Energy assistance: US asks Pakistan for ‘realistic wish list’

Pakistani officials’ lack of coordination leads Americans to ask for ‘strategically important’ projects.

ISLAMABAD: Even as the United States has shown willingness to finance large-scale energy projects in Pakistan, Islamabad has yet to prioritise its ‘wish list’, forcing Washington to ask Pakistani officials to focus only on strategically important projects.

Senior officials from both countries met on Wednesday as part of the Fourth Pakistan-US Strategic Dialogue on Energy, chaired jointly by Water and Power Minister Naveed Qamar and US Special Envoy for International Energy Affairs Carlos Pascual. Among the goals of the meeting was to identify projects that the US might be able to fund as part of the $7.5 billion Kerry-Lugar civilian assistance package for Pakistan.

Pakistani officials gave an overview of the energy situation in the country and then listed a series of large-scale projects that they wanted to be funded. But there appeared to be little coordination between the various government departments that made presentations.

The Water and Power Development Authority (Wapda) sought US financing for the Diamer Basha Dam, as well as the Dasu and Bunji dams, while the Pakistan Electric Power Company (Pepco) asked for funding for thermal power generation projects, said an official of the water and power ministry.

(Read: US likely to persuade Pakistan to abandon Iran gas pipeline project)

The lack of coordination comes even as the US appears to have conceded on a key Pakistani demand: that Washington finance a smaller number of large, ‘visible’ and strategically important projects rather than the dozens of smaller projects that it currently seems to be funding.

The largest programme that the US has funded thus far – providing money for the Watan Cards compensation scheme for flood victims – cost $190 million. Many of the projects funded by the US were as small as $4 million.

The reason for the smaller-scale of Washington-funded projects is what is known as the ‘earmark’ system in the US legislative process, whereby US lawmakers are allowed to request funding for proposals of their choosing. This diverts funding from projects that Pakistan needs to those US lawmakers think are important, based on their domestic, US-based constituencies.

Much of Washington’s funding thus far under the Kerry-Lugar bill has gone to projects that were so small that they did not need foreign financing.

The discussions between Pakistan and the US were meant to focus on 13 different areas of cooperation, but it remains unclear whether Washington will divert all of its funding to the power sector.

Many experts in Pakistan believe that the country would be better off reforming the energy sector to remove its many inefficiencies rather than pinning hopes on the United States to provide assistance. Pakistan’s international lenders, including the IMF and World Bank, have pointed out that Islamabad has no hope of achieving its budgetary targets until it reforms its heavily-subsidised, highly-inefficient energy sector.

Among the presentations on Wednesday were some on the energy sector reforms that Pakistan is introducing, including attempts to improve efficiency. In his opening remarks, Naveed Qamar said that Islamabad was committed to reform.

Yet officials, including Qamar and Finance Minister Abdul Hafeez Shaikh, insisted that technical and financial cooperation with the United States is essential for improving the energy sector and alleviating the chronic power crisis.

“Financial support is an important aspect of the shared understanding for the implementation of certain power projects Pakistan has started,” said Shaikh while meeting with Pauscal at the sidelines of the bilateral talks.

Shaikh said there are a number of areas where there was room for American investment particularly in the hydroelectric power, exploitation of coal reserves in Pakistan, and liquefied natural gas (LNG) import projects.

The talks are scheduled to continue on Thursday (today).

Published in The Express Tribune, September 15^th,  2011.