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Daily Times Editorials – 12th February 2016

OMT victims

In pursuance of its ambition of building a train project in Lahore at the cost of other important needs of citizens, the Punjab government is putting the overall character of the city at stake. Almost daily new stories of injustice are appearing in the media that highlight the suffering of citizens due to the execution of this ill-planned project. Despite the obvious faults of the project, the Punjab government of Chief Minister Shahbaz Sharif is not giving any importance to the law, rules and regulations. Even the stay order issued by the Lahore High Court has no worth in the eyes of the Punjab government that is busy depriving people of their homes and businesses through the state machinery and resources. Can the Punjab government explain the urgency of the project when other social sectors are facing utter neglect? How will the Punjab government arrange electricity to keep the train running when people are losing jobs due to the energy crisis? By depriving citizens of their homes and businesses along the route of the project, the Punjab government is earning their wrath, which may impact the political fortunes of the PML-N in Punjab negatively in future.

The government will have to keep the project running through massive subsidies once it is completed. There are also concerns about the compensation being paid to the victims, who are criticising the government for depriving them of their homes and businesses without providing any alternate arrangement or paying adequate rates for their properties. The Orange Line Metro Train (OMT) is proving a disastrous project just like the Metro Bus projects in Lahore and Islamabad that have failed to end traffic congestion on the roads. So far, OMT promises to prove an expensive white elephant. The government needs to invest in sectors that are aimed at the welfare of the maximum number of citizens, first and foremost education and health. There is no disagreement on the construction of modern mass transit infrastructure, but it should be done after taking all stakeholders into confidence by preparing a fault-free design that does not prove a burden on the citizens or the economy. Inadequate compensation, diversion of funds to this project, large scale demolition of houses and risk to heritage sites have made the project controversial. The government should review the design of OMT and address the concerns of citizens. Instead of constructing development projects in a haphazard manner, the Punjab government needs to adopt a sensible approach, give an ear to the advice of experts, and refrain from following the whims of an individual, no matter how powerful.

Neoliberal dogma

Due to its obstinate pursuit of a dogmatic neoliberal economic policy and its poor handling of consequent dissenting voices, the government of Prime Minister (PM) Nawaz Sharif finds itself assailed from all corners on the domestic front. In these times of trouble for the PM, the arrival of World Bank President Jim Yong Kim can be read as the descent of a reassuring guardian angel. Speaking at an event, Jim Yong Kim was full of praise and encouragement for the PM and his economic orientation. According to him, Pakistan’s economy has improved and stabilised well beyond expectations over the past three years. He expressed his strong support for the government’s “tough economic decisions” and reiterated his belief in the agenda of structural reform. Jim Yong Kim also urged the government to be even more “ambitious” in following through with “strengthening the role of the private sector” and other assorted steps that are predicted to create “a higher level of growth and opportunity for [Pakistan’s] people”. The PM reciprocated the backslapping and was equally effusive in his praise of the World Bank. Furthermore, he sought to reassert his credentials as a neo-liberal economic reformer by confirming to the World Bank chief his belief in a private-sector driven, ‘trickle-down’ economy and his distaste for state-owned enterprises.

The government will no doubt point to such a high-profile endorsement as proof of the validity of its agenda. Nonetheless, the lofty claims of Jim Yong Kim need to be dissected. The economy Dr Jim is extolling does not inspire much confidence upon closer examination. The fact remains that the over the last three years the energy crisis has exacerbated. The result has been a near-total collapse in the productivity and viability of Pakistan’s local industries. Given these prevailing conditions and a lack of certainty about the future, there is a flight of capital as entrepreneurs seek to make their fortune in more encouraging climes. We need a reality check rather than illusions stemming from wilful denial. Quite apart from dispelling the reassuring fiction of a resurgent economy, there is a need to be critical of the basic assumptions underlining the endorsement of Dr Jim and the response of the PM. The blind faith in the capacity of the private sector to be the driver of the economy is open to question. Quite simply, in a developing country with severe shortfalls of capital and investment, handing the keys to profit-maximising private actors is not the answer. In (the many) areas where the private sector is traditionally shy to invest because of long payback periods and relatively modest returns (e.g. heavy industry), there is no alternative to the government stepping in for the public good. Fresh thinking is required as these neo-liberal platitudes and shibboleths don’t live up to their billing.

A welcome deal

In a welcome development, an agreement has been reached between Pakistan and Qatar for importing liquefied natural gas (LNG) for 15 years. According to the agreement, Qatar will provide Pakistan with a billion dollars worth of LNG annually. Qatar Liquefied Gas Company Limited will sell the gas from the year 2016 to 2031 to Pakistan State Oil (PSO). The need to import LNG is a result of the gas shortage and relatively higher cost of power generation through furnace oil and diesel fuel. The LNG will be pumped into the national gas grid to ease the gas supply and power crisis as well as serve the needs of the fertilizer industry. Under the terms of the agreement, Qatar will supply a total of 3.75 million tons of LNG to Pakistan annually on a government-to-government basis under a pricing formula that translates into a current price of LNG of $ 5.35 per Million British Thermal Units (MMBTU). The long-term LNG sales and purchase agreement (SPA) also provides for annual upward and downward flexibilities up to three LNG cargoes per contract year. As per the agreement, the two sides can review the price 10 years after the start date. And if they fail to do so, either party may terminate the SPA with effect from the end of the contract year in which the termination notice was served, in which case the supply period can be as short as 11 years. The provision of LNG would help meet up to 20 per cent of the energy requirements of the country and result in saving one billion dollars per year plus $ 600 million in diesel costs. The deal would help revive non-functioning electricity generation units of 2,000 megawatts and three fertiliser plants. This offer will really help alleviate the energy crisis caused by the gas shortfall in the country. The gas shortfall increases during the winter season when domestic consumers face load shedding of this utility in their homes.

Overall, the deal has a lot of positive prospects for the country. However, there are certain reservations regarding the agreement. With the LNG import deal again in the spotlight, quarters concerned have started expressing concern as to how the agreement could be in the best interests of the country. Factors that make the LNG import controversial include the absence of proper infrastructure to offload, store and transport the gas to various parts of the country as well as the reservations of the Sindh government. The latter has accused the federal government of not consulting it on the LNG import issue as well as its transmission, distribution, safety, environment protocols and pricing and tariff regime. It has also objected to the setting up of an LNG-fired power plant in Punjab alone while ignoring the other provinces. Other issues include the finalisation of the deal without going for international competitive bidding. Why did the government not prefer the option of purchasing gas from Iran and what will be the end cost of the LNG for a local buyer? It has been asserted by the Minister for Petroleum and Natural Resources Shahid Khan Abbasi that gas from Iran would be more expensive compared to the import of LNG from Qatar. The cost of gas being imported through the IP pipeline will be $ 5.70 per MMBTU and from the TAPI pipeline from Turkmenistan $ 5.90 on the basis of a benchmark Brent price of $ 40. The federal government needs to make sincere efforts to address all concerns regarding the deal. The Centre should not be biased against any province. All efforts should be made not to make this deal controversial by ensuring transparency and sharing all the relevant details. There should be a balanced policy and the government needs to address the concerns of all stakeholders. Pakistan needs to set up a proper system for injecting LNG into the national gas grid to fully transfer its benefit to the power sector, industry and the public. There should be proper arrangements for the safe transportation as well as the distribution of LNG to all parts of the country.

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