IDENTIFICATION AND THE STRATEGIC ROLE OF STAKEHOLDERS ALONG MINING VALUE ...

143 Pages·2015·2.4 MB·English

IDENTIFICATION AND THE STRATEGIC ROLE OF
STAKEHOLDERS ALONG MINING VALUE CHAIN IN
PAKISTAN

ZEESHAN ASGHAR

A research project submitted to the Faculty of Engineering and the Built
Environment, University of the Witwatersrand, Johannesburg, in fulfillment of
the requirements for the degree of Masters of Engineering

Johannesburg, 2015
DECLARATION

I declare that this thesis is my own unaided work. Where use has been made of the
work of others, it has been duly acknowledged. It is being submitted for the Degree
of Masters of Engineering in the University of the Witwatersrand, Johannesburg. It
has not been submitted before in any form for any degree or examination in any other
University.

Signed:

_________________

Zeeshan Asghar

This ________ day of _______________ 2015

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ABSTRACT

Pakistan set up two national mineral policies in 1995 and 2012. The first mineral
policy was introduced after the discovery of Thar Coal to address the issues regarding
mineral assets. After twenty years, it was observed that the National Mineral Policy
of 1995 could not address the core issues faced by the mineral industry of Pakistan
and there came a need to address the gaps in the policy. Therefore, a new mineral
policy with new aims and objectives was introduced in 2012.

Furthermore, it was identified that one of the major gaps of both mineral policies was
that they were made without the realization and consultation of stakeholders along the
mining value chain. With the identification and assessment of the strategic roles of
stakeholders in the mineral industry being vital for the formulation of a mineral
policy, the purpose of this research was to identify and analyze the role of
stakeholders in the mining value chain in Pakistan.

Forthwith, a critical review of the mineral policies in general was carried out in this
report to analyze the contributing factors towards the failure of the first mineral
policy. The result of the second mineral policy was not analyzed because no major
FDI has been injected in mineral sector yet. The results of the absence of stakeholders
were also compared with the expected outcomes of the mineral policy and the
disparities were identified. Strategic and tactical interactions of stakeholders were
analyzed to create value loops and virtuous cycles and the presence of positive and
negative boosters were also identified. After analysing Pakistan's business
environment, a stable business model was created in order to facilitate the
formulation of a stable, transparent and equitable mineral policy.

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ACKNOWLEDGMENTS

I would like to acknowledge my colleagues at the School of Mining Engineering and
the following individuals for their guidance and encouragement.

 Ms. Tomi Oshokoya, my supervisor throughout this journey.
 Dr Farhat Abbas Bhatti, Ehsan Qadir and Nazarat bashir my brothers, who are my
inspiration.
 Mr. Raja Imran Sultan, who remained a pillar of support throughout my life.
 My wife, Dr Shaista and my two beloved kids, Aqsa and Talha for selflessly giving
me their love and patience while I undertook this research.

This research work is dedicated to Almighty Allah. I cannot express how grateful I
am to Him. He has never left me alone for a day as He guided me through life’s ups
and downs. He has blessed my life with the realization of right and wrong and given
me the strength to defend the right in every sphere of life.

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TABLE OF CONTENTS

CHAPTER ONE ......................................................................................................... 1
1. Background, Literature Review and Aims of Research .............................. 1
1.1 Introduction.......................................................................................................... 1
1.2 Literature Review ................................................................................................ 3
1.2.1 Mining Value Chain ..................................................................................... 3
1.2.2 Zachman Framework .................................................................................... 6
1.2.3 Tools for Analysis ........................................................................................ 8
1.2.3.1 Scorecard Analysis ....................................................................................... 8
1.2.3.2 Leading and lagging indicators in Policy ..................................................... 8
1.3 Justification of the study ...................................................................................... 9
1.4 Aims and objectives of the research .................................................................. 12
1.5 Structure of report .............................................................................................. 14
1.6 Conclusion ........................................................................................................ 16
CHAPTER TWO ...................................................................................................... 17
2. History of mining in Pakistan ...................................................................... 17
2.1 Introduction....................................................................................................... 17
2.2 Pakistan - An Overview ..................................................................................... 18
2.2.1 Brief History of Pakistan - A glimpse ........................................................ 18
2.2.2 Geography of Pakistan ............................................................................... 19
2.2.3 Climate of Pakistan ..................................................................................... 20
2.3 The Cultural dynamics of Pakistan ................................................................... 21
2.4 Religious Dynamics ........................................................................................... 22
2.5 The mining industry of Pakistan ........................................................................ 22
2.5.1 National Mineral Policy Environment - A critical review ......................... 26
2.5.2 Challenges for mining sector in Pakistan ................................................... 28
2.5.2.1 Management and effective governance ...................................................... 29
2.5.2.2 Environmental sustainability ...................................................................... 30
2.5.2.3 Local involvement and community development ...................................... 30
2.5.2.4 R & D and Human Resource Development ............................................... 31
2.6 SWOT analysis of Pakistan ............................................................................... 31
2.6.1 Strengths of Pakistan .................................................................................. 32
2.6.2 Weaknesses of Pakistan .............................................................................. 33
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2.6.3 Opportunities for investment in Pakistan .................................................. 35
2.6.4 Threats against Pakistan's business environment ....................................... 36
2.7 Conclusion ......................................................................................................... 38
CHAPTER THREE .................................................................................................. 40
3. Stakeholders along the Mining Value Chain .............................................. 40
3.1 Introduction....................................................................................................... 40
3.2 Types of stakeholders ........................................................................................ 40
3.3 Stakeholders analysis and identification ............................................................ 41
3.3.1 Government and its subsidiaries ................................................................. 43
3.3.2 Law Enforcing Agencies (LEAs) ............................................................... 44
3.3.3 Religious Monarchs .................................................................................... 45
3.3.4 Indigenous People ...................................................................................... 46
3.3.5 Communal Mining Institutes ...................................................................... 47
3.4 Conclusion ......................................................................................................... 51
4. Outcome of Stakeholders' absence in Policy-making ................................ 52
4.1 Introduction........................................................................................................ 52
4.2 Evolution of Pakistan's mineral sector in absence of stakeholder consultation 53
4.2.1 Organizational Issues .................................................................................. 53
4.2.2 Functional gaps of the mineral policies ..................................................... 54
4.2.3 Technical gaps and lack of standardization ................................................ 57
4.2.4 Fiscal gaps for attracting FDI ..................................................................... 58
4.2.5 Explicit fiscal impediments ........................................................................ 60
4.3 Conclusion ......................................................................................................... 62
CHAPTER FIVE ....................................................................................................... 63
5. Tactical and Strategic Interaction of Choices and Value Loops .............. 63
5.1 Introduction........................................................................................................ 63
5.2 Business Model .................................................................................................. 63
5.3 Strategic choices and the value loop .................................................................. 64
5.4 The Virtuous Cycle ............................................................................................ 66
5.5 Strategic interaction of Stakeholders- Inter dependency ................................... 68
5.6 Framework for the Mineral Industry ................................................................. 69
5.7 Conclusion ......................................................................................................... 70

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CHAPTER SIX ......................................................................................................... 71
6. Impediments in Mineral Policy of Pakistan for Successful Coal
Utilization ....................................................................................................... 71
6.1 Introduction........................................................................................................ 71
6.2 The Role of Power Generation in GDP of Pakistan .......................................... 73
6.3 Rising demand of coal from neighboring countries .......................................... 74
6.3.1 Outlook of India and China as emerging markets ...................................... 74
6.3.2 China and India demand for energy materials ............................................ 74
6.4 Thar Coal Project ............................................................................................... 75
6.4.1 Introduction ................................................................................................ 75
6.4.2 Characteristics of Thar coal ........................................................................ 76
6.4.3 Potential of resource in terms of power generation and local use .............. 77
6.4.4 The Policy of power generation and Thar coal........................................... 78
6.5 Power generation policy vs. Mineral development policy: Impediments for
Thar Coal Project ............................................................................................... 79
6.5.1 Risks associated with mining in Pakistan ................................................... 79
6.5.2 The Current situation affecting investment in Pakistan.............................. 80
6.5.3 Options available for Pakistan .................................................................... 82
6.6 Conclusion ......................................................................................................... 84
CHAPTER SEVEN ................................................................................................... 86
7. Conclusion and Recommendation ............................................................... 86
7.1 Introduction........................................................................................................ 86
7.2 Conclusion ......................................................................................................... 86
7.3 Recommendations.............................................................................................. 87
References ................................................................................................................... 89
Annexure A .............................................................................................................. 102

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LIST OF FIGURES
Figure 1.1: Porter Value Chain. .................................................................................... 4
Figure 1.2: Generic mine value chain. .......................................................................... 5
Figure 1.3: Mining value chain and Porter Value Chain mapping. .............................. 6
Figure 1.4: Dependency of leading and lagging indicators.. ........................................ 9
Figure 1.5: Mineral policy development process. ....................................................... 10
Figure 1.6: Competitive advantage. ............................................................................ 12
Figure 1.7: Schematic role of stake holders in a balanced National Mineral Policy. . 14
Figure 2.1: Map of Pakistan.. ...................................................................................... 19
Figure 2.2: Temperature range of Pakistan. ................................................................ 21
Figure 2.3: Mineral map of Pakistan. .......................................................................... 25
Figure 2.4: Inter-linkage of industries. ........................................................................ 27
Figure 2.5: Educational population density in Pakistan. ............................................. 34
Figure 3.1: Power influence Matrix. ........................................................................... 43
Figure 3.2: Areas of Pakistan showing Terrorist influence......................................... 45
Figure 3.3: Geological Survey of Pakistan. ................................................................ 49
Figure 4.1: Impact of Terrorism in Pakistan.. ............................................................. 56
Figure 4.2: Government of Pakistan budget.. ............................................................. 61
Figure 5.1: Stages of competitive process framework. ............................................... 64
Figure 5.2: Proposed virtous cycle for Pakistan.......................................................... 66
Figure 5.3: Vicious cycle of Pakistan. ........................................................................ 67
Figure 5.4: Proposed virtuous cycle for Pakistan Mineral Sector. .............................. 68
Figure 5.5: Tactical and strategic stages. .................................................................... 69
Figure 6.1: GDP growth rate of Pakistan. ................................................................... 72
Figure 6.2: Trade deficits.. .......................................................................................... 73
Figure 6.3: Location of coal reserves in Pakistan. ...................................................... 76
Figure 6.4: Procedure for approval of solicited proposal. ........................................... 80
Figure 6.5: Federal and provincial organizations involved in Thar coal project. ....... 82
Figure 6.6: Proposed virtuous cycle for Thar Coal. .................................................... 84

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LIST OF TABLES
Table 1.1: Major mineral deposits in Pakistan. ............................................................. 1
Table 1.2: Generic Zachman Framework...................................................................... 7
Table 1.3: Ranking of Pakistan in Asian countries ..................................................... 13
Table 2.1: Minerals and extractions in Pakistan. ....................................................... 23
Table 2.2: Comparison of the focus areas of the National Mineral Policies. .............. 26
Table 2.3: Comparison of Pakistan's HDI with neighboring South Asian countries. . 32
Table 2.4: Summary of SWOT analysis of Pakistan................................................... 37
Table 3.1: Stakeholder prime interest matrix for mineral policy. ............................... 42
Table 3.2: Population density of Pakistan. .................................................................. 46
Table 4.1: Provincial agencies for minerals and its divisions. .................................... 53
Table 4.2: Non-standardized duration and prospecting areas among provinces. ........ 58
Table 4.3: Key attributes of Pakistan fiscal regime. ................................................... 59
Table 4.4: IRR and government share of revenues of other countries. ....................... 59
Table 5.1: Proposed set of choices for mineral sector in Pakistan. ............................. 65
Table 6.1: Mineral deposits of Pakistan. ..................................................................... 71
Table 6.2: Percentage of global consumption of coal in last 30 years. ....................... 74
Table 6.3: Comparison of China and India consumption. .......................................... 75
Table 6.4: Comparison of Thar Coal characteristics with international mines ........... 77
Table 6.5: Consumption of coal in Pakistan in 2002-2003. ........................................ 78

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KEYWORDS AND ABBREVIATIONS

APT Additional Profit Tax
BSI Balanced Scorecard Institute
CIL Center for Intercultural Learning
CPI Corruption Perception Index
DG Directorate General / Director General
EBIT Earnings before Interest and taxation
FATA Federally Administrated Tribal Area
GDP Gross Domestic Product
GNI Gross National Income
GoC Government of Canada
GoP Government of Pakistan
GoS Government of Sind
GSP Geological Survey of Pakistan
HES Higher Education System
IofM Institute of Manufacturing
IRR Internal Rate of Return
KPK Khyber Pakhtun Khuwah
MoD Ministry of Defence, Pakistan
NGO Non-Governmental Organization
NEPRA National Energy and Power Regulatory Authority
NMP National Mineral Policy
PIA Pakistan International Airlines
PBS Pakistan Bureau of Statistics
PMDC Pakistan Mineral Development Corporation
PPP Purchasing Power Parity
SAIMM Southern African Institute of Mining and Metallurgy
SBP State bank of Pakistan
SCP Supreme Court of Pakistan
SWOT Strength Weakness Opportunity Threat
TCF Trillion Cubic Feet
TOE Tons of Oil Equivalent
UGC Underground Gasification of Coal
UK United Kingdom
UN United Nations
UNDP United Nations Development Programme
USGS United States Geological Survey
WAPDA Water and Power Development Authority
WoT War on Terror
WB World Bank
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