Diamer Bhasha project: Do not compromise on transparency, ADB warns

Bank will not provide funds if competitive bidding is not ensured.

ISLAMABAD:

The Asian Development Bank (ADB) has told Pakistan that it will not finance Diamer Bhasha Dam if Islamabad compromises on safeguard measures and competitive bidding process while seeking financing from China for the $11.2 billion project.

The message was delivered by the ADB’s country office to Water and Power Development Authority (Wapda) Chairman Shakil Durrani, according to officials privy to the development.

The news comes just before Prime Minister Raja Pervez Ashraf’s scheduled visit to Beijing next week where he is expected to place a request for financing the dam.

This has further deepened controversy as conflicting reports emerge over the fate of the mega project, which will be able to produce 4,500 megawatts of electricity, besides storing huge quantity of water for irrigation.

The officials quoted the ADB as saying that it would be happy to have China as a financing partner, but it would not like to see issues of quality and transparency being compromised in the process.

The ADB has already taken a position that it will not be able to finance the project alone because of the need for huge amount of money.

During a recent briefing given to the prime minister, officials of the water and power ministry said “the ADB is reluctant to pour money into Diamer Bhasha Dam as a lead donor even though it made the commitment four years ago.”

According to the ministry’s documents, the ADB wanted the World Bank to also provide funds, but “the WB has repeatedly refused to do so as it considers Gilgit-Baltistan a disputed area”, where the dam is planned to be built.

The ministry put two options in front of the premier to take the project to its logical end. First, make a request to the ADB to act as lead donor without the involvement of World Bank and approve the financing this year. In this option, other donors like the Islamic Development Bank, the United States, Japan and the Saudi Fund may also be approached.

In the second option, the government should seek construction bids with financing arrangement for the main dam, tunnels and power houses, which are estimated to cost $3 billion. The ministry told the premier that three top Chinese firms have already expressed their interest in this connection.

Furthermore, the ADB should be simultaneously involved in the process along with other donors for supplier credit and loan, according to the documents.

ADB’s position

While the government says the ADB has shown reluctance, the lending agency insists it hasn’t.

ADB’s Country Director for Pakistan Werner Liepach, for the first time, has clarified that the bank has not walked away from financing the project, but at the same time said the bank cannot go halfway. “There is a lot of misreporting. We have not walked away from anything,” said Liepach.

He, however, said the ADB had not been as fast as the government wanted the agency to be, but there were reasons for that.

He further said the ADB had not sought no-objection certificate from India for financing the dam. “It is a complex project and dialogue is continuing with Pakistani authorities.”

According to an official of a lending agency, the World Bank has asked for NOC from India if Pakistan is keen to get loans. He added the ADB had conveyed to Pakistan that according to its criteria for financing any project in the disputed territory, it needed views of the other country concerned at the board meeting at the time of approval of funding. He said the ADB did not require the NOC.

The ADB had earlier financed a power project in Azad Kashmir and India had abstained from voting, he added.

He further said the ADB had never committed to providing up to $5 billion, adding funds would be committed keeping in view the overall lending position.

Published in The Express Tribune, September 4^th, 2012.