Reko Diq

Published July 30, 2012

THE untapped gold and copper deposits at Reko Diq are in the news again, with more of the same — further delays. The dispute at the moment is over which lawyers will hear the case in international arbitration. But this is only the latest obstacle in a stand-off between a foreign mining company and the Balochistan government that flared up a year and a half ago over the reportedly massive deposits in the province. And it has been nearly two decades since an exploration agreement was first signed that could by now have helped transform Balochistan’s fortunes. Now stuck in both the Supreme Court and in international arbitration, the disagreement shows no signs of being resolved while the province relies on handouts from the federal government and languishes for lack of development.

Each side offers a series of arguments against the other. Tethyan Copper claims the 1993 agreement includes a generous pay-off for the provincial government and that there was no valid reason to deny them a mining license after they invested more than $200m in exploration. Balochistan claims the agreement offers no real financial benefit for the province and did not guarantee a mining license, and that the company has failed to begin mining for years. Lost in all of this is the bigger picture. For one, although various speculative figures are thrown around by people on both sides of the debate who undervalue or overvalue the deposits depending on their motivations, Reko Diq is a substantial deposit by global standards. The Balochistan government needs to get realistic about whether it has the means or the expertise to tap into this badly needed source of revenue. Second, the matter goes beyond Reko Diq. Foreign direct investment has been falling for the last four years, including by 50 per cent in 2011-12. If this case becomes yet another example of Pakistani economic policies and contracts changing depending on the government in power, that will only further damage the country’s reputation as an investment destination. It is worth trying to put nationalist rhetoric aside and reshape the agreement rather than necessarily throwing it out altogether.

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