Pakistani politicians reacted with anger and market watchers voiced concern after the World Bank slapped South Asia’s second largest economy, with $6 billion in damages for refusing to honour a mining lease to an international conglomerate.
The ruling that Pakistan must pay Tethyan Copper (TCC), a joint venture of Chile’s Antofagasta and Canada’s Barrick Gold, risks deterring foreign investors when the country is desperate to attract capital, analysts said.
Imran Khan, the country's prime minister, ordered an internal review to determine “how Pakistan ended up in this predicament” and “who were responsible for making the country suffer such a loss”.
Tethyan and Pakistan have spent years in arbitration since the firm was denied a lease to mine Reko Diq, despite having found enormous copper and gold deposits there and investing $220 million in the site. In 2013, Pakistan's supreme court voided a deal between Tethyan and the provincial government of Balochistan, where the deposits are.
Shares in Antofagasta jumped as much as 4.5 per cent on Monday after the decision. The ruling paves the way for TCC to begin legal moves targeting Pakistani assets to pay the damages. However, trying to recover assets would be time-consuming and an out of court settlement is more likely, analysts said. TCC has said it is “willing to discuss the potential for a negotiated settlement with Pakistan”.
The ruling by the World Bank's International Centre for Settlement of Investment Disputes (ICSID) would place additional pressure on Pakistan's struggling economy, Talat Masood, a political and security analyst, told The National.
He went on: "I think it will have a negative impact globally because it shows that Pakistan's dealings worldwide are not correct. I think in that sense it will discourage investment."
Politicians questioned how Pakistan, which has just gained an IMF bailout to fend off a balance of payments crisis, came to make the costly decision to withhold a lease.
Taimur Khan Jhagra, finance minister in Khyber Pakhtunkhwa province, said: “Reko Diq could have been a showcase of large scale investment into Pakistan. Instead, it is a mess.
“If we continue to view profit and enterprise as evil, this country will continue to pay the price, as we did in Reko Diq.”
Sherry Rehman, a leading figure in the Pakistan People's Party, said: “Who is going to make the judge who ruled on this answerable? Pakistan is paying through its nose. Any asset of Pakistan outside the country can be sequestered if we don’t pay.”
The Reko Diq saga has already been a significant deterrent to foreign investment, diplomats say, with international businesses alarmed by how TCC was treated.
The size of the deposit and its sensitive position near the border with Iran and Afghanistan means Pakistan's military considers the mine a national security matter with the country's generals reportedly taking a leading role in plans to develop the site.
