign investment and would contribute in a meaningful way in energizing Pakistan’s economy.

2) Government of Balochistan should adopt a transparent process in negotiations with the company with suitable advice and over sight. Government of Balochistan should engage the services of an independent professional transaction advisor to facilitate a reasonable agreement maximizing national and provincial interests in the framework of adequate profitability and international good practice. International tendering is not the only feasible option always.

3) Environmental aspects should be investigated adequately and requisite remediation provided for within the established rule and good practices.

4) The company is expected to adopt a more open policy towards releasing adequate information out of the feasibility study conducted by it. Trying to hide facts does not create confidence in the minds of the general public, either in Balochistan or elsewhere in the country. It would be in every body’s interest if all aspects of the projects are out in the open.

5) Consideration should be given to provide for producing blister Copper. The company has proposed a very capital intensive and risky transport system of installing a 682 kms long slurry pipeline. The same investment could be diverted to installing Blister copper facilities. Recognizing that copper smelting is an energy intensive operation, Flash smelting based on electric arc furnaces based on cheap electrical power from Iran could be considered as a technical option. Alternatively the Bio-leaching SX-EW route could be implemented on mineral waste and tailings and as well as the virgin Sulphide ore as has been done elsewhere in the world(pls see appendix for details). The company has already offered a fund of one million US dollars for undertaking the relevant feasibility study, which is a welcome step. A separate JV can be formed for this purpose, with a possible participation of Pakistan’s private sector. The mining contract should provide for local sales, if and when such projects come up.

6) A railway track linking Rekodeq mine site with Gawadar airport would have been a more advisable option for concentrate transport. Reportedly that aspect was investigated and dropped in the least-cost perspective. GOP may be asked to fund the additional finance, if required.

7) A 189 MW power project has been proposed based on furnace oil based Internal Combustion Engines in a combined cycle mode. Pakistan is already burdened under very large unsustainable oil imports. Rekodeq has Good Wind and Solar Thermal resource. It may also make a good commercial sense to have a wind-cum solar thermal based power generation, whereby the mines process heat requirements may be met through the wind-solar combine. Possibilities of imports of cheap electrical power from Iran may also be looked into, if nothing else, than to add to the projects energy –mix and security.

8) There is almost a national consensus on pursuing open economic policies encouraging FDI and privatization. It is in this spirit that even profitable companies like PTCL have been privatized. It would be highly unadvisable for government to venture into the risky and capital intensive business of Copper mining. Government is already facing problems in meeting the deficits of large public sector corporations. The claims of self-doing do not meet up to our robust enquiry and consideration. There are other Copper deposits in the area where local excellence and expertise can be adequately demonstrated. These would become more feasible, once the proposed project is implemented which may provide a pool of trained manpower.

9) The project deserves much more conscientious attention of all the stake-holders in the interest of the best outcome in the form of the earliest implementation maximizing national gains, without recourse to a possible international litigation that may not be in Pakistan’s best of interests.

Table 6: Rekodeq profits, royalties and Revenue projections (guess-estimates)

Assumptions		USD	%	50 year Revenue
Assumptions	One year revenue		Percent	50 year Revenue
Total deposit Tonnage	billion tons	5.9
Economic Deposit	billion tons	2.5
Ore composition
Ore copper	%	0.53
Ore Gold content	gms per ton	0.30
Ore concentrate
Copper output	Tons per year	200,000
Gold output	Oz per yr	250,000
Average selling price CU	USD per lb	2.2
Avg. selling price gold	USD per Oz	1,200

Royalty rate	% of sales	5
Before Tax Profit	% of sales	30
Tax rate	% of profit	30
GOB Equity	%	25
Estimates & Projections
Sales Total o/w		1,268,000,000	100.00	63,400,000,000
Sales Copper		968,000,000	76.34	48,400,000,000
Sales Gold		300,000,000	23.66	15,000,000,000
Annual Royalties		63,400,000	5.00	3,170,000,000
Estimated Profit o/w		380,400,000	30.00	19,020,000,000
GOB share		95,100,000	7.50	4,755,000,000
Tethyan Profit b. Tax		285,300,000	22.50	14,265,000,000
Tax Rev. GOP		85,590,000	6.75	4,279,500,000

After tax Profit Tethyan		199,710,000	15.75	9,985,500,000
Total GOB Revenue		158,500,000	12.50	7,925,000,000
Total Pakistan Rev		244,090,000	19.25	12,204,500,000
Asset value

Ore Copper Value	Billion USD	64.13
Ore Gold Value	Billion USD	31.68
Total	Billion USD	95.81
Asset value(@royalty rate)		4.79

Source: Authors Estimate: Based on Tethyan website data

Full pdf report here. https://docs.google.com/viewer?a=v&pid=explorer&chrome=true&srcid=0B7bxkHDcg3mhYTJlYmJmNzgtOGNhMS00NTQ0LWExMWEtMzA1ZTBjMWRlYTQw&hl=en&authkey=CIyZ56MK

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