The sudden withdrawal of Kingho group, one of China’s largest private coal mining firms, from its Thar coalfield proposal is being construed differently in the media as regards its cause.

The group had come up with an ambitious 20-year long investment vision, estimated to cost up to $19 billion that included a chemical complex.

The Wall Street Journal which broke the story on September 30, later carried by some Pakistani newspapers, quoted a company official saying it was because of security concerns for its personnel that it decided to quit in August. At that time, there had been much bombings and killings in Karachi and other major cities.

But the reason the WSJ itself gave was more political than economic, also being similarly pursued by other US newspapers including the New York Times. It said, it is the “reluctance” and “lukewarm response” of China to Pakistan to help it in a big way, (as did the US), in the wake of deteriorating relations between Pakistan and the United States because China thinks, “Islamabad may remain dependent on aid from Washington for some time to come.”

Besides, it says, “Islamabad, in Beijing’s eyes, has failed to live up to its promises, including to ensure security for investments. A number of Chinese workers have been killed in Pakistan in the past decade, some of them in troubled Balochistan province, where armed separatist insurgents have opposed Chinese investments.”

Meanwhile, Zubair Motiwala, chairman of the Sindh Board of Investment, has confirmed the withdrawal of Kingho from Thar but insists it was a temporary pullout. The company has not refused, nor abandoned its project, he says. Kingho was short-listed by the Thar Coal and Energy Board in July to invest in Block VII of the Thar coalfield following an international competitive bidding process.

A local newspaper gave a different reason for Kingho’s pullout. It said the banks and financial institutions had refused to extend any loans to the company in the wake of uncertain situation in Karachi which compelled it to suspend the project.

But the explanation given by Secretary, Sindh Coal and Energy Development Department on October 3 is quite strange and unsympathetic, if not provocative. It said the real cause of Kingho’s giving up the project was turning down of its proposal which sought “extraordinary concessions” and that could not be accepted by the evaluation committee of the Board. How far it is true remains unconfirmed unless the company reacts to it.

A few years ago, a Chinese company Shenfa State Corporation, which was planning a huge investment in Thar coalfield, had to abandon the coal-power project because it refused to offer the desired kickbacks to the officials handling the project. Shenfa president had offered to produce electricity at the rate of 5.89 cents per unit with a commitment to deliver two power plants of 325 MW each by the end of 2009, and two similar plants by the end of 2010.

Pakistani officials insisted on a price below 5.5 cents per unit. However, a price of 5.39 cents per unit was agreed upon. But since there were no big cuts or commissions to be made, the project was dumped.

The Sindh government’s press release further says that The WSJ’s report and that of other newspapers gave an impression that the Chinese firm Kingho had “abandoned” or cancelled its investment because of ‘security concerns’ which is not true.

The correct position, it said, is that Kingho Group “did not have any project nor had entered into any ‘pact’ or ‘deal’ with any authority for investment in Thar coal field.”

In March this year, an expression of interest (EoI) was received from the company.

“A mere EoI, the terms of which could not be worked out, cannot be termed as ‘abandoning’ of an investment,” the press release said.

The Sindh government is unwilling to accept that Kingho left because of ‘security concerns’. But there is no denying that the security factor has deterred investors, even of domestic origin, over the years from making substantial investments. In the past, many Chinese personnel including engineers had been kidnapped or killed by militants. In fact, it is a highly hazardous mission for them to come here to work on our country’s projects in such an atmosphere.

In 2008, Taliban militants had abducted two Chinese engineers in the northwest region of the country “to avenge Pakistani government’s constant bombardment and shelling “in their areas, as claimed by their spokesman. So, the Chinese had been a victim of violence for no fault of theirs.

Meanwhile, the Sindh government has been able to strike a deal with another Chinese mining company –– Global Mining Company and a MoU has been signed for a coal-mining and power generation project in Block I. The other companies short-listed include Australasia Mining and Pakistan Petroleum. A high-level delegation from the UK visited Pakistan recently and most of its delegates showed interest in mining sector.

Liyang Liu, who is the chief executive officer of Sino-Sindh Resources, a local subsidiary of GMC, signed the MoU. The company, he said, would complete the feasibility study within six months, and the groundbreaking ceremony of Mine Construction would be held in the first week of April 2012. Production of coal would start within three years and power generation of 900 MW was expected by 2014.

The GMC will produce five million tons of coal per annum with an initial investment of $3 billion. Out of investment of $4.5 billion, $1.5 billion will be spent on infrastructure development. A comprehensive incentives package has been developed to market Thar coal. It includes, among other things, 30 years exemption on corporate tax, no custom duties on import of coal mining projects and exemption on withholding tax to shareholders on dividend for 30 years.

Officials say that foreign investors are showing great interest in Thar’s mining sector which can also ultimately emerge as a leading export sector of the country. Mining sector, it is believed, can export more than the textile sector.