Saindak is Sinking

SEPTEMBER 2001 - Most Pakistanis can be forgiven for being unable to identify what or where Saindak is. One can readily understand this because a Matric student when asked to identify what or who was Mohammad Ali Clay, replied confidently that it was a pottery factory in Sindh. Saindak has remained in the shadows because it lies in Baluchistan, which itself remains in the shadows. However, its obscurity cannot be equated with its importance for Pakistan. Rich in copper, gold and silver ore, the Saindak Copper Gold project was commissioned years ago as the first major mining venture of our country. Built with promises of great things to come, with Chinese, German and French loans, the ground reality of the project, as in most things here, is yet another shameful chapter in our history. Once again, what is on record is how we have failed to utilize abundant natural resources not because we couldn’t harness these but because we are corrupt and rotten inside. The project, literally a gold mine that would have substantially improved the lives of the wretched Baluchs and brought in fortunes for the country, is the victim of officialdom’s greed, sloth and personal advancement.

The main plant was built on a turnkey basis by the Metallurgical Construction Company of China (MCC) while the 50 MW power plant came through German and French loans. The roads, residential areas and offices were built by Pakistani contractors. The plant was over capitalized and even if it were to operate under ideal conditions – which we all know doesn’t happen in real life, cannot even service its cost of financing. The government’s investment, which means your money and mine, is already Rs. 14 billion. The project has never performed and has now run into major problems.

In order to save the entire project from sinking further, a good decision was made to absolve the project from its outstanding financial burden. Undertaking to repay all the foreign and local currency loans through its own resources, the government last year offered the project on a 10 year lease operation to the highest bidder. This step was designed to save the government an annual expense of Rs 200 million spent on maintenance, pay and allowances of the employees and give the project a fighting chance to live up to its potential. MCC of China’s 14 year association with Saindak has been an unmitigated disaster in more ways than one. As things stand at the moment, the design is outdated and the plant cannot produce copper at a profit, unless a number of miracles take place, such as sky rocketing global prices of copper and gold continuing for years. There being no such evidence on the horizon and miracles being in short supply generally, the project is into a nosedive.

This brings us to the present. In response to the international tender, 15 companies showed interest, 6 were short listed and only 2 put in proper bids -- MCC from China and an Australian company, Holly Mining. Between the two, there was no comparison as the Australian bid was infinitely superior to the Chinese, but this is where things started to go wrong. Interested quarters in Islamabad had no intention of the bid going the Australian company’s way and the Ministry of Petroleum and Natural Resources, which has been home to some great scandals and misdeeds in the past, broke accepted tender practices and fair play, and asked MCC to improve their bid. This is highly scandalous of course but is the norm where big money is involved.

Ironically, even after this unfair chance, the MCC bid still couldn’t come anywhere near the HM bid, leave alone equal or better it. A comparison between the two bids makes things crystal clear. Point for point, the HM, Australian company offers the best terms. For instance, in Mining, HM commits upgrading from 4 million to 10 million tons annually. MCC offers nothing. In Milling, HM offers plans to upgrade and process 10 million tons annually. MCC offers nothing. While MCC plans to bring 300 Chinese staff and decrease to 30 after 10 years, HM undertakes to maintain 20-30 expats and employ 1000 Pakistanis. MCC wants the first three years free, after which it will pay US$ 500,000 per annum, whereas HM is prepared to start from the first year with US$ 800,000 per annum !! HM commits that Pakistan will make a profit of US$ 70 million in 10 years whereas MCC offers no such terms saying that it will depend on global prices of copper and gold! So, no commitment in other words. This alone should have swung the already tilted balance the right way, but then were such things to happen, we wouldn’t be where we are stuck today. In terms of Upgrading and New Investments, HM is committed to expand Saindak with an additional investment of US$ 100 million. MCC is silent and not prepared to make any investment at all. In the HM bid, the Saindak project would receive 45% of all surplus funds whereas MCC offers 30% provided -- and that’s a big provided, copper and gold prices exceed the benchmark. If they don’t, tough luck. HM is ready to pay all taxes payable under GOP rules which means additional revenues for us, but MCC’s bid states that it will not pay any taxes, rain or shine. Lastly, HM guarantees a payment of US$ 50,000 per month starting from the 9th month if start up of the plant is not achieved. MCC offers no such guarantee!!

Any one even with a coconut to pass for a head would long ago have decided that the two bids are not even comparable but when people at the top have different agendas then all kinds of shady deals start to emerge. The Ministry is clearly and heavily biased in favour of one company and prepared to compromise national interests and the country’s resources to achieve their goal. This is a crime against the country yet not only are these people strong and influential, they command the attention of the highest quarters. There is reason to believe that the CE has been given a biased and incorrect assessment of the project and our long standing friendship with MCC’s host country is being used to leverage the deal. Any one with an iota of national interest would have asked the MCC to match the deal were political considerations paramount and if this was not possible, as was well evident, the project should have been awarded to the highest bidder. Incidentally, the same company, MCC already owes Pakistan over US$ 18 million in claims about which not much is known. In the meantime, we are paying a staggering 9% interest on the Chinese US dollar loan.

If Saindak falls by the wayside, it won’t be the first project to suffer at the hands of unscrupulous and conniving officials. Our poor history is replete with such honourable tales and while just a handful have been brought to book, the vast majority lead lives of luxury with reprogrammed consciences that are mercifully bereft of any guilt whatsoever. In the end the nation loses, the people remain poor and miserable and another opportunity is squandered. On Wednesday night, the President told the Indians to ‘lay off.’ One wishes he were to do the same to those who are determined to sink Saindak and make a killing in the bargain.