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Reko Diq

Pakistan and Saudi Arabia Strike Deal on Reko Diq Project Stake Sale

Islamabad, May 24, 2024, The Europe Today: In a significant development, Pakistan and Saudi Arabia have agreed in principle to a deal that will see Islamabad sell its 15 percent stake in the multibillion-dollar Reko Diq project to a Saudi investor. This decision follows Barrick Gold Corporation’s refusal to sell its stakes in the project, according to sources informed by The News.

The agreement is set to reduce Pakistan’s overall shares in the Reko Diq project from 50 percent to 35 percent. Within this reduced share, the Balochistan government’s stake will remain unchanged at 25 percent, while the federal government’s State-Owned Enterprises (SOEs) stake will drop from 25 percent to 10 percent. As a result, Pakistan will transition to a minority shareholder in the project.

A senior government official explained that Pakistan has prior experience in joint ventures with international entities, such as in the telecommunications and banking sectors. The government believes that becoming a minority shareholder in the Reko Diq project will not pose significant operational challenges.

Further assurance was provided by noting certain clauses in the current arrangement with Barrick Gold, which prevent unilateral major decisions, particularly those related to investments, thus allowing Pakistan to invoke these clauses if necessary.

The inclusion of Saudi Arabia in the Reko Diq project is expected to positively impact Pakistan’s investment climate, especially in light of the country’s investment-to-GDP ratio reaching its lowest point in 50 years during the fiscal year 2023-24.

Two high-ranking officials confirmed that the deal had reached a breakthrough, with a formal announcement anticipated in the coming weeks. Saudi Arabia’s involvement is expected to expand beyond the initial stake, with plans to increase their investment in additional blocks of the Reko Diq project in the future.

A consultant hired through the Special Investment Facilitation Council (SIFC) submitted a valuation report that facilitated the sale of stakes in the Reko Diq project. This move aligns with Pakistan’s recent efforts to strengthen ties with the Gulf Cooperation Council (GCC), highlighted by the signing of a Free Trade Agreement (FTA) and Bilateral Investment Treaty (BIT), providing for international arbitration rights.

High-level interactions, including visits by Pakistan’s Chief of Army Staff General Asim Munir to Saudi Arabia and subsequent visits by Saudi ministers to Pakistan, have played a critical role in pushing forward these multibillion-dollar investments.

Saudi Arabia and Pakistan have negotiated terms and valuations through Manara Minerals Investment Company, a venture between the Saudi Arabian Mining Company (Ma’aden) and the Public Investment Fund (PIF), to invest in mining assets globally and support resilient global supply chains.

The agreement includes a graduated approach for resolving investment disputes, beginning with a mandatory eight-month domestic resolution period before escalating to international arbitration forums like the Permanent Court of Arbitration (PCA) or the International Centre for Settlement of Investment Disputes (ICSID) if necessary.

The investment chapter, which includes investor-state dispute settlement processes through the ICSID, will be annexed to the FTA with GCC countries. This draft is currently undergoing legal review and will be shared with Pakistan in due course.

This deal marks a significant step in enhancing economic cooperation between Pakistan and Saudi Arabia, with far-reaching implications for both nations’ economic and industrial sectors.