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Financing of Diamer-Bhasha dam and the CPEC

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Anam Fatima

These days, the financing of Diamer-Bhasha Dam is in the news. Prime Minister Imran Khan has called upon the expatriate Pakistanis to generously support funds for the dam. The Supreme Court has already established a dedicated pool to generate money through donations.

The move is quite noble. But clearly, it is being said, constructing a dam may need far more resources than could be collected through donations even over an extended period of time. As per some estimates, the dam is reported to cost around USD 14 billion.[1]

So what are Pakistan’s options?  In the past, different international donors have been in talks with Pakistan on financing the dam including World Bank (WB)[2] and Asian Development Bank (ADB).[3]But these donors refused to finance on the grounds that Pakistan could not provide No Objection Certificate (NoC) from India. India claims that Diamer, site of part of the dam, comes in the disputed territory.

One source to which Pakistan can turn to is the CPEC. It is interesting to note that for all the reportage about the Bhasha Dam, very little is being said about its potential financing under CPEC. In August, however, the Senate Chairman, in his visit to China, called for financing the dam under CPEC.

China has already been investing in Pakistan under the umbrella of CPEC, a collection of various socio-economic development, energy and infrastructure projects. Both countries agreed to generate around 17,100MW[4] of energy under CPEC projects. As of now, the 15 prioritized energy projects are generating 11,110 MW of energy. Strikingly, merely two (2) are hydroelectric power projects with of 1,590MW generation capacity.[5]This is despite the CPEC Long Term Plan (LTP)[6] stressed development of hydropower projects.

Nonetheless, both the governments have now decided to generate remaining 6,000MW by developing hydro power projects under CPEC. The Water and Power Development Authority (WAPDA), which produces electricity in Pakistan, underlined that China is interested to include Diamer construction in CPEC, as there is no mega hydro-power project[7] under CPEC (The two projects, discussed above, are no mega projects.)

But as of now, there does not seem to be any development to that end. According to a news report, WAPDA Chairman Muzammil Hussain said that China sought ownership of project and some financial conditions that were “not doable and against our interests.”

Various reasons are reported, such as that China promised to develop another operational dam in Pakistan in return to its demand of ownership of Diamer-Bhasha dam including its maintenance and security cost.[8]

In a cabinet committee meeting on CPEC, Federal Secretary Ministry of Water Resource seven said that China has raised some issues pertaining to technical aspect, socio-environmental and geological impact, as well as geo-political facet of the project. In the meeting, as per Business Recorder, a national daily covering business affairs, the Secretary told the Prime Minister that China’s reluctance is also due to “trans-boundary dispute between Pakistan and India”, a stance similar to other international donors.[9]

Before the commencement of 7th Joint Cooperation Committee (JCC) of the CPEC, Pakistan withdrew its plea to bring Diamer-Bhasha dam construction under CPEC due to the tough terms and conditions applied by China.

Official of the National Development and Reform Commission (NDRC), the economic planning body of China, however, discredited media reports about China having placed tough conditions and demanding ownership of Diamer dam. The NDRC further clarified that both countries have been in touch regarding the construction of Diamer-Bhasha dam but it is not yet included in CPEC energy projects.[10][11]

As per Former Minister of Planning, Development and Reforms Ahsan Iqbal China in principle agreed to include the dam project in the framework of CPEC and even formed an experts committee to examine and validate its technical aspects. [12]Some reports suggest that China is ready to send their technical staff to Pakistan to further precede the discussion on this issue.

The larger picture is therefore this: On the one hand, there are reports that Pakistan has stopped seeking funds on the dam from China, owing to strict conditions. On the other hand, there are reports and desires of Pakistan seeking Diamer’s fund support from a Chinese power company. The government either seems to be ambivalent as vindicated by the fact that different officials are painting different pictures on such a mega project.

(Anam Fatima researches at CPEC-Watch.com)

[1]Business Recorder, October 12, 2014, http://fp.brecorder.com/2014/10/201410121231979/

[2]Jamila Achakzai, The News, May 2, 2012, https://www.thenews.com.pk/archive/print/359548-world-bank-agrees-in-principle-to-fund-diamer-bhasha-dam

[3]The News, August 26, 2011, https://www.thenews.com.pk/archive/print/616187-adb-assures-funding-for-diamer-bhasha-dam

[4]Board of Investment, March 3, 2018, http://boi.gov.pk/ViewNews.aspx?NID=2534

[5]Shahbaz Rana, The Express Tribune, November 15, 2017, https://tribune.com.pk/story/1558475/2-pakistan-stops-bid-include-diamer-bhasha-dam-cpec/

[6]Long Term Plan for CPEC, http://cpec.gov.pk/brain/public/uploads/documents/CPEC-LTP.pdf

[7]Aiman Ali, Business Recorder, June 21, 2017, https://www.brecorder.com/2017/06/21/355508/china-ready-to-include-diamer-bhasha-project-in-cpec/

[9]Mushtaq Ghumman, Business Recorder, December 30, 2017, https://fp.brecorder.com/2017/12/20171230331333/

[10]Dawn, December 8, 2017, https://www.dawn.com/news/1375238

[11]Global Times, December 7, 2017, http://www.globaltimes.cn/content/1079282.shtml

[12]Nuqta-e-Nazar, September 10, 2018, https://www.youtube.com/watch?v=V0IQjGnoqCk

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