PIA, Reko Diq & K Electric: Mistakes made while contracting with foreign companies

I suggest that expropriation or exclusivity clauses are the two options which can relieve the nation from the unbearable load shedding; K-Electric has caused a potential law and order situation with the deaths of hundreds of persons ever since it took over.

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He was an ex-PAF, a PIA jumbo pilot, and above all, a known upright, honest man who, while signing any paper was so detail-oriented that he always put a time stamp along with the date. Further, he often used to lead the prayer in the mosque located in office premises reflecting his pious nature. k-electric 

While on an official UK visit, he had a meeting relating to his executive assignment in the airline, he was asked by a UK vendor to sign an MOU (Memorandum of Understanding) leading towards a formal agreement after a couple of months. Since the MOU, as per our understanding, is non-binding, hence the Captain signed the MOU on his own with a foreign company at London and returned home.

However, to his dismay, the management did not grant approval for converting that MOU into a formal agreement because of various economical and social considerations including dissent from crew unions, and the honest Captain had no option but to intimate the vendor in UK that a formal agreement could not be signed.

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The vendor from UK sought legal remedy on the pretext that the MOU was binding while in Pakistan we presume that MOU is just an understanding, although we actually signed a legal document. Various correspondences took place between PIA, the vendor and PIA’s representative at London, and PIA narrowly escaped any financial compensation as the vendor was of the view that they refurbished certain premises and declined other future business in anticipation of PIA.

Only then we came to know that an MOU can be binding in UK depending upon its language.

Common blunders 

The public at large does not know that PIA has, during the last 20 years, entered into management agreements with two reputed foreign companies to manage its certain departments located in Pakistan.

Those two companies were M/s Swissport (the world’s largest airport handling company) engaged to handle airport services and SATS (Singapore Airport Handling Company) to manage PIA’s huge kitchen of 40,000 plus meal capacity. Both these foreign companies departed prematurely in an unceremonious way, however, luckily no financial compensation incurred on us as the undersigned know.

At the Federal level, the nation is aggrieved with the fine of US$ 6 Billion on Reko Diq  (gold and silver reserves of Balochistan), luckily put on hold for now as a result of Pakistan’s desperate efforts, and US$ 1.2 Billion on Karkay case (a ship – based energy company.)

Read More: PIA: Little known causes of downfall and the way forward

And the menace that continuously haunting Karachiites for two decades now in the name of K-Electric agreement is going to create a menacing situation soon. Right now I am in my office at 1.40 pm and there is no light since morning in the port area of Pakistan. I happened to visit K-Electric Customer Service centre and we were told that Karachi Port is not a VIP area while Bilawal House and Corps Head Quarters are declared VIP areas for exemption from load shedding.

Seeing the plight of 30 million people and the incapacity of K-Electric the only way is to getting rid of K-Electric management by exercising the exit clause but sadly and pathetically, that option is too expensive to adopt due to commitments of agreement.

Looking towards a solution

International Agreements should only be administered by the government hired a panel of local and International experts because international companies only invest when jurisdiction for disputes is an international court rather than courts of Pakistan.

Reko Diq agreement was administered by ministry officials under Pakistani rules, which are not definite in nature and tend to negate each other so much so that even killers get off scott free, while IPP including Karkay agreements were handled by Federal Cabinet itself and none were experts. Experts here means not the technical men and lawyers that usually enter into such contracts, but only the business savvy persons in the relevant field, so that deals can be struck in a way that tilts more towards consumers than the vendors.

Getting rid of K-Electric

A board member of K-Electric, a couple of days back warned to seek international court assistance if the exclusivity clause was challenged by the Government of Pakistan.

I suggest that expropriation or exclusivity clauses are the two options which can relieve the nation from the unbearable load shedding; K-Electric has caused a potential law and order situation with the deaths of hundreds of persons ever since it took over.

The instances of both, the law and order situation and deaths nearly caused closures of city many times and it’s a ticking bomb. The incapacitated K-Electric has incapacitated the city too. The winter is coming and gas shortages will be the major tool that will presumably be exploited for providing lesser power to the poor masses.

The time is up for a decisive decision.

Mushtaq Jumma

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