Govt reviews CPEC project options

Seeks to include top local firms in bidding process for $1.8b road construction

ISLAMABAD:

Pakistan is set to request China to allow top local firms to bid for the construction of a $1.8 billion Karakoram Highway project and is also considering building the strategic road from its own resources in case of any further delay in signing a loan agreement.

Islamabad plans to take up the issue of fast-tracking the construction of the Karakoram project to keep the vital road connectivity with China functional during a Joint Technical Working Group meeting, said the Pakistani authorities. The meeting is tentatively scheduled to take place by the end of August in Beijing, they added. Minister for Planning and Development Ahsan Iqbal issued those instructions during a progress review meeting on the China-Pakistan Economic Corridor (CPEC) projects held on Tuesday.

According to the government's proposal, Pakistan will seek an amendment to the government-to-government framework agreement on the project that covers competition only among three Chinese companies. This model has been followed for all the CPEC infrastructure projects since the strategic initiative came into effect over a decade ago. During the upcoming Joint Technical Working Group meeting, Pakistan may propose China to look into the possibility of including top Pakistani contractors in the competitive bidding process for the construction of the project, Ahsan Iqbal said while talking to The Express Tribune.

The existing 280-kilometre-long road will submerge by May 2028 due to the construction of Diamer-Bhasha Dam. Both Pakistan and China have planned to build an international-standard new road with 85% Chinese financing. However, no major development has taken place since 2024 and despite approval of the scheme by Pakistan no financing agreement has been reached between the two nations.

The projected cost of the project is Rs502 billion, or $1.8 billion, and the first phase is estimated to cost Rs320 billion, or $1.1 billion. The phase-I cost has been calculated on the basis of a joint feasibility study.

Planning ministry officials said that if the road was built in line with local standards and by the local contractors as well as on the basis of National Highway Authority (NHA) rates, the cost for the first phase could be brought down by 35% to Rs208 billion.

The planning minister had given instructions to work out fresh costs according to domestic standards, in case China did not fund the project, said the officials. They added that the minister asked to review the possibility of self-financing, if no funding agreement was signed during the upcoming technical committee huddle. When contacted, Ahsan Iqbal said that hopefully the financing agreement would be reached during the technical group meeting. In case there was further delay, Pakistan may start implementing the project through its own resources due to the urgency of having an alternative road before the existing one submerges by May 2028, he said.

Pakistan and Chain had agreed on the implementation plan in May 2025, setting the broader principle of 85% Chinese financing and the remaining to be funded from local resources. China shared the financing cost of the first phase covering 102 km in June last year, putting the price tag at Rs320 billion, or $1.1 billion. Pakistani authorities said that over the past one year, several letters had been sent by the Ministry of Communications, the Ministry of Economic Affairs and the Ministry of Planning with a request for finalising the financing deal.

However, China did not respond until last month, when it suggested a working group meeting to review the cost and allied matters, said the officials. Pakistan has also shared bidding documents pertaining to Engineering, Procurement and Construction (EPC). Officials said that Pakistan made efforts to convince China to begin the tendering process but Beijing did not agree until the funding agreement was struck.

Pakistan is seeking a concessionary loan for the project but China has indicated commercial financing. No final decision has been taken yet, which is expected during the working group meeting, said the sources. The technical working group huddle was expected to be held early this month but has now been rescheduled with mutual consensus.