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Paksat Project vital for Pakistan

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Implementation Agreement between Govt of Pakistan and Alcatel is to be signed as an umbrella document

Special correspondent, Islamabad
Sep 27 - Oct 03, 1999

PAKSAT Project which involves launching of telecommunication and broadcast satellites into the Geo-Stationary Orbit (GSO) has been in the offing since 1983 when SUPARCO conducted a feasibility study for the project jointly with the help of Hughes Communications of the USA. The feasibility study defined the broad parameters of PAKSAT and estimated the cost of the project at US $400 million including two satellites, their launching and ground infrastructure. The project could not be implemented.

In 1990, the government had decided that private sector should be involved in financing and operation of the project. A review of the project was carried out by the erstwhile Pakistan Investment Board (PIB) and in 1994 a Request for Proposal was floated, to elicit response from the private sector. The Federal Cabinet in its meeting on April 16, 1997 decided to proceed with the PAKSAT project on the basis of the Letter of Intent (LOI) earlier issued to the Alcatel Spacecom (Alcatel) of France on April 16, 1996. The matter remained again in low gear until it was expedited by the Ministry of Communications when a licence was issued to Alcatel on June 13, 1998 by the Pakistan Telecommunication Authority (PTA). It is to be mentioned here that a Coordination Agreement has also been signed between PTA and Alcatel.

Sources say that an Implementation Agreement (IA) between Government of Pakistan and Alcatel is to be signed as an umbrella document that will lay down the legal, operational and fiscal framework for the satellite operating company (named Eurasia Spacecom Ltd (ESL) which is yet to be registered in Pakistan). The other agreements such as the Training, Know-how and Technology Transfer Agreement, Free Capacity Agreement, Slot Usage Agreement would form part of the IA. The Licence will come into force only upon signing or the Implementation of the Agreement.

PAGE has learnt that observations of various government agencies mainly relate to those clauses of the Implementation Agreement in which exemptions have been sought for payment of duties and taxes for import of ground and space equipment, corporate income tax, stamp duties, tax on foreign lenders (which are covered by the existing rules), insurance rules and permission to open and operate special foreign currency accounts in and outside Pakistan. The project is the first of its kind in Pakistan and unique in character. Private sector operators of satellites often exercise freedom to manage tax liability by locating themselves in tax havens. INTLESAT, a giant satellite operator has tax exempt status worldwide including Pakistan. On the same lines, there should be exemption from tax of any payment to or by ESL from or to any person. As a whole, the concessions sought by Alcatel for the project are vital to provide a level playing field failing which the commercial viability of the project would be very much in doubt making it even more difficult to find a financier in the highly competitive world market. The Government of Pakistan will not be adversely affected by extending the said concessions but rather stands to benefit from the project if it is successfully implemented.

A high-level government inter-ministerial meeting was held earlier this year and it has been unanimously decided that in view of the extraordinary nature of the project, it required special treatment. Also it agreed that in view of heavy pressure on the orbital slots in the GSO, the coordination process has become very difficult and painstaking - in fact as a very late entrant, the options are few. Therefore, the project should go ahead at the earliest in so far as the Government of Pakistan is concerned. Alcatel are still in the process of finding financiers for the project. By signing the IA the GOP would give a positive signal to the investors. The PAKSAT Project if not implemented may result in loss to Pakistan of orbital slots in the GSO which is a unique and scarce resource. The consequence will be that Pakistan will be deprived of the right to own and operate communication/broadcast satellites in the GSO. It is therefore imperative to extend the requested concessions to Alcatel to facilitate the launch of PAKSAT satellite by making it a commercially viable project.

The PAKSAT project entails launching of two satellites in the Geo-stationary Orbit and retaining one satellite on the ground as spare. Two positions in the GSO reserved at 38E and 41E for satellites. The footprint of the satellites would cover our own region, Western Europe and a steerable beam over South Africa. Private sector invited to take up the project in view of a price tag of US $400 million. A Letter of Intent issued to M/s Alcatel Spacecom of France in April 1996 to develop, launch, operate and maintain PAKSAT system comprising the satellite itself and Tracking, Telemetry and Command (TT&C) stations located at Islamabad with backups at Karachi and Toulouse (France). A license issued to M/s Alcatel Spacecom by PTA on June 13, 1998 and on the same date PTA also entered into a Coordination Agreement with M/S Alcatel Spacecom pertaining to the frequency coordination aspect of the PAKSAT satellites. Main benefits of the projects include introduction of new technologies having commercial, technical and political connotations, securing of Pakistani Orbital positions in the GSO which is a limited natural resource, increased employment opportunities, revenues to the GOP in the form of royalty on revenues, free equity (6.5 percent), ITU system engineering fee, free transporder capacity and dividends from free equity. These are expected to average about US $6-7 million per year and option to acquire a further 8.5 per cent of equity in the ESL.