The arrest of former PM Abbasi for LNG deal, and the confidence of foreign investors
On Thursday, Pakistan’s anti-graft agency, the National Accountability Bureau (NAB) arrested the country’s former Prime Minister Shahid Khaqan Abbasi on allegations of corruption in the import of liquefied natural gas (LNG), from Qatar.
Senior party members of ruling party Pakistan Tehreek-e-Insaf (PTI), which came to power last year on the back of a campaign against corruption, have long held that contracts signed by the previous PML-N government for the LNG import epitomize financial malfeasance at the very top of the political elite.
As a sign of its disaffection with the earlier deal, Pakistani authorities decided to import LNG through international companies, instead of signing another direct agreement with Doha and on Thursday, Pakistan opened the technical bids of four international companies for the supply of 400 million cubic feet per day of LNG for a period of ten years, while stating they “hoped to get a better deal than the purchase agreement signed with Qatar in February 2016.”
While the need for accountability cannot be overstated, the government must remain aware of the growing energy demands of the country, and of the impact such cases might have on investor confidence.
Javed Hasan
Last year, NAB initiated an inquiry to look into Abbasi’s involvement in the alleged misappropriation of funds from the import of LNG from Qatar at a price equivalent to 13.39 per cent of the international benchmark crude oil price.
Apart from being expensive, government sources contend that the contract also lacked transparency, especially with respect to the granting of a 15-year contract for an LNG terminal to a favoured company of Abbasi’s choosing.
Abbasi, however, has unequivocally defended himself and stated that the LNG import pricing and processing terminal contracts are completely transparent and serve national interests.
The intricacies of determining the most economic pricing for long-term LNG contracts in the volatile hydrocarbon markets are complex, and those that involve international contracts, are even more so.
It will therefore be a challenge for NAB to unravel the complexities and clearly demonstrate unfair pricing, not only to Pakistani courts, but also to withstand scrutiny by the International Court of Arbitration.
NAB’s case will however be helped considerably, if as has been reported in local media, one of the key bureaucrats, former secretary for petroleum, Abid Saeed, turns into an approver against Abbasi.
PM Khan’s campaign promise to root out corruption among the ruling elite, especially the political classes, remains a popular goal among core PTI supporters. Despite a slowing economy, the incarceration of high-profile figures like Zardari and Abbasi remains popular among the PTI base.
The opposition, led by PML-N on the other hand, sees the anti-corruption drive as political victimization and the silencing of opposing voices. They also accuse the government of bending NAB to launch a ‘witch-hunt’ against its opponents, which the government vehemently rejects.
While the need for accountability cannot be overstated, the government must remain aware of the growing energy demands of the country, and of the impact such cases might have on investor confidence.
This case must be dealt with in a manner that does not adversely impact the government’s ability to attract investments into Pakistan. Already, Reko Diq hangs like a spectre haunting foreign interest in the country.
Whether ex-PM Abbasi is guilty or not remains to be seen, but the PTI government, nevertheless, sees the latest high-profile arrest as validation of its persistent drive against corruption. It has pursued such high-profile cases relentlessly since coming to power last year, presumably, in its efforts to embed the idea of accountability among public office holders.
But going forward, the government must remain sensitive to the concerns of international investors with regards to transparency and must apply international best practices in enforcement- and be wary of how the optics of such cases might impact the confidence and considerations of critical investors abroad.
