Generous to a Fault
By Dr Shireen M Mazari

The Pakistani state has certainly never been niggardly as far as its friends go -- especially if they happen to be part of the Muslim World. With our own citizens it is a different story. That is why while we have always been in the forefront of aiding Muslim causes since the time we came into being -- from lending our nationality to Tunisian and Algerian freedom fighters to taking up the cudgels for the Palestinian cause - we have continued to ignore the plight of our own Pakistani brethren stranded in Bangladesh.
Again, undoubtedly, it was in that spirit of being in the forefront of supporting the Ummah that dictator Zia decided to accommodate Saudi Arabia in its request that Pakistan provide temporary passports to Burmese Muslims fleeing religious persecution. The late King Faisal had acceded to the request of the Rabita Al Alam Al Islami to allow these persecuted Muslims to settle in Saudi Arabia, but wanted them to obtain passports from another country so as to facilitate their stay in Saudi Arabia. As usual, Pakistan stepped forward and obliged with passports and National Identity Cards on the understanding that these people would be granted Saudi nationality after 14 years of stay in the Kingdom -- that is, in the year 2000. Now the Saudis have reneged on this understanding and Pakistan is left with thousands of Burmese holding Pakistani nationality.
On financial matters, it is the same old story. One does not need to recount the scandalous tale of the sale of the Pakistan Steel Mills, details of which have already been exposed by the media, and the case is now before the Supreme Court. But it seems that we also showed an amazing generosity and accommodation to the UAE's Etisalat in the context of the sale of PTCL. When Etisalat failed to deposit the first installment despite three extensions of the deadline, Pakistan showed an amazing level of accommodation to renegotiate the deal with even more concessions because, as the then privatization minister put it: "We wanted this deal with Etisalat". Now if only we can convince the UAE government to be as accommodating when it comes to projecting our perspectives in their media or accommodating our agricultural products in their market. And we need to remember that both PTCL and the Steel Mills were economically viable concerns at the time of their sale. Nor has Pakistan been anything less than generous in its sale of a controlling interest in Habib Bank to the Aga Khan Fund for Economic Development (AKFED).
However, our generosity is not limited to our dealings with fellow Muslim states and entities. If we just delve into our recent past in terms of state contracts with foreign companies, three features stand out: delays, cost overruns and penalties. Whenever we have had differences with foreign companies in terms of contracts, we have always ended up paying additional costs/penalties to these concerns. Take the case of the Ghazi Barotha project and the Italian firm, Impreglio. Delays in the initial start of the project plus 9/11 and the issue of security led Impreglio to move the International Center for the Settlement of Investment Disputes (ICSID) to reclaim what it said it had invested in the project. The Pakistan government challenged the claim and insisted that the company had not invested in the project and so could not go to the ICSID and in January 2005 the ICSID gave a ruling in favor of the Pakistan government. Yet, Impreglio did not withdraw its case until the government made an out-of-court settlement. Why we did this is not clear, but the Italians then went back to work on the project -- after the government of Pakistan had paid vast amounts for the so-called settlement out of Public Sector Development Program funds. Despite efforts to find out why we had to pay the firm, all I could discover was that there was an initial delay in the start of the project because the land purchase had not been finalized and the international loans had not been procured at the time the contract was signed. What was the hurry to sign before these arrangements had been made given that this would result in delays and, therefore, possible penalties?
It was the issue of delays and design alterations in the construction of the new Karachi airport that landed the government in a situation where it had to pay costs to the French firm, Sogea. Despite a provision in the contract that in case of dispute Pakistani laws would apply, the French company took the case to the International Chamber of Commerce (ICC), Paris, in 1993, which constituted an arbitration tribunal. The Civil Aviation Authority took the case to the Sindh High Court and obtained a stay order which the ICC totally ignored. It went ahead with its proceedings and announced an award in 1996 in which the CAA had to pay the French company 509.91 million francs. No one was interested in the terms of the contract calling for the applicability of Pakistani law and in the end the French government intervened -- so much for private enterprise -- and the Pakistani cabinet acceded to the French demands and agreed to pay 476 million francs, in installments. After all, right or wrong, we could not sustain the French government's pressure.
Then there are the infamous independent power producer (IPP) contracts with which the country is stuck with and which have failed to resolve our electricity problems -- despite all manner of claims when the contracts were being signed. In fact, the IPPs have been the subject of legal and politico-economic battles in almost all developing countries where they have been established. The argument that IPPs allow governments to conserve public resources for other priorities is simply not correct because IPP investors will not construct a power plant unless they are sure they will be repaid – via a generous profit margin. Hence, they first require a power purchase agreement in place which means the electricity utility gives an undertaking to buy all the power produced, the price of the power usually in foreign currency.
Clearly, apart from the issue of corruption, and a recent tender relating to the import of British black cabs threatening to become the next scandal to hit the public, a far greater problem that seems to be emerging is our inability to either read the fine print in the contracts or to even read the contract carefully.
It is in this context that a decision to pledge the motorways and national highway for a mere Rs. 6 billion loan to meet the National Highway Authority's (NHA) maintenance backlog, raises security concerns. After all, these assets are strategic in the sense that they are our communication lines. Private banks, headed by Habib Bank, are the leading consortium, and, according to the news reports, the laws governing the NHA have been amended to reassure the banks that in case of a default they could take over the NHA's assets to recover their dues. Where in the world are strategic communication lines handed over to private parties to do with as they please?
But then our state has been too generous by far to others. Perhaps it is time to look after our own.
(The writer is director general of the Institute of Strategic Studies in Islamabad. Courtesy The News)




Editor: Akhtar M. Faruqui
2004 . All Rights Reserved.