NLC lost Rs1b in glitzy twin towers project: Audit

Draft report cites irregularities, says NLC yet to furnish details.

ISLAMABAD:

Back in the mid-2000s, the proposed, glitzy Karachi Financial Towers in the city’s financial district were a symbol of progress and prosperity.

Six years later, the abandoned construction site along the II Chundrigar Road is a glaring manifestation of financial misappropriation and possible embezzlement.

Embroiled in the mismanagement is the state-owned National Logistic Cell (NLC) which purportedly suffered a loss of Rs1 billion due to “fraudulent activities in a joint venture project which ultimately failed,” according to a draft audit report for 2011-12.

NLC made an investment with UAE-based M/s Enshaa Group and entered into a joint venture agreement with the firm “against basic principles of the said business,” the report stated. Enshaa, meanwhile, has completed several reputed projects in Dubai.

The audit added that “NLC refused to provide a complete file of the said investment … the audit could [therefore] not assess the exact loss that NLC had suffered in that joint venture.”

“However, it is established that the NLC sustained a loss of Rs1 billion in this project,” the report added.

Project details

The twin towers were ambitious nonetheless.

Minutes of the NLC Board meeting revealed that Pakistan Railways awarded a piece of land measuring 12,950 square yards to NLC on a 99-year-lease at a cost of Rs2.3 billion in February 2006.

NLC then entered into a joint agreement with M/s Enshaa Group for the construction of the 45-storey twin towers on the Railways land. NLC held 49% of the shares compared to Enshaa’s 51%. The initial financing plan envisioned equity of Rs1.2 billion, a term loan of Rs1.68 billion and the remaining amount to be generated from sale of office space by the joint venture company.



Six years later, the project remains abandoned and lack of records by the NLC management means it is difficult for the auditors to assess the reason for failure of the project, the total investment made by the joint venture firm, the share of M/s Enshaa Group in the company and the loss sustained by the NLC on this account.

Details also show that the cost of land, Rs2.3 billion, was paid by the NLC, and in the absence of records, any share of Enshaa in this payment could not be ascertained by the auditors.

Meanwhile, despite NLC making the major investment, a majority shareholding by Enshaa also appeared unjustifiable.

Admitting irregularities

NLC management, meanwhile, itself admitted to the auditors that the project was a glaring example of past mismanagement and irregularities. The management added that there had been massive corruption in the joint venture.

The management also admitted that a large sum, in excess of Rs1 billion, has been siphoned off from the company accounts through connivance of members of the board of directors and contractors.

The issue was reported to the NLC management on November 29, 2011 and the ministry of planning and development on Dec 8, 2011, but no reply was furnished by the latter.

Published in The Express Tribune, December 15^th, 2012.