Majyd Aziz Balagamwala: Making Minerals a National Priority

thThe European Parliament presented a year-end gift to Pakistan by according us the status of Generalized Scheme of Preferences (GSP) Plus that should provide a much needed boost in exports, especially textiles and leather. Everyone concerned with this achievement patted themselves on the back for a job well done. It did not matter who did what or how or what really spurred the European Parliament to take a positive decision. However, in the initial euphoria, it seemed that stakeholders completely forgot the importance of what is nonchalantly referred to as non-traditional exports. Minerals, for example.

Various trade development policies and frameworks did provide incentives and subsidies for many items but there has never been a focused attention accorded to minerals: see the Mines Act (IV of 1923) which although old still gives rights to workers and sets out basic standards. There is the usual bragging that Pakistan is richly endowed with natural resources and has billions of tons of coals to last a century, etc, etc but actions speak louder than words. The Pakistan Strategic Trade Policy Framework (2012-15) earmarked only “Rs 20 million for subsidy at 100 per cent of the prevailing mark-up rate for establishing mining and processing units in Khyber Pakhtunkhwa and Balochistan.”Interestingly, the same amount is allocated for Women’s Chamber of Commerce and Industry.

Why are minerals exports in the slow lane? Can minerals enhance the economic figures? Are the stakeholders serious? Is there a strategy to focus on minerals? The answers are neither satisfactory nor encouraging because there has seldom been an institutionalized approach to promote and project the potential of minerals in the global marketplace. The stakeholders range from the individual mine owners to the dealers, the transporters, the exporters, and the government. It took years for the Board of Investment to make the shift towards promotion of minerals. In the final days of the erstwhile government, a Sector Advisory Board on Mining was constituted consisting of representatives of Federal and Provincial governments, mine owners, exporters, and experts. A couple of long and focused meetings of the Board have taken place and there has been progress in formulating a workable approach to encourage mining and to enable it to be a game changer in the export regime. The participants have come up with attainable proposals and recommendations. It is hoped that the government would take decisions based on these deliberations in the Advisory Board.

There are huge deposits of metals such as antimony, chrome ore, copper, gold, iron ore, manganese, and zinc lead to name a few. In non-metallic, Pakistan has deposits of aragonite, marble, basalt, agglomerate, granite, onyx marble, different kinds of clay, barite, dolomite, feldspar, gypsum, limestone, phosphate, quartz, pumice, rock salt, silica sand, soap stone, and of course, coal. What all these amount to are potent reserves that could transform the nation from abegging bowl syndrome to a country with sovereign foreign exchange reserves.

Pakistan must get out of the dependence on just traditional exports as the main revenue generators. The country can never enhance the export regime by dabbling in a limited number of ten or twelve sectors and concentrating on merely protecting whatever share these products have in the world market. It is time to move out of the narrow shell that has been the base for past many decades. A shift towards development of minerals also brings a marked change in the lives of citizens living in undeveloped areas of the country. Unemployment and social deprivation in these areas can best be addressed if opportunities are provided at their doorsteps rather than compelling them to move to the already congested and highly competitive urban areas.

It should now be abundantly clear to anyone who has the welfare of Pakistan at heart that the future of the people and the whole country depends not only on broad-based and concentrated industrial development but that the mining of precious minerals can thoroughly serve the interests of the country as a motivation for the development of other non-traditional sectors of the national economy. The major drawbacks in mining are the non-availability of competent technical workforce, the total reliance on antiquated and manual mining mechanisms which results in inconsistency of quality and productivity, the lack of quality assurance testing services at mine mouth or within the proximity, the low availability of transportation resulting in higher trucking charges, the difficulty in accessing the mines due to non-existent road network, and more threateningly, the worrisome law and order situation, including regular attacks by so-called secessionists. The hard and dangerous living conditions in most of the mining areas in Balochistan and Khyber Pakhtun Khwa impact severely on the progress of mining too.

It is imperative that a paradigm shift is made to bring about a revolution in minerals development. This is where the stakeholders must now concentrate. It is incumbent upon the government to recognize the need to assist and facilitate those who are committed to develop the potential of exports of minerals as well as promote the utilization of minerals for domestic requirements. The government must provide freight subsidy of Rs 500 per tonne from mine mouth to port, export consignments certification charges subsidy upto 50% through the Export Development Fund, exemption from Withholding Tax, as well as preferential support of atleast 3% of FOB to encourage this sector.

There is a need to set up a Minerals Promotion Council as envisaged for leather and services sector in the Strategic Trade Policy Framework (2012-15). It is also proposed that the government-owned SME Bank Ltd must be nominated as the focal bank to provide financial facilities to mine owners, dealers, and exporters and that the government must make an infusion of atleast one billion Rupees in the Bank for this sector.

Trade Development Authority of Pakistan must be directed to encourage and subsidize the participation of exporters of minerals at various global minerals exhibitions and conferences so that minerals are promoted at international forums. Minerals must be included in all present and future Free Trade Agreements as well as Preferential Trade Agreements. Educational institutions must be directed by the Higher Education Commission to introduce mining technology courses to train technologists to improve productivity, quality, and value addition of minerals (for example through beneficiation of minerals). 100% subsidy must be given by government to students from mining areas.

It is only through concerted efforts and detailed planning would Pakistan be able to attract foreign investment in mining. The stage has to be set before the act can begin. Instilling confidence and improvement in conditions are essential. The target for 2014 should be set at $750 million and by end of 2015 the country should cross the billion-dollar threshold. Pakistan must make the giant leap forward. Minerals will result in deliverance for Pakistan. Debacles such as the Reko-Dig Project must be avoided in future to restore confidence of international investors. The protectors of the country must heed the advice of Indian businessman Anil Agarwal who said,“If left-wing extremism continues to flourish in parts which have natural resources of minerals, the climate for investment would certainly be affected.”

The author is former President, Karachi Chamber of Commerce and Industry. This post is from his blog and has been reproduced with his consent.

Email: majydaziz@gmail.com

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Filed under Discussion, Legislation, Mining, Pakistan

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