Pakistan’s fragile economy has been dealt another avoidable blow. Saudi and Kuwaiti investors have launched a $2bn international arbitration over the government’s handling of K-Electric (KE), Karachi’s power utility. The case is more than a legal dispute. It exposes how regulatory drift, political interference and administrative paralysis have turned Pakistan into a high-risk jurisdiction for long-term foreign capital even from its closest allies.

The arbitration, filed under the OIC Investment Agreement and UNCITRAL rules, follows years of policy reversals and inaction that effectively destroyed the investors’ exit from KE. If Pakistan loses and its record in investor–state disputes offers little reassurance, the financial, diplomatic and reputational consequences could be severe.

KE was once held up as a rare privatisation success. In 2005, Pakistan sold a 71 per cent stake in the then Karachi Electric Supply Company to a consortium led by Saudi Arabia’s Al-Jomaih Group and Kuwait’s National Industries Group, alongside US investors. At the time, the utility was loss-making, unreliable and a fiscal drain. Over the next two decades, the investors injected more than $4.7bn, cut transmission and distribution losses dramatically, expanded........

© The Friday Times