Arresting LNG

August 15, 2019

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The writer is a member of staff.
The writer is a member of staff.

BY now, it has become so normal and routine a procedure that very few people even notice it. The government enters into a large deal with a local or foreign investor, questions are raised about the deal, key people involved in it are arrested, the deal is killed or halted, and there the matter dies.

In the public sphere, some TV anchors and commentators dance around the issue the way primitive tribes danced around a fire to celebrate a successful hunt. Then the dust settles, everybody forgets what the issue was in the first place, and things move on. And then it happens all over again, in a different deal, involving different people, under a different government.

Ask yourself this: what exactly was the Supreme Court’s problem with the original Steel Mills privatisation back in 2006? How many people remember? Or what specifically was the issue with the Reko Diq case? There were two judgements given in that case, one in 2011 and another in 2013. What was the issue in each? Or try the Karkay case for that matter. How many can recall what precise points of law were raised in that case and what was the issue?

Try another example. Remember the arrest of former petroleum minister Asim Hussain? And what exactly was the issue there? His indictment said he was guilty of Rs462 billion worth of corruption, but does anybody remember how they arrived at this number? Hint: the reasoning involved was so absurd that it should be memorable for that reason alone. Does anybody know what the status is of that indictment today? One reference is indeed moving forward, but it has a very different set of charges and allegations compared to the one that had the infamous ‘Rs462bn’ worth of corruption allegation. Does anybody know which one?

Then the government changed again, and those who had successfully closed the LNG deal found it was their turn to face absurd queries.

The costs of this sort of gaming of business deals make for grievous reading. Never mind the $6bn judgement given against Pakistan in the Reko Diq case. The amount is largely symbolic. Consider how killing the original LNG import deal back in 2006 meant that Pakistan had to sit out the growth of the world LNG market for more than a decade.

Our domestic reservoirs of gas declined at an accelerating pace from 2010 onwards, massive deficits opened up between gas supply and demand, cities went up in the flames of street protests for days on end as factories were shut and unemployed workers poured into the streets. Our industry gasped for its vital fuel for almost five years until the shortages finally began to recede when a new government managed to get an LNG deal through and gas supplies began to return to normal.

Then the government changed again, and those who had successfully closed the LNG deal found it was their turn to face absurd queries and questions from people who have no clue whatsoever how global LNG markets operate, how financing of large private-sector gas infrastructure like floating regasification units is carried out. In the Steel Mills judgement of 2006, the presiding judges famously asked one of the lawyers to explain how a ‘discounted cash flow’ analysis method works, and it had to be explained to them that the word ‘discount’ in this case does not mean the same discount that they ask from shopkeepers when they go shopping with their families.

This time around people are comparing the prices of LNG from spot markets with those from long-term supply agreements that are indexed to crude oil, and wondering why these prices are different. They are different because those are two completely different markets! From the questions being asked by NAB, the same entity that thought that a World Bank model designed to estimate the flow remittances around the world based on certain assumptions somehow provided proof that billions of dollars of corruption money was flowing from Pakistan to India, it appears that they have no specific handle on any wrong doing in the deal. In short, they are fishing for clues.

One day, they ask whether PPRA rules were followed when bidding for the supply contract was done. The next day, they want to know the roles of specific people in concluding the deal. Then they ask why long-term supply is better than buying from spot markets. This is a technical and factual question, the answer to which can be obtained from a text book or an industry publication; it does not require a law-enforcement investigation.

Currently, three people are in detention because of this sad and pathetic story. I know two of them well — Miftah Ismail and Sheikh Imranul Haq — and can say without a shadow of doubt that they are both fine and honourable men. One can question and investigate all one wants, but to hold them in custody like this is unfair and amounts to victimisation.

The third is a former prime minister of the country, Shahid Khaqan Abbasi, and though I do not know him beyond a few face-to-face encounters, it is worth asking why he or the others in this case need to be held in custody if they are already cooperating and providing answers to all the questions that they are asked.

I often get visits in my office by foreign investors who wish to discuss the economy and general direction of things in our country. I can confirm that in almost all cases, the foremost concern on their minds is the sanctity of contracts in Pakistan, from one government to the next. A decade of throwing around allegations, that are quickly forgotten once the short-term objectives being pursued under the guise of accountability have been achieved, must end.

The writer is a member of staff.

khurram.husain@gmail.com

Twitter: @khurramhusain

Published in Dawn, August 15th, 2019