In a strategic move set to reshape investment dynamics, Pakistan and Saudi Arabia have reached a preliminary agreement regarding the Reko Diq project. This development comes as Pakistan plans to transfer 15% of its shares to a Saudi investor, while Barrick Gold Corporation retains its stake in the multibillion-dollar mining venture.
Transforming Partnerships: A New Era for Reko Diq
With this new arrangement, Pakistan’s shareholding in the Reko Diq project will decrease from 50% to 35%. The Balochistan government will maintain its 25% stake, while the federal government’s share, held through State-Owned Enterprises, will be reduced to 10%. This shift positions Pakistan as a minority shareholder, but officials emphasize that this strategic decision is based on successful joint venture experiences in sectors like telecommunications and banking.
There are safeguards in place to protect Pakistan’s interests, as certain clauses within the current agreement with Barrick Gold restrict unilateral major investment decisions. These clauses ensure that Pakistan can address urgent matters if necessary.
Saudi Arabia’s Role: Enhancing Investment Climate
In light of a declining investment-to-GDP ratio, Saudi Arabia’s involvement is anticipated to invigorate the investment landscape in Pakistan. High-level discussions have made significant progress, and an official announcement regarding the deal is expected soon. Saudi Arabia aims to expand its involvement in the Reko Diq project by increasing stakes in additional mining blocks.
The Special Investment Facilitation Council (SIFC) has played a pivotal role by engaging a consultant for valuation, paving the way for this strategic transaction. Moreover, the signing of a Free Trade Agreement (FTA) with the Gulf Cooperation Council (GCC) is poised to bolster investment, with the Bilateral Investment Treaty (BIT) enabling international arbitration rights.
Facilitating International Investment and Dispute Resolution
Saudi Arabia and Pakistan have been negotiating the final terms and valuation of this partnership. The Manara Minerals Investment Company, a joint venture between the Saudi Arabian Mining Company (Ma’aden) and the Public Investment Fund (PIF), is poised to invest in global mining assets and fortify resilient supply chains. The Reko Diq Mining Company (RMDC) will oversee levies and payment mechanisms specific to Balochistan.
Paving the way for effective dispute resolution, the agreement includes a graduated approach for addressing investment disputes, mandating an eight-month period for domestic resolution before resorting to international arbitration forums like the Permanent Court of Arbitration (PCA) or the International Centre for Settlement of Investment Disputes (ICSID). This framework, part of the investment chapter annexed to the FTA with GCC countries, ensures a structured process for investor-state dispute settlements.
As Saudi Arabia and Pakistan finalize these strategic agreements, the stage is set for robust economic collaboration, underscoring the potential for transformative growth and investment in the region.
