Pakistan: Difference between hug and a bear hug

Federal Minister for Petroleum and Natural Resources Dr Asim Hussain has said that the Russian Federation

has shown interest in oil exploration in Pakistan as well as laying of pipelines. However, he was of the view that bilateral trade between the two countries could only be promoted if there was rail and road linkage between the two countries via Afghanistan. The minister seems to be lacking worldly experience and understanding because his statement is caracterised by a lack of sophistication and critical judgement. This is only possible if there is peace in Afghanistan and the Western powers with forces in that country, agree to reduce Pakistan's economic dependence on them and also allow closer regional relations. The Nato alliance, led by the US, does recognise that Afghanistan's neighbours can play a positive role in promoting economic development, peace and harmony in the landlocked country. However, these neighbours need to also recognise the security concerns of the Western alliance. Peace in Afghanistan is a far cry. But Pakistan needs to look within to improve its energy supply situation which is increasingly getting messier. The load management plan in the natural gas sector is increasingly becoming irrelevant on account of growing political interference. All and sundry want natural gas for themselves and that too at a cheaper price than other competing fuels. Both electricity and natural gas transmission and distribution are now facing a negative cash flow due to higher cost of production and lower receipts in collection exacerbated by line losses due to a very high incidence of theft and as well as an old leaky T&D system needing replacement and upgradation. Similarly, both sectors are being subjected to political considerations consistently overriding business aspects of the state-managed entities. The expansion of electricity and gas T&D into rural Pakistan is desirable, but the cost of doing so must be borne by the federal budget and not paid by the urban consumers. Tariff in both sectors is beset with cross-subsidies - wherein industrial and commercial users are subjected to higher tariff - to compensate for losses on account of life-line and residential consumers. Further, consumers in Balochistan and Fata are on minimal fixed tariff, whose subsidy is also borne by the industry and commercial users. The ever-rising tariff of energy is now making Pakistani businesses increasingly non-competitive in the international market. Unless we put our own house in order - no fresh investment, whether from a government-owned entity or a major private sector conglomerate, can be enticed to bridge the supply-demand gap. The decision to invest in the KESC was an emotional decision by a Karachiite (Arif Naqvi of Abraj). The labour problems and the failure of the government agencies to fulfil the guaranteed assurances to the investor is indeed a very poor reflection for any future foreign investment. President Vladimir Putin was persuaded by the Musharraf/Shaukat Aziz government, to order the oil and gas giant Gazprom and Megnatagorski Metallurgical Kembles (MMK) to invest in Pakistan. MMK was the machinery supplier to the Pakistan Steel Mills. MMK committed 40 percent shareholding in the consortium, led by Arif Habib's $550 million bid for Pakistan Steel. MMK therefore invested time and money to prepare the bid for privatisation of the Pakistan Steel. However, the manner in which the Supreme Court cancelled the process (on legal grounds) would have certainly confused the Russians, wondering about how this country really ticks. The way this country treated the MMK must have created a negative impression on Gazprom as well. We really wonder why Gazprom would waste their energies once again on us. The world is open for investors and countries are competing for investment dollars. Pakistan may be God's gift to its citizens, but it's certainly not to the outside world. We need to create a climate where businesses can plan with certainty and rule of law prevails. Continuity of policy instead of adhocism needs to prevail. No one is a better ambassador for seeking foreign investment than the foreign investor already present in Pakistan. Listen to them. Treat them well and urge them to speak to the world investors that Pakistan is a friendly country for foreign investment. Russia must be willing to sell its machinery and other goods. Investment requires a bear hug which does not seem to be on the horizon.