Pakistan asks AIIB to fund Diamer Bhasha dam

Estimated cost of the dam is $14 billion

ISLAMABAD:

Pakistan has requested the newly established Beijing-based Asian Infrastructure Development Bank to fund the $14 billion Diamer Bhasha dam, after years of being turned down by international financial institutions dominated by the US and Japan. However, there were early indications that AIIB may not be able to fund the project either.

Pakistan has proposed to the president-designate of the AIIB to consider financing the Diamer Bhasha dam along with the International Finance Corporation of the World Bank and the Asian Development Bank, said Finance Minister Ishaq Dar on Wednesday. AIIB President-designate Jin Liqun is visiting Islamabad in his first foreign tour after being named to head the bank. Dar was addressing a press conference, along with Jin, and said the project’s location was ideal since it is close to the route of China Pakistan Economic Corridor.

However, there were early indications that the newly formed international development bank may not yet have the capacity to provide the necessary financing. At the press conference, Jin said that there are limitations on how much AIIB can lend to a single country. “There are 57 potential borrowing countries and we cannot put all the money in a single sector,” he said.

The AIIB has been set up with $100 billion in initial capital and was created by China after the US Congress refused to allow Beijing a greater say in the US-dominated World Bank. Given the amount the bank has available in capital, it seems unlikely that AIIB will have the capacity to fund a project as large as the Diamer Bhasha dam, though the AIIB chief did say that the bank would seek to collaborate with the World Bank and the ADB.

There were also indications that the factor that made the World Bank withdraw from the project – India’s opposition – may also be a hindrance for the AIIB. When asked if India’s opposition would be a factor, Jin said that India is an important member of the AIIB and will be a beneficiary of its financing. However, he added that: “The China Pakistan Economic Corridor should not be seen as only belonging to Beijing and Islamabad. It is a project of regional connectivity and other countries including India can benefit from it.”

Jin also met with Prime Minister Nawaz Sharif to discuss the possibility of financing infrastructure projects in energy, urban development and seaports.

Meanwhile, Dar said that Pakistan and Turkey have reached an understanding over a rotation of an executive director position at the AIIB. Pakistan will appoint an ED for three years and Turkey’s nominee will hold the post for seven years. He said the period was decided on the basis of voting share. Pakistan’s voting share was 1.58%, and Turkey’s share is 3.44%.

Published in The Express Tribune, October 8^th, 2015.