ISLAMABAD: The Asian Development Bank (ADB) has finalised a road map for attracting private-sector investment from both domestic and international investors in the mineral sector of Pakistan, especially in Balochistan.
The road map, contained in the final report which has been prepared at the completion of a small-scale policy and advisory assistance, has been designed to help the federal government and Balochistan manage and address issues relating to mining leases and mine development.
It will also guide the government in resolving ongoing and avoiding future disputes in large-scale mining transactions, and other immediate barriers to attracting investment into the mineral sector of the country.
Reko Diq, a small town in Chagai district of Balochistan, has a world-class copper and gold deposits which, if developed, would set the standard for large-scale mining in Pakistan and encourage further substantial investment in the mineral sector.
In 2010, a joint venture completed an extensive and detailed bankable feasibility study costing well over $200 million to establish the basis to develop the Reko Diq mining project.
The proposed $3.3 billion project would build and operate a copper-gold open-pit mine with an estimated mine life of 56 years, using high-efficiency mining techniques and cutting-edge technology. The project came to a standstill in late 2011 after the Balochistan government rejected the joint venture’s application for a mining lease.
In addition to resolving the Reko Diq dispute, there are other barriers to attracting sustainable investment into the mineral sector in Pakistan. These include award and monitoring of licensing, environmental and social safeguards, and mine security.
The current legal framework does not provide sufficiently clear criteria or detailed explanations for the licensing process. This is a strong deterrent to investors who shun arbitrary, discretionary regulatory decisions — and are concerned about the outcome of the Reko Diq mining project dispute.
The ADB says environmental and social impact assessments (ESIAs) are required as part of application for mining lease, but the evaluation of ESIAs and their enforcement are not properly enacted.
Mine closure and land reclamation plans are required, but there are no mechanisms in place to ensure monitoring and that companies are held liable for their implementation. Security and political risks are high. But they can be reduced by sharing benefits from mining activities with local communities through conflict-sensitive business practice.
The final report of the technical assistance contained an overview of the country’s minerals sector, existing legal and regulatory framework, and mineral sector as well as licensing in Balochistan and existing revenue management was well prepared.
The report also included initial key findings which have been shared with the government agencies at federal and provincial level. Sample mining agreements in line with best international practices have been developed and shared with the federal and Balochistan governments.
The final report also provides a summary of recommended interventions that, based on comparative mineral market experience, have potential to establish the legal, financial, technical and overall foundation for a viable large-scale mining sector in Pakistan.
The final report identified multiple areas including mineral-related policies, legal and regulatory matters, mine workers’ rights and safety, institutional strengthening, environmental and social protections as well as financing options, and identification and support required from government and donors.
According to the report, the ADB will hold a multi-donor meeting in Islamabad shortly and invite donors to take forward and required interventions in the large-scale mining sector.
The World Bank also engaged with the mineral sector in Pakistan in 2003 when it provided a diagnostic assessment of policy, legal and regulatory environment. In 2005, the World Bank assisted to strengthen mineral sector institutions and legislation at both federal and provincial levels, with a focus on Balochistan.
Based on this work, in 2009 the World Bank processed a $45m technical assistance loan for Balochistan as an initial pilot for mineral sector reform and development in Pakistan. However, the project was not implemented and resources were reallocated to other projects due to lack of capacity and focus at the provincial government level at that time.
In 2011, the World Bank prepared a small technical assistance programme of $750,000, initially focusing on knowledge-sharing capacity building around international norms and standards on mineral sector development for Balochistan.
This programme was later expanded to include other provinces. The United States Agency for International Development has also been providing a support to attract investment into the mineral sector at provincial level.