Have the echoes of resource nationalism in the popular discourse on the Reko Diq saga helped Pakistan? Last seven years should have made it apparent that Pakistan lacks the indigenous capacity – financial and technological – to go it alone in mining its metallic minerals deposits. Meanwhile, proven reserves of key metallic minerals – such as copper, gold and chromite in Balochistan, iron ore in Punjab, magnesite in Khyber Pakhtunkhwa, and bauxite in Azad Kashmir – remain largely untapped.
Odds currently look stacked against foreign investment in Pakistan’s large-scale mining industry. The Reko Diq controversy still lingers in national memory; worst is yet to come when damages will be awarded to Tethyan Copper Company, the plaintiff, next year. Meanwhile, Pakistan’s sole international mining lease, where China’s MCC has been operating at Saindak since 2002, expires later this year.
But it is crucial for Pakistan to shake off this state of affairs. Exploitation of indigenous metallic minerals can not only provide cheap raw materials for local industries, but it can also help secure valuable export proceeds. Data from the US Geological Survey suggest that Pakistan has a reserve advantage in the region, where its copper, chromite and gold reserves can feed some of the metal appetite of its neighboring countries, mainly China and India.
There is a need to get the policy environment right. Provinces have the sole right over metallic minerals, as enshrined in Article 172 of Pakistan’s Constitution. Federal government has the right over metallic minerals located in Fata, Islamabad Capital Territory, and in international offshore water territories. Efforts have been made in the past to coordinate between the two tiers, most recent being the 2013 National Mineral Policy.
The NMP had mandated the federal government to take some formative steps. The center was to assist provinces through setting up a consultative Mineral Investment Board. For latest mining techniques, a Mineral Exploration and Development Fund were to be set up. A separate Exploration Promotion Division was envisaged. Besides, a Geo-data Bank was to be established to assist provinces and private sector.
As for provinces, each was supposed to set up its own Mineral Investment Facilitation Authority. They were also required to digitize, publish and regularly update, in a cadastre, the details all mineral titles awarded. They were to restructure the government bureaucracy such that all mining rules and regulations were enforced under one department. Besides, concerned departments were to upgrade their mining-related human capacity.
Little has changed at either the federal or provincial level (except for KP bringing its own mineral policy in 2014) since the NMP came out. Besides federal-provincial coordination, other challenges also exist. Chief of them are the difficulties in providing utilities – such as water and electricity – to metallic mineral sites, many of which are located in remote districts. Road access and rail connectivity are also concerns. Security is another issue.
But these issues shouldn’t deter big-league foreign miners, for they experience similar conditions in other markets. In addition, the existing policy environment offers some good tax incentives. For instance, exploration-related expenditures can be immediately deducted to determine taxable income. Expenses on feasibility studies can be amortized later. There is zero custom duty and sales tax on equipment import. However, the lack of a finder-keeper provision does discourage potential investment.
It must be noted that small-scale mining continues to feed local demand. Mineral rocks – such as gypsum, limestone, rock salt, granite, marble, sand stone, etc. – are being mined at small scale through the involvement of local private sector. But the large-scale mining sector – which has a more external focus in terms of FDI and exports – sulks on a backburner. There is a clear crisis of confidence that needs to be addressed through concrete policy actions.
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