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The privatization of Saindak project

  1. 'Pakistan Energy Conference'
  2. $ 1.3 billion trade deficit
  3. The privatization of Saindak project
  4. Industrial Policy in Pakistan
  5. Petroleum linkages and socio-economic upliftment

The Chinese contractors have offered to take over the project's management

From Shamim Ahmed Rizvi, Islamabad
Apr 17 - 23, 2000

The committee set up by the Cabinet in December last to examine the possibility of restarting the Saindak gold copper project in Balochistan has reached the conclusion that the project may be privatized as it appeared next to impossible to run it as a public sector enterprise in view of past experience.

The decision to this effect, as pointed out by a spokesman of the Petroleum and Natural Resources Ministery at a press briefing, has emanated from the liquidity crunch the government has remained smarting under over the past several years. It may be pointed out that this option had been always there, ever since the assignment of the leading role in the economy to the private enterprise. Nevertheless, in view of the complicated nature of the various arrangements under which work on the project was kept going under the most trying circumstances, the delay in this regard becomes quite understandable.

It may be recalled that its discovery in the 70s was followed by a big effort, in collaboration with a Chinese engineering firm, aimed at exploiting the treasures of the precious metals laid deep down the barren mountains of Balochistan. However, though launched with great enthusiasm, it ran into serious snags during the long years of Zia era which had remained visibly dotted with impediments in many an economic initiative of the preceding political government. Later, breaking the chain of numerous uncertainties in the way of implementation of the project, a number of measures were introduced to ensure resumption of the stalled activity from time to time. The disquieting trend remained there, upsetting the progress of work at Saindak all through the game of musical chairs that witnessed too many governments come and go. And as the cost of implementing the scheme kept rising with the rolling years. There came a time, some four years ago, when the then government regretted its inability to inject the needed funds to make the project really functional.

The matter came under discussion when the Chief Executive, Gen. Pervez Musharraf, who appeared keen to initiate some development work in the neglected and the backward Balochistan, held a cabinet meeting in Quetta. The Provincial government complained to the Chief Executive that nothing had been done by successive federal governments during the last 10 years for the development of their province and cited the example of Saindak and Pak-Iran Oil refinery — two development projects earlier but could not take off because of the casual attitude of the government and the bureaucratic rigmarole.

This multi billion rupee copper gold and silver project is a classic example of how government indecision, political expediency and bureaucratic wrangling can harm a reasonably promising public sector enterprise. This Rs. 17 billion project is currently standing idle for want of funds to meet its initial cost of operations. The project started its trial operations in 1995 and its monthly production was 1,700 tonnes of copper, 6,000 oz of gold, 12,000 oz of silver for the four months that it was in operation. But after successful trial production the plant had to halt production because of the government's failure to meet the project's initial costs despite the fact that a commitment to this end had been given earlier.

It was on repeated representations and protests of Balochistan government that former prime minister Nawaz Sharif agreed to visit the site. It was in the last week of September 97 when the former prime minister, along with finance minister, governor and Balochistan chief minister, visited the multi billion rupee estate of Saindak lying dead due sheer neglect, mismanagement and corruption of the bureaucratic set-up. During this visit, the then Managing Director of the project, Maj Gen (Rtd) Muhammad Yaqub Bezenjo, while briefing the prime minister about the project had said that a sum of only Rs. 1,500 million was required for running it on commercial basis.

The Ministry of Finance negotiated with Bank of America, and ABN Amro who agreed to provide a loan of Rs 15,000 million as working capital against guarantees of government of Pakistan. In addition government provided about Rs. 600 million out of its own resources to complete the pending work, construction and provision of infrastructure to make it ready for commissioning. The two banks, however, backed out of their commitment because of the post blast economic sanctions on Pakistan throwing the project once again in doldrums.

There is a good news now for the project. The Chinese contractors who have been involved with the project since its inception have offered to take over the project's management. They have also offered to build a refinery on site so that the cost of the finished product comes down. As things stand, the Chinese proposals may inject new life into the long-neglected project. For its part, the government would do well to pull the Saindak project out of its neglected state and turn it into a working industry with the help of the Chinese, and make it yet another shining example of Pakistan-China friendship and cooperation.