Sarmad Ishfaq is an independent researcher and writer whose work has been published by Harvard Kennedy School Review, The Diplomat, Open Democracy, Paradigm Shift, Mondoweiss, and Eurasia Review to name a few. He has also been published by several international peer-reviewed journals such as Taylor and Francis' Social Identities. Before becoming an independent writer, he worked as a research fellow for the Lahore Center for Peace Research. He has a master's degree in International Relations from the University of Wollongong in Dubai where he was recognized as the 'Top Graduate'.
The tragedy of Pakistan is that although blessed with abundant natural resources, the envy of the world, we have failed to utilize them to create a developed and sustainable future. The mismanagement of resources in Khewra Salt Mines, Reko Diq, and Saindak, are perhaps the most infamous cases in Pakistan and will be detailed in this piece, showcasing not only the potential of such natural resources but our unwillingness to satiate such tremendous potential.
Reko Diq
Reko Diq is a town located in Balochistan’s Chagai District – the latter renowned as the “Museum of Minerals.” Near the town, there is a vast copper and gold mine estimated to hold 5.9 billion tonnes of copper (with a grade of 0.41%) and 41.5 million ounces of gold reserves. This makes Reko Diq not only one of the largest copper mines in Pakistan but also among the largest in the world.
Over a decade ago, Tethyan Copper Company (TCC), a joint venture between Barrick Gold of Canada and Antofagasta Minerals of Chile, discovered substantial deposits of gold and copper in Reko Diq and planned an open-pit mining operation. The mining project had a total cost of $3.3 billion and comprised four main components: an open-pit mine, a processing facility, a transport pipeline, and a project village for employees. The company had advanced the mine development until August 2010 and submitted a Mining Lease Application in February 2011.
The fledgling Reko Diq project came to an abrupt halt in 2011 when the Balochistan government denied their lease request. In 2013, under Chief Justice Iftikhar Chaudhary, the Supreme Court of Pakistan declared the lease invalid. Prior to the termination, the consortium had invested $220 million in the project. The Reko Diq case emerged following the Supreme Court’s termination of the mining contract between the Balochistan government and Tethyan Copper Company (TCC).
TCC sought international arbitration and presented its case before the International Centre for Settlement of Investment Disputes (ICSID). In July 2019, to Pakistan’s dismay, the international tribunal awarded $5.9 billion to TCC. Additionally, Pakistan spent nearly $30 million on legal fees, hiring three separate international firms at different stages of the case.
Many analysts and commentators have criticized Chief Justice Iftikhar Chaudhary for the substantial penalty. The 700-page ruling issued by the ICSID even stated on page 171 that the Pakistani Supreme Court displayed a lack of awareness of international law and conventions regarding contracts and demonstrated unprofessionalism. However, some believe that the Supreme Court, despite its legal shortcomings, acted in the best interest of Pakistan in the long run.
The agreement between the Balochistan government and TCC stipulated that Pakistan would have a 25% stake in the multi-billion dollar project, while TCC would hold a significant 75% share. Furthermore, the Balochistan government would only receive a meager 2% in royalties. Objections were also raised because the consortium intended to smelt and refine the products outside of Pakistan. The question arises as to why such an imbalanced deal was signed, particularly by the unelected interim Moeen Qureshi caretaker setup. Moreover, the lack of accountability after signing the agreement highlights Pakistan’s unrepentant behavior toward international investors. Concerns were raised about the transparency of TCC’s feasibility report, heightening worries of Pakistan being cheated.
There were many vicissitudes in this lengthy and expensive legal case that was eventually settled out of court between the government and Barrick Gold in March 2022. The current status of the long-overdue project is that production will begin in 2028 and the feasibility study will be completed at the end of 2024. The new ownership shares are 50% with Barrick Gold, 25% with Baluchistan’s government, and the remaining 25% with 3 state-owned enterprises. While this might raise optimism, nothing is ever set in stone in Pakistan.
Saindak
The Saindak Copper-Gold Mine is located near the town of Saindak in Balochistan’s Chagai District, similar to Reko Diq. It encompasses three ore bodies: the South Ore Body, the North Ore Body, and the East Ore Body. The mine has a mining capacity of 4.25 million tons of ore per year and a copper smelting capacity of 20,000 tons per year. In the 1970s, copper deposits were discovered in Saindak through a collaboration with a Chinese firm. After establishing the necessary infrastructure, Saindak Metals Ltd (owned by the Pakistani government) and China Metallurgical Group Corporations (MCC) conducted a trial run in 1995. However, this initial cooperation did not yield fruitful results.
Faiqah A Jabbar is licensed under CC BY-SA 4.0
An official document reveals that between 1996 and 2001, the Pakistani government incurred an annual loss of 300 million rupees regarding Saindak. In 2002, the government decided to step away from the mining operations and instead leased the Saindak Mine to MCC in exchange for a share in the profits. Initially, this deal was supposed to last for 10 years, but it was subsequently renewed for an additional 5 years and then again until 2022. This was further extended for 15 years.
The federal government decided to lease the mine for a third time in 2017 which generated discontent among many in Balochistan. According to the 18th Amendment and the Aghaz-e-Haqooq-e-Balochistan Project, the Saindak project was supposed to fall under the jurisdiction of the Balochistan government. However, the federal government re-leased the mine to the Chinese, claiming to have obtained the consent of the provincial government. Regardless of consent, the Balochistan government should, in principle, have greater control over the mine and the leasing process, as it is their constitutional right, as asserted by Balochistan Members of Parliament.
The previous arrangement saw the federal government receive a 50% share in profits, while the remaining portion went to the Chinese company. Out of the government’s share, 20% was retained, and 30% was allocated to the Balochistan government. Balochistan also received a meager 5% royalty. The Chinese have been criticized for excessive mining, but Pakistan must also shoulder the blame, as officials claim that there is a lack of an effective oversight and evaluation body. Syed Fazl-e-Haider, author of “The Economic Development of Balochistan,” stated, “The Chinese exploited Saindak’s resources for 16 long years without any checks.” According to a Saindak official, the project has paid over seven billion rupees to the Balochistan government from 2003 to 2017.
In 2022, under Mr. Imran Khan’s government, a new 15-year extension was signed with new terms. It has increased the share of Pakistan from 50% to 53% and the royalty to Balochistan has hopped from 5% to 6.5%. The MCC will also increase its rent and social uplift payments to the governments as well. The social uplift point is of utmost importance as the locals are still living in sub-standard conditions. These large-scale projects have an ethical obligation under the umbrella of Corporate Social Responsibility (CSR), but locals have not extracted much benefit akin to Sui.
Locals have complained about the lack of electricity for decades, and they state that while the Chinese have constructed roads leading to company sites, village roads remain unpaved. There is also significant concern regarding the scarcity of “good” job opportunities provided by the company to locals. People from Chaghai complain that even those with professional degrees from the province are overlooked in favor of outsiders. Others are relegated to low-paying jobs in security and labor.
Only time will tell if the living standards of the people of Balochistan, especially of Saindak, will improve under the new deal and if there will finally be any transparency. However many remain pessimistic – a former Lt General and Corps commander Shafaat Shah tweeted his dejection with regards to Saindak’s corruption-laden past as well as his perceived distrust of the mine’s future.
Khewra & Himalayan Salt
The second largest salt mine in the world, Khewra is an economic and tourist spectacle to behold. Conservative estimates state that Khewra contains 82 million tons of salt while other sources report a a number close to 600 million tons. The Khewra Salt Mine plays a significant role in the production of Himalayan salt – in fact if you have lived abroad and you have seen Himalayan or pink salt, most chances are that it was mined in Khewra. Most of the world’s Himalayan salt mines are located in Pakistan, with Khewra alone producing 350,000 tons annually.
While many claim health benefits associated with this salt, I will let you be the judge of that. Regardless, the salt is consumed, used in lamps, utilized in spa treatments, and employed for healing purposes worldwide. Its price ranges from $5 to $8 per 100 grams, which is twenty times higher than regular table salt. The Khewra Salt Mine is owned by the Pakistan Mineral Development Corporation (PMDC), with mining operations carried out by both PMDC and private companies (some mines are leased by PMDC). Pakistan’s major salt export destinations include China, India, America, and Germany. The salt also manages to travel to Israel (indirect trade) which Pakistan does not recognize.
Historically, Khewra and Himalayan salt exports have faced familiar issues such as inconsistent trading policies, illegal trade, bureaucratic systems established by previous governments, and irregularities in banking for exporters, among others. Despite being the leading global pink salt producer, Pakistan has not realized its full potential. A few years ago, there was a spotlight on Khewra due to a rather bewildering revelation. Social media was abuzz with claims that Pakistan has been selling its raw salt to India at low prices for years, while India repackages and exports it at significantly higher prices. The hashtag #OurSaltOurAsset went viral as Pakistanis shared images of Pakistani Himalayan salt neatly packaged as Indian salt and sold worldwide.
In addition to India, there are reports of Israel and France also reselling Pakistani salt in the international market. Although Pakistan and Israel have no direct trade agreements, one can find Pakistani salt packed by Israel in global markets. In 2016, Pakistan exported 625 metric tons of Himalayan salt to India at a paltry Rs. 2.98 per kilogram, while India rebranded and exported 15.09 metric tons at Rs. 125 per kilogram to various countries
There was a lot of discussion on social media and even in some mainstream outlets claiming that Pakistan is obligated to sell salt to India, regardless of the state of peace or war, based on an outdated trade agreement between the two countries. However, this information is incorrect and should not be propagated. According to Article IX of the trade agreement signed in 1949, the deal was only valid for a period of twelve months, from July 1, 1949, to June 30, 1950. This means that the agreement should have expired in 1950 and has not been renegotiated since.
Furthermore, Article VI of the agreement explicitly prohibited both countries from re-exporting any imported commodity in its original form. Additionally, it stated that a mere change in packaging does not constitute a change in form. There is evidence that many Indian companies are simply repackaging and re-exporting Pakistani salt without altering its form, thereby violating the terms of the expired agreement. This agreement has been rendered a mockery, and the government needs to take swift action.
The illegal trading and exporting of salt by the private sector to India at unregulated prices have exacerbated the situation. A senior official from Pakistan’s Commerce Ministry emphasized the need for a proper salt export policy. He highlighted that the absence of a Geographical Indication (GI) prevented Pakistan from directly exporting salt under its own branding, which has severely impacted the economy. In 2021, work reportedly started on this, however, it is still in the pipeline. In 2023, the Salt Manufacturers Association of Pakistan pushed for this move and stated that it would aid in greater exports and the rupee. Pakistan waits anxiously.
Conclusion
Social media has allowed more information (and disinformation) to reach the average citizen, making pressurizing corrupt governments much easier. However, since accountability is still inexistent in Pakistan, obfuscated deals, underhanded policies, and nepotism are rampant which benefit only a select few while the country suffers. A comprehensive review of the agreements, regulations, and oversight mechanisms should be undertaken to ensure that the interests of the local population and the country as a whole are safeguarded. By promoting transparency, accountability, and equitable distribution of benefits, Pakistan can transform its resource exploitation practices into a more sustainable and inclusive model that benefits all stakeholders involved. Easier said than done.
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