Transparency works

Recently, former Prime Minister Yousuf Raza Gilani told the media that PPP lost the 2013 general election because of pre-poll "rigging" which, according to him, took the form of accountability of the President, himself and Raja Pervez Ashraf. That's what they call blindness despite 20/20 vision. While he suffers from this disability, Nawaz Sharif should tackle issues that may lead to his accountability for questionable decisions that his regime appears involved in. The two issues needing his immediate attention are the Nandipur power project and import of Liquefied Natural Gas (LNG) from Qatar.
According to media reports, in the case of LNG import, the ECC has sought exemptions from the mandatory Public Procurement Regulatory Authority (PPRA) rules that apply to purchase contracts entered into by the government, citing energy 'emergency' as the reason for it. To begin with, the LNG import contract hasn't been negotiated with the Qatari government; it was signed with Conoco Phillips, which is a private entity wherein Qatar's government has no ownership interest. Thus, on the face of it, it is not a government-to-government deal. Besides, beneficiary of the export proceeds is Conoco Phillips, with no indication of Qatari government's share therein. Unless the deal is signed with the Qatari government and Conoco Phillips identified as its agent (with a fixed fee), it can't be treated as a government-to-government deal.
Also, the Economic Co-ordination Committee (ECC) of the Federal Cabinet decided to award the multi-billion dollar LNG import contract to Engro Vopak Terminal Ltd on a "negotiated" basis. Thus, the importer of LNG too, is not the government of Pakistan. Furthermore, the sovereign guarantee to be issued will not be in favour of the Qatari government but in favour of Conoco Phillips, which further strengthens the argument that this is not a government-to-government deal," and hence not eligible for PPRA exemptions.
There are allegations that the agreement is on a price higher than the one offered in the open tender (according to TI Pakistan, 5 years ago), implying thereby that Pakistan will bear an additional burden of $2 million a year - an oversight that the TI Pakistan wants investigated. That's not all; the contract is at a price that would remain fixed for 20 years, implying thereby that the contract will cost $3.5 billion per year for the next 20 years, and Pakistan won't benefit from a drop in the global LNG price, although that is expected in the coming years.
Because Pakistan doesn't as yet have a large enough LNG-specific storage facility at the Keamari port, Engro has been contracted in to convert its chemicals import terminal at Port Qasim, for storing the LNG on a tolling basis, which could temporarily solve this problem. But Engro's bidding for the tender issued by SSGC for storage services, and being declared the successful bidder was questionable (in the opinion of the government's international advisor and SSGC's lawyers) because the then chairman of SSGC was also on Engro's Board of Directors.
According to Port Qasim Authority (PQA) and Ogra officials, because Engro's terminal is located in the port's main navigation channel, it is unsuitable for the purpose as per navigation safety standards. Engro may now be 'facilitated' in obtaining one-time waiver from PQA. In addition thereto, doubts are being expressed about the mandatory constitution of the PPRA because, presently, its board does not have the mandatory three members from the private sector; all members are federal government employees and the MD of the procuring agency. Indeed there is a shortage of energy in Pakistan, but does that fall in the category of emergencies wherein purchase contracts can be exempted from complying with PPRA rules? Expert and legal opinions suggest that energy shortage does not fall within the definition of emergency. Put together this mix of distortions and you begin doubting the integrity of the decisions being taken. This is what the observers have been pointing to because, to re-establish the credibility of the state administration - the need of the hour - such gaffes must be avoided. The other worrying development has been the revision of the cost estimates in the case of Nandipur power project from Rs 22.335 billion to Rs 57.380 billion, implying a hefty rise therein of 157 percent. This was done by the Planning Commission of Pakistan (PCP). The point to note here is that this distortion was pointed out to the Chief Justice of the Supreme Court by the ex-MD of Pepco. According to media reports, the revised PC-1 of the project would benefit a select private sector party, which too has been identified ex-MD of Pepco.
The Prime Minister acted quickly first by ordering an inquiry into this affair and then rejecting the inquiry report presented by the Secretary PCP but the fact is that work on this project, though urgently needed, was started without examining the bases of project cost revision. The issue needing inquiry is possible interference by the stakeholders, their identification and punishment, and thereafter revision of the cost estimates transparently. Unlike the LNG affair, in this case the government has acted diligently, but that's what is required in all cases. Indeed, a revision of the project cost is necessary because of the delay in its execution, damage caused to project's equipment over three years, cost rise due to inflation, depreciation of the rupee, and losses suffered by the stakeholders, but each requires justification and verification. Payment for the equipment of the project has already been made. Thus, the Rupee's depreciation will have its impact only on fresh import of damaged equipment and parts, Chinese project supervisors' salaries, and insurance premiums - all payable in foreign exchange. The increase demanded by the project contractor, Dongfong Electric Corp, is $40 million. But what has gone up is the domestic cost component due to inflation in the past three years but this component can't exceed 50 percent of the total project cost, and compounded impact of inflation too can't exceed 30 percent. Given this setting, a 157 percent rise in the total project cost is amazing. It is such distortions that shock everyone since they reflect poorly on the expertise and integrity of the experts adoring the corridors of the PCP.
Federal Minister for Planning and Development Ahsan Iqbal has, therefore, rightly hinted at a revamp of the PCP. He said the PC couldn't perform effectively as an apex economic planning and public policy think tank due to its lack of focus and adjusting to the new realities ie impact of globalisation, bigger role of the private sector, civil society, media and IT, and of the devolution of power via and NFC Award.