On the night of the 21st of December 2020, reporters across Lahore began getting vague calls from Turkish companies working in Pakistan, asking them to attend an emergency press conference. Dedicated as they are to their jobs, some of the reporters managed to get up from their greasy dinners or sleepless slumbers and went over to the hastily organised presser.
What they found there was astounding. Officials from the company milled about looking rather annoyed and as if they had not been the ones to call up this meeting with such short notice. It was not clear what had happened, but a small crowd had gathered, and they did not look happy. It quickly became apparent that something was not right.
The companies in question were Al-Bayrak and Ozpak. The two Turkish waste management companies had come to Pakistan nearly a decade ago under the invitation of then-Punjab Chief Minister, Mian Shehbaz Sharif of the Pakistan Muslim League Nawaz (PML-N). Back then, they had been portrayed as saviours of the city, helping turn Lahore into a dynamic, modern city. But here they were late at night condemning the Lahore Waste Management Company (LWMC) for a raid conducted on their workshops with assistance from the Punjab Police.
So how did relations between the LWMC and Lahore’s former leading lights sour so much that the LWMC felt it necessary to bang open doors with a police escort and start pulling out drawers and confiscating files? Profit looks at what went bad with Lahore’s waste management system. [restrict paid=”true”]
Waste is a problem
Managing solid waste is actually one of the biggest problems and considerations that urban planners have to deal with. Since it is not a particularly glamorous topic of discussion, the hard work that goes into keeping cities clean often happens behind the scenes and out of the public eye. And a lot of the time, the technique used by administrators is out of sight, out of mind. Of course, at some point or the other, it stops being out of sight and starts being on the mind as well, and people begin to complain.
Something of the sort had been happening in Lahore around 2011. While the City had never had the sort of issues that Karachi has faced on a waste management front (partly because it does not have as much commercial activity or people), the cracks in the system were beginning to show as Lahore’s population began to grow and as new settlements began to form.
Eid started becoming a sore spot, particularly Eid ul Azha, which would lead animal entrails in unseemly places. The City was slowly turning into a garbage dump. The collection and management of solid waste in the city had previously been overseen by City District Government Lahore (CDGL), which had also been of the see no evil, hear no evil school of thought. Naturally, Solid Waste Management (SWM) suddenly became very important to Shehbaz Sharif in 2010, and the LWMC was formed as a government-owned company under section 42 of the Companies Ordinance 1984.
This was a very encouraging step and it seemed that for once a problem would be tackled before it got too late. Now, the LWMC is a government-owned company. The idea of a government-owned company is a simple one: they are a legal entity that undertakes commercial activities on behalf of an owner government.
The idea is that these state-owned enterprises will have a higher standard of corporate governance. As such, the company is limited by guarantee and has no share capital, and is formed not for profit. However, it is governed by a Board of Directors (BODs), headed by a Chairperson, and has all the functions, assets and responsibilities of the SWM department of the CDGL.
But this is where things began to change. The LWMC, instead of operating on its own, under the direction of the Chief Minister, signed an agreement with two Turkish companies, Al-Bayrak and Ozpak, in November 2011 to outsource its trash collection operations in Lahore.
This is the time when the PML-N was sitting on top of a gold mine of political capital. In Islamabad, they were watching the Pakistan Peoples Party (PPP) led government flounder and criticised them from the opposition benches as Shehbaz Sharif released one shiny project backed by China or Turkey after another. But now, a decade later, it still remains unclear what the exact agreement between the LWMC and these Turkish companies was, and whether either side kept up their end of the bargain.
What we do know is that the contract began in 2013 after details were sorted out, and the seven-year agreement with Al-Bayrak set a total cost of $146 million, excluding withholding income tax. The agreement was for garbage and solid waste removal using a variety of techniques. A similar agreement was signed with Ozpak for $174 million.
It was also decided with both the Turkish Companies that the contract price, including the increases that may occur due to the additional work, shall be paid by LWMC. Lahore was divided into two parts for cleaning purposes, and both Turkish companies had to purchase the machinery themselves, after which the companies would set up their offices at six different places in the city and were bound to pick up 600 million metric tons of garbage from all over Lahore for seven years.
What happened
The raid that was conducted by the LWMC and the police on the offices of Al-Bayrak and Ozpak happened around 10 days before the seven year contract was due to end. Since then, the tussle has been a very public and very messy one.
The Project Coordinator of Al Bayrak, Çagri Özel, told Profit that after 8 years of dedicated services in the waste management sector of Lahore, on Dec 20, 2020, the LWMC accompanied by the police, raided the workshops under the use of Albayrak and Özpak without any legal document or just cause. “This treatment was utterly unfair, illegal and a gross violation of our rights. We have initiated legal proceedings regarding the incident and have already filed a criminal complaint against the relevant executives of the LWMC,” he said.
“We are the first and the largest waste management company in Turkey and have been serving for the past 30 years in the waste management sector around the world and with this rich experience, we came to Lahore in 2012 to modernise the waste management services for the citizens. Our investment in Pakistan is not merely fiscal as we are emotionally invested in the country whose people stood with the people of Turkey in the trying times. Although we came to Pakistan for a commercial activity, our main motivation has always been to share our experiences with our Pakistani brothers.”
The undertaking has not been a small one. Just Al-Bayrak has engaged 4,000 required sanitary workers, and deployed 1,500 additional workers. They have lifted 6,898,254 tons of waste as per their agreement with the LWMC. Going beyond the scope of their contract at times to get the job done, the company deployed 64 additional mini dumpers, one container disinfectant vehicle worth millions of rupees and more than 5,000 additional containers.
They also introduced electrical sweepers, have carried out more than 3,500 awareness drives in Lahore, provided waste bags, distributed literature, and worked on Eids with extra machinery and workforce. What is particularly strange about the whole raid is that while their contract expired in February 2020, they continued to provide services on a month to month basis on the request of the LWMC.
Özel claimed that despite plans, the LWMC failed to roll out the tender process and could not finalise any plans to take over the waste management services of Lahore. Consequently, the current contractors were forced to provide the services through two more extensions. The extensions and certain issues of the past eight years were incurring commercial loss to their company.
“Nonetheless, we continued to serve so that Lahore would not return to the old days and the citizens were not deprived of cleaning services. While accepting the last deadline in July, we had communicated to our client that Dec 31st would be our last working day as the worn out machinery and current contract price were a menace for the waste management operations of Lahore. Moreover, since last year, we have only been partially paid. Despite this, we managed well to cover the wages and other expenses of the waste management services.”
Özel went on saying that for the past two years, at least seven officers have joined and left the position of the Managing Director of the LWMC. The previous management of the LWMC always looked forward to resolving the issues via dialogue, a policy that was shockingly dismissed by the current management.
After taking the office, the current management closed the door on the contractors. They did not formally convey their reservations about their operations. Essentially, it is another example of the Pakistan Tehreek-e-Insaf (PTI) led Punjab government wanting to remove any trace of the projects initiated or built up by the PML-N government that preceded it.
“We had requested them to take over operations in phases by Dec 31, 2020. Instead, without replying to our letters and without informing us, they raided our premises while there were only 10 days left in expiration of the contract. This forced us to seek legal remedy and redress. We would like to reiterate that the requirement of delivery of the equipment claimed by the LMWC is completely fabricated, and the contract we signed clearly states that all equipment, except those delivered by the LWMC to our company at the end of the project, belong to our company,” said the company in a statement.
“We have had no equipment at our disposal that was a property of the LWMC. The LWMC illegally seized our company’s equipment and committed a serious crime. We had stay orders from court regarding workshops and equipment dated Dec 21, 2020, and Dec 8, 2020. In the city where we have worked for eight years and were a subcontractor of the LWMC, we were misbehaved with. Our Pakistani and Turkish staff, who worked day and night were mistreated, illegally evacuated and harassed,” it added.
The other side of the story
When contacted by Profit, LWMC spokesman Jamil Khawar insisted that no illegal action had been taken by the company. According to the LWMC narrative, now that their agreement with the companies had expired, twenty-four days before the end of the contract, on December 7, these companies wrote a letter in which they said that they could not work with the LWMC from December 10th, and that they should be paid.
After this letter, the chairman, CEO and other senior officers of the LWMC called the officials of these two companies for a meeting and told them that since our agreement is till December 31, you should complete it.
For this, a provisional payment of Rs170 million per company was also made to both the companies. However, the companies refused to work, saying that the amount was small and that workers and sub-contractors could not be paid. The LWMC then insisted that the companies had been paid and the remaining amount will be paid keeping in view the forensic audit report.
“We did not want to end on a bad note. We told them, you complete your work and when the contract expires, you will also be given a farewell party by us and for the payment you are demanding, a Dispute Resolution Committee will be formed and we will abide by the decision of the committee,” says Khawar.
“About 93 per cent of the payments have been made to these companies and the remaining six to seven per cent will be released soon. These companies are demanding Rs2.5 billion, while the forensic audit report says that we have paid them more than Rs7 billion excess payment. However, they stopped working on December 10 and the situation was very serious for us. About 5500 tons of waste is collected daily from Lahore, and due to non-collection of this waste for ten days, 55,000 tons of waste was present on the streets and roads of the city, which is when we decided that it was in the public interest to seize their machinery, because after ten days the machinery was to become our property as per the agreement.
The government continues to be a bad business partner
What does all of this mean? Essentially, here is what happened. Obsessed with Turkey, Shahbaz Sharif decided to outsource Lahore’s waste management to two Turkish companies. This was going well enough, even though it would have been much better to form Pakistani companies for this. When the PTI came into power, they decided they did not want anything to do with these companies and asked them to leave.
When the companies asked them for their dues, the government responded by confiscating their machinery and raiding their offices while they were still occupying them. Because of the contract being unclear, it is unsure whether the government has any recourse to confiscate machinery even after the contract ends since the companies were responsible for buying it themselves and thus own it.
Even if there is some senseless provision in which the ownership transfers to the government at the expiration of the contract, the trigger happy administrators at the LWMC could not wait 10 days for it. And as per Jamil Khawar’s own statement, all of this was done under the direct orders of the government, which is once again proving itself to be an unreliable business partner.
The communication manager of Al-Bayrak, Naeema Saeed, told Profit that the agreement between LWMC and the Turkish companies did not stipulate that the companies would hand over their goods to them after the expiration of the contract.
“Despite this, a responsible officer of our company had told LWMC that we would give the imported machinery to LWMC as a gift. If there was any machinery that we bought at the request of LWMC and were reimbursed for it, then, of course, the machinery would have been owned by LWMC and we would have returned it to them but it never happened. We were given 11 tractor trolleys by LWMC to start the operational work and they were definitely owned by them which they had to get back.”
According to the Turkish companies, there was nothing in the agreement that would give the impression that all their machinery would be given to LWMC, whereas according to the LWMC, all the machinery was to be returned to them. If we look at Article 29.1 of the agreement, it is clear who was wrong in both.
Özel expressed grief over the situation and said that the Al Bayrak Family in Pakistan did not deserve this treatment as the Al Bayrak has made Pakistan its second homeland. “In this time of misery, our only consolation is to know that this illegal attitude and unjust mindset of the LWMC administration is not shared by our Pakistani brothers and friends. We filed the case against the LWMC because they have tried to damage and harm the brotherhood of Pakistan – Turkey and tried to sabotage the trade relations between two countries,” he said.
“They also have tried to set obstacles in the way of foreign investors’ activities in Pakistan and tried to harm the commercial reputation of our company and because this behavior is the breach of contract, a breach of trust, a violation of fundamental rights and contempt of the court.”
“Our confiscated machinery is being misused by LWMC. The machinery that had been busy polishing the city’s streets for the past nine years is now in a state of disrepair. The officers of LWMC are stealing parts of our field vehicles which will be sold in the markets later and removing names of our companies from our vehicles and affixing stickers of LWMC. No proper inventory has been made of the machinery they seized, nor is it known where they are being used.”
“Why would LWMC steal spare parts of vehicles?” Khawar questioned, adding that vehicles have completed their life after running for almost nine to ten years, but now that they have to operate them with these vehicles, 300 out of their 450 vehicles are in the field while some vehicles are in the workshop for repairs.
The excuses from the LWMC are typical. They claim that the companies were not doing their job, and that the waste collection from these contractors was costing them Rs2,200 per ton while the waste collection from the new contractors was costing them Rs900 per ton. To be fair to the companies, it will cost less to the new contractors when they have someone else’s machinery made available to them. And if the government did make a bad deal a decade ago, it is the duty of the incumbent government to keep its word.
Meanwhile, referring to the payments made by the government to the Turkish companies, Naeema informed Profit that since the collection of garbage was to be done using different techniques, they had offered a price per ton of garbage.
“In seven years, we had to collect six million tons of waste, while we collected 6.8 million tons of waste. We did not have to pay against the dollar price because the contract set a ratio in our payments. According to this ratio, we had to receive 30 percent of our total amount at the dollar rate on the day of the contract, while the rest of the 70 percent of the payment was to be against the fresh rate of dollar.”
This meant that if the companies collected 100 tons of garbage, the payment of 30 tons of it would have been at the old price of the dollar, which was Rs88 at that time, while the payment of 70 tons would have been at the new price of dollars because the value of the dollar in Pakistan has been increasing day by day.
“The price of waste collection set in the agreement was reduced by five dollars per ton by the then government and 53.21 million dollars were directly and voluntarily reduced as a result of negotiations. In return, when we imported our machinery, the LWMC had given us relaxations in customs duties from the FBR, but that did not mean that the machinery would be theirs later,” she said.
“We imported 62 Special Purpose Vehicles (SPVs) for garbage collection and a letter was written to the FBR by LWMC in which it was clearly stated that the said vehicles are to be used for the work of LWMC. Therefore, their duty should be forgiven while the FBR waived customs duties and issued instructions that we cannot use or sell these vehicles for any other purpose for five years. But five years later, when this condition expires, what we do with these vehicles is up to us and no one can claim ownership of them.” [/restrict]
