ISLAMABAD: The Asian Infrastructure Investment Bank (AIIB) has expressed willingness to invest $400 million in the Pakistan Infrastructure Bond after Islamabad highlighted the bank’s tilt towards other regional countries, particularly India.
The bank has confirmed its plan to pour money into a 10-year bond which the government will float soon to raise funds for mega projects, said sources in the Ministry of Finance. AIIB informed Pakistan about its decision last month.
Sources added that the projects likely to be funded by the AIIB investment were the Dasu hydroelectric power project and prime minister’s housing scheme.
The government has already initiated the process of issuing the bonds for placement with the AIIB at attractive rates, said the sources. Established in 2016, the AIIB has so far invested in only two Pakistani projects and has turned down multiple proposals for investment in the energy sector. The bank has so far committed funds for Tarbela dam’s fifth extension and the M4 motorway.
Pakistani authorities believe that the AIIB’s reluctance to provide finances for Pakistan was because of Indian influence in the bank, said the sources. AIIB Chief Investment Officer Dr DJ Pandian is an Indian civil service officer. So far, the AIIB has financed 32 projects valuing $6.4 billion in its member countries, according to the bank’s website.
Of these, eight projects, which account for one-fourth of the total portfolio, are being established in India. Bangladesh is another major recipient of the AIIB loans in the South Asian region.
Finance Minister Asad Umar raised the issue of the AIIB’s lack of exposure in Pakistan during a meeting with the bank’s senior management. The meeting took place last month in Indonesia on the sidelines of the IMF-World Bank annual meetings. The AIIB has now assured Pakistan that it will send a technical team for exploring further investment opportunities. The World Bank and the Asian Development Bank remain Pakistan’s largest multilateral lenders.
The AIIB’s decision to invest in Pakistan’s bonds will save approval time which is significantly high for the government. One of the biggest complaints by the World Bank and the Asian Development Bank is that Pakistan takes a longer-than-usual time just to get mandatory approvals, which often extends up to 1-1.5 years.
This delays the relevant project’s approval despite completing all the technical work. Pakistan faces a massive infrastructure investment gap, which cannot solely be filled with public funds. The public-private partnership model has so far not borne fruit due to usual bureaucratic snags. The Ministry of Finance-administered Infrastructure Projects Development Facility (IPDF) has become another white elephant. It remains far from meeting the declared objectives.
Similarly, the Pakistan Development Fund Company, formed with $1.5 billion worth of Saudi grant in 2014, has also remained largely dormant. The company’s funds were drawn about two years ago to buy equity in two government-owned power plants just to understate the budget deficit in that year.
The Pakistan Tehreek-e-Insaf (PTI) government has now announced that it will arrange Rs100 billion outside of the budget books in the current fiscal year to finance mega development schemes.
Against the revised Public Sector Development Programme of Rs675 billion, the Ministry of Finance has allocated Rs575 billion. The finance minister has announced that the government will fill the gap through innovative sources.
AIIB President Jin Liqun met Prime Minister Imran Khan on Friday in Beijing. The premier underscored that several cooperation opportunities existed in Pakistan’s power generation and transmission, transport and water supply sectors, urging the AIIB president to explore the available avenues in those areas.
Jin stated that the AIIB was committed to supporting projects in Pakistan. He assured the prime minister that the bank would actively engage with Pakistan in order to review project proposals and looked forward to playing its role in Pakistan’s economic development while upholding shared principles of openness, transparency, independence and accountability. It was also agreed to expedite disbursements for projects in the pipeline.
Published in The Express Tribune, November 4th, 2018.