China irked by delay in Gwadar project

Despite submitting bid several months ago, Pakistan continues to show lack of progress

ISLAMABAD:

China is reportedly upset over the slow progress made in awarding the $2-billion commercial contract that includes laying a gas pipeline and setting up a LNG terminal in Gwadar.

A senior government official said that while a Chinese firm had submitted the commercial bid for the contract, it had not been opened yet. Even after several months, no decision has been taken on the contract, much to the dismay of the Chinese side.



The LNG Gwadar pipeline project was planned as an alternative solution to the Iran-Pakistan (IP) gas pipeline project, which has not moved ahead due to sanctions against Tehran. The Gwadar project was also conceived to meet an obligation regarding the IP gas pipeline project.

The official said that the Chinese side had asked Pakistan to apply for the loan, but this process has been delayed as the government wanted to have the PC-1 approved from the Planning Commission.

The slow progress apparently stems from one minister in the government who is reluctant to release funds. Under the proposed structure of the project, the Chinese side is to provide 85% financing under the government-to-government deal to implement the LNG Gwadar terminal and pipeline project. The finance ministry, however, is reluctant to release the remaining amount.

The official said that the neighbour was upset over the lack of progress, adding that a high level delegation comprising members of the Chinese firm and Exim Bank of China visited Pakistan, but could not meet any finance ministry official. “They had to meet junior level officials in the Economic Affairs Division (EAD),” the official added.

The China Pipeline Bureau (CPB) was designated by the Chinese government to implement the project. Officials said that Chinese banks had offered financing at the rate of Libor plus 2.25%. The official said that the finance ministry was to arrange 15% financing through Gas Infrastructure Development Cess (GIDC) levy being collected from gas consumers for gas import projects. But the finance ministry had consumed all these funds, which amounted to Rs183 billion, for projects like the Metro bus.



The PC-1 was taken up by the Central Development Working Party (CDWP), but after questions raised by the Planning Commission the project was not approved.

The official said that the petroleum ministry had moved a summary to the Economic Coordination Committee, requesting to expedite the project and issue directions to the EAD to arrange loans for the project. The ECC approved to give sovereign guarantee after several months had already been wasted.

Published in The Express Tribune, May 3^rd, 2016.

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