Japan refuses additional funds before completion of delayed projects

ISLAMABAD: Japan has refused to finance any more major projects till the ones that it has already funded are completed. The projects have been delayed because their completion requires the government to allocate its share of the financing costs.

By linking financing for new power projects with completion of ongoing schemes, Japan has become the second international donor after the Asian Development Bank which has refused additional funds due to financial and administrative mismanagement.

According to minutes of the policy dialogue held between Pakistan and Japan International Cooperation Agency, the donor country expressed concern over the delay in completion of ongoing development projects in the power sector.

“Future commitments for the power sector will be linked with efficient execution of ongoing projects which are facing delays,” the minutes said.

Nonetheless, Japan has indicated that it would keep discussing projects for hydropower, thermal and renewable energy. So far, it has financed projects for up-gradation of transmission lines.

Previously, the Asian Development Bank had linked the approval of a $500 million loan, the third installment of the $2.3 billion umbrella project, to the completion of ongoing projects of National Highway Authority. It was feared that due to less-than-needed allocation for these projects, the ADB’s interest was at stake.

Besides the power sector, Japan has refused to fund three other important projects. Pakistan wants money for these projects as a support to counter terrorist activities and manage water reservoirs, but Tokyo insists that these do not fall under its domain.

These projects include upgrading training equipment for the Marine Academy, study on flood management through joint operation of Tarbela, Chashma and Mangla reservoirs and a communications system for management of coastal areas along the Arabian Sea.

Despite financial constraints the government has been approving new development schemes, primarily on political grounds rather than based on economic considerations.

According to Planning Commission’s estimates, the cost of already approved but incomplete projects is over Rs4 trillion.

It has also been suggested that even if the government does not approve a single project over the next five years, it would still be unable to properly execute the already approved projects.

Meanwhile, independent development experts criticise the Planning Commission for its failure to fulfill its duties and approving projects as a result of political pressure.

Finance Minister Dr Abdul Hafeez Shaikh had announced on June 4 that during fiscal 2010-11 the government would not approve any new schemes. Instead, preference would be given to the completion of existing projects.

However, within one month of this announcement, the Planning Commission held two secret meetings to approve new schemes worth billions of rupees.

Due to financial constraints the government has fixed development budget at Rs280 billion for this year, which is not sufficient to meet the requirements of even the ongoing projects.

During last year, a Rs446 billion federal development budget had been announced but it was later slashed to Rs250 billion.

Japan has remained an important bilateral donor for Pakistan. It pledged $1 billion at the donors conference in Tokyo last year to compensate for the losses suffered by Pakistan on account of the war on terror. To date, it has signed various agreements amounting to $512 million.

In the power sector, the cost of ongoing schemes is more than Rs1.4 trillion. The government has allocated only Rs41.5 billion for this fiscal. Only WAPDA’s throw-forward account has been estimated at Rs990 billion.

Published in The Express Tribune, August 1^st, 2010.