Pakistan on Friday approved to pay $11.6 million in compensation to the Chinese nationals who either had lost their lives or were wounded in a terrorist attack.

It also agreed to give 56% shares of a government company to the UK by converting a 14-year-old grant into equity.

The decisions were made by the Economic Coordination Committee (ECC) of the cabinet. It was remotely chaired by Federal Finance Minister Shaukat Tarin.

“The ECC, after deliberation and considering the depth of our relationship with China, approved the proposal of payment of $11.6 million as a goodwill gesture on [the] government level,” read a statement issued by the finance ministry.

Pakistan has agreed to make the payment to remove an irritant in relations, as it was not legally bound to a pay a penny to any Chinese citizen who was killed or wounded in the terrorist attack.

A total of 10 Chinese national lost their lives and another 26 were hurt in a suicide attack on a bus that was carrying them to the work site of the Dasu Hydropower Project in July last year.

After the Chinese contractor suspended work and demanded $37 million in compensation, the government had worked out four different compensation amounts ranging from $4.6 million (Rs810 million) to $20.3 million (Rs3.6 billion).

The government agreed to pay $11.6 million (Rs2 billion) by taking into account the compensation paid to Chinese workers in 2004 and inflated the old number by using purchasing power parity based GDP per capita.

The amount is double than what China gives to its citizens who die in similar attacks in its territory.

UK grant

The finance ministry also presented a summary to the ECC to resolve the issue of the reversal of Foreign Commonwealth and Development Office (FCDO) of the UK unspent grant equal to Rs2 billion. The UK had given that amount in 2008.

The money remained unspent for over a decade because of the mismanagement by the officials of the State Bank.

The finance ministry proposed that a new Credit Guarantee Company (CGC) should be established and the UK should be given 56% shares equal to Rs7.3 billion (present value of the grant) against the unspent amount in it. The remaining 44% shares will be held by Pakistan.

The UK will control its share in CGC through Karandaaz, according to the ministry’s proposal. The UK owns the Karandaaz — an entity that had been set up to give small loans.

However, official documents revealed that there was no mention of the Karandaaz in the memorandum of understanding (MoU) signed between Pakistan and the UK for management of the grant.

The UK had provided £50 million as grant or Rs2 billion in 2008 to support small and medium companies in Pakistan. The agreement had been signed in July 2008 with the UK’s Department for International Development. However, now it is being given shareholding worth Rs7.3 billion.

In December 2020, the ECC had also approved to sell the majority stake in the government-owned company to the UK through its controlled entity by converting “grant” into equity in a legally questionable manner.

At that time, it had been proposed that the UK should be given 51% shares in the Pakistan Credit Guarantee Company (PCGC), which had been set up in 2019 for the purpose.

The Express Tribune had then reported irregularities in the deal and subsequently the federal cabinet had shelved the proposal.

After The Express Tribune reported the issue, the matter was referred to the law ministry for opinion.

Read More: Pakistan to pay Dasu attack Chinese victims

The Law Division had opined that selling stakes to the UK constituted privatisation, which could be done without competitive process. The law ministry had also opposed giving the State Bank of Pakistan (SBP) shareholding in the PCGC.

On the question of converting grant into equity, the law ministry had said: “The clause in the MoU stating that the unutilised amount of the grant shall be returned to DFID [now FCDO] is not invalid”. However, more importantly the ministry had said that “they do not have sight of any document from DFID stating that the Karandaaz comes within the said programme and framework”.

To bypass the law ministry’s legal opinion, the SBP had come up with the proposal to set up a new “Credit Guarantee Company in which the principal unspent of the FCDO funds will be used for 56% shareholding of the Karandaaz and the “existing PCGC will have to wound down”.

The clause related to surrendering unspent amount had been inserted in January 2015, after closure of the programme, all unspent funds were either to be reverted to the DFID or be provided to its enterprise.

Over a year ago, the finance ministry was of the view that “any clause signed subsequently that runs counter to the main/primary agreement within the MoU is ab-initio invalid”. However, the law ministry did not back this stance.

Other issues

The committee, considering the food crisis and prevailing situation in Afghanistan, approved a summary presented by the commerce ministry and allowed the export of selected commodities to the neighbouring country against the local currency by adding them to a list of items.

The ECC also allowed the removal of 45% regulatory duty on the import of Chilghoza from Afghanistan. The reduction of tariff on this item will encourage the legal import of unprocessed Chilghoza for processing in the country for export and will also be instrumental in creation of jobs in the far-flung areas of border regions of Khyber-Pakhtunkhwa and economically backward areas of Balochistan.

The industries and production ministry presented a summary on the urea fertiliser requirement for the remaining Rabi season of the fiscal year 2021-22.

The ECC after detailed deliberation allowed the operations of plants running on Sui Northern Gas Pipelines Limited (SNGPL) — Fatima Fertiliser, Sheikhupura plant and Agritech — for a further two months post January 2022, i.e. February to March 2022, at a gas rate of Rs839/MMBTU.

The committee approved a summary tabled by the information technology and telecommunication ministry for the constitution of an advisory body headed by the finance minister for the release of IMT/5G spectrum.

The information technology and telecommunication ministry also presented a draft policy, “Directive of the Pakistan Telecommunication (Re-Organisation) Act 1996”, for the renewal of cellular licence of the Pakistan Mobile Communication Limited. The ECC after discussion gave nod to the summary.

The ECC also approved Rs5 billion for the planning and development ministry for conducting the 7th population and housing census.

The cabinet body gave the nod to set up a committee to resolve the administrative and financial issues being faced by the Pakistan International Airlines on the Roosevelt Hotel. The committee will dispose of the furniture and equipment of the closed hotel. It will also resolve issues of the ex-union employees including terminal benefits and pension etc.

A similar committee had earlier approved $172 million bailout package for the Roosevelt Hotel.