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)
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