Japan's loan disbursements dry up

Only 14 per cent of earmarked amount received during April to December 2010.

Japan's loan disbursements have fallen massively behind target due to Pakistan's weak project management, causing delays in completion of projects besides a phenomenal increase in cost.

The Japanese government disbursed a mere 14 per cent or Rs2.5 billion during April to December 2010 against a target of over Rs18 billion, official documents available with The Express Tribune revealed. The Japanese financial year commences in April.

Due to red tapism, 10 crucial projects in the areas of education, agriculture, power, road infrastructure and irrigation are facing delays and resulting in cost overruns. Total cost of these projects is over Rs96 billion and so far only Rs14.6 billion have been released ­ 15 per cent of the total cost.

“Delay in taking agreed actions and weak project management by executing agencies are the main reasons behind the disbursements drying up,“ said an Economic Affairs Division official responsible for handling Japanese affairs.

Former finance minister Shaukat Tarin once said that against each rupee being spent on development projects, there is a loss of another rupee due to various reasons

He had estimated Rs250 bil lion annual losses on this account to the national exchequer.

On one hand, the federal government is desperate to obtain foreign loans to meet its budgetary and development needs, while on the other, it is unable to fully exploit the available financing window.
Lower Chenab Canal System Rehabilitation Project Pakistan signed a contract for Rs13.3 billion loan for this project in 2005. The documents show that against a Rs3.8 billion disbursement target, only Rs522 million were disbursed, a wide gulf of 86 per cent.

The project is meant to enhance crop production in northern Punjab through rehabilitation and remodelling of the existing canal system.
The project management unit became a cause of delay in disbursements due to weak management.
Punjab Irrigation System Improvement Project Pakistan inked a Rs12 billion loan deal with Japan in 2008 for upgrading existing water distributaries and small channels in the largest agriculture crops producing province.

Against this year's disbursement target of Rs2.4 billion, total releases remained at a mere Rs90 million. The Japanese government is seeking approval of the project's revised PC-1 besides expeditious procurement process.

National Transmission Lines and Grid Stations Strengthening Project This is another crucial project which is facing delays due to bottlenecks in acquiring land and the National Transmission and Dispatch Company's inability to fast track the bidding process.
Pakistan obtained a Rs24.6 billion loan for this project.
Indus Highway Construction Project The project to improve the national trade corridor is hitting snags due to issues of land acquisition and delay in scrutinising bank guarantees submitted by the contractor.

Pakistan inked Rs20.5 billion loan agreement with Japan in 2006. Disbursements to date are negligible.

Improvement of KararoWadh Section of National Highway Authority A perfect example of bureaucratic snags, the project is facing delays due to a tax refund dispute between the Government of Pakistan and Taisei Corporation of Japan

The loan agreement signed in 2006 for an amount of Rs4.4 billion has already lapsed in January 2011.

Published in The Express Tribune, March 24^th, 2011.