Diamer Bhasha Dam: ADB faces internal resistance to financing vital project

Bank commits to only partial funding; insists Pakistan take the lead.

ISLAMABAD:

The Asian Development Bank (ADB) has admitted that it is facing internal resistance to plans to finance the multi-billion-dollar Diamer Bhasha Dam because of a lack of consensus among donors.

In a report submitted to the Ministry of Water and Power, water wing of the Water and Power Development Authority (Wapda) quoted ADB Director General Central West Asia Development Klaus Gerhaeusser as saying the bank was committed to financing the Diamer Bhasha project to resolve some of the issues, but it could not provide funds for the entire project.

Gerhaeusser said this during a meeting between ADB delegates and senior government officials including the Wapda chairman in Islamabad on June 28. He outlined policies which asked Pakistan to carry out reforms in the energy and water sector.

According to the report, the ADB has refused to take a leading role in a consortium of financiers for Bhasha Dam, which will have the capacity to produce 4,500 megawatts of electricity.

“It is left to Wapda and the government to arrange a consortium of financiers for the project to which ADB will provide its due share,” the report said, adding the government had shown full commitment to the project.

Gerhaeusser also acknowledged that the bank was facing internal resistance because of absence of consensus among donors, but the report did not elaborate.

In the report, Wapda’s water wing pointed out that arrangement for financing from donor agencies was a big issue. To push ahead with the project, Wapda is also negotiating a loan from the Employees Old-age Benefit Institution (EOBI).

“In addition to financing, boundary dispute between Khyber-Pakhtunkhwa and Gilgit-Baltistan to determine royalty is also a big threat to the construction of the dam,” it said, adding delay in acquisition of land by the local administration was also creating hurdles.

“Frequent interference by local people to press their ‘undue demands’ is creating hurdles in the way of contractor’s activities related to the project’s colony and model village,” the report said.

According to the report, pre-qualification documents for Lot-1, Lot-2 and Lot-3 and the expression of interest (EOI) prepared on the basis of World Bank’s guidelines had been cancelled as required by the ADB for financing the project. Later, the documents and EOI were updated as per ADB guidelines and were ready for submission to the bank for approval.

Earlier, an ADB mission reviewed the project in March 2009. For getting funds, the government met the bank’s pre-condition which called for national consensus as the inter-provincial Council of Common Interests (CCI) unanimously approved the dam on July 18, 2010.

In the last week of December 2011, another ADB mission held detailed talks about the progress on the project as well as financing arrangements. Praising the work done for acquisition of land and resettlement of people, the bank called for upgrading the land acquisition and resettlement plan.

“The ADB also shared a memorandum of understating (MoU) with the Economic Affairs Division (EAD), stipulating various terms and conditions for financial assistance from the bank. Final draft has been submitted to the EAD,” the report said.

The Economic Coordination Committee (ECC) also considered a summary in June 2011, submitted by the Ministry of Water and Power, for arranging Rs20 billion for the dam and allowed Wapda to raise money with government’s guarantee through term finance certificates or Islamic bonds to be repaid by Wapda from its own resources.

Published in The Express Tribune, September 26^th, 2012.