ADB denies abandoning dam project

September 4, 2012

ISLAMABAD: The Asian Development Bank has clarified that it has not walked away from the $12 billion Diamer-Bhasha Dam, but warned Pakistan against awarding the contract to China without international competitive bidding.

“We have not changed our position. We have not walked away from the project,” an irritated country director of the bank in Islamabad, Dr Werner E. Liepach, told journalists. He said the bank remained committed to the project and continued to have dialogue with stakeholders in a positive professional manner.

Dr Liepach agreed that the ADB had not moved as fast as the government of Pakistan may have desired, but then the bank should not be blamed for the slow progress because a lot of steps the government and the Wapda were required to take have not been completed.

“Yes. We are not ready yet to complete its financing because it’s a very complex project and required a lot of money that ADB alone could not afford to extend,” he said.

The ADB official said the bank had been advising the government to bring other parties on board for financing “but we have not seen that happening”. He said the project may need securitisation of Wapda assets which was a complex issue, required lengthy valuation process and financing.

“We cannot do it alone. We need others to get involved. There should be more thought process to involve private sector also,” he said.

“What we want to see before taking the project for approval before the ADB board of directors is that entire financing plan for the project is complete, it complies with safeguard policy guidelines, including those relating to environment, resettlement and procurement, and meets transparency standards,” the ADB chief in Pakistan explained.

Dr Liepach said it was clear to all stakeholders, including Pakistan, that no institution would alone fund the project worth $12-13 billion. Such a large financing envelop has to be pooled together by a number of multilateral and bilateral financing agencies to share risks and returns.

He said the ADB did not want the project to be taken up piecemeal as it may lead to shortage of funds midstream, result in cost overruns and attract criticism for imprudent use of money.

“We want a successful project (Diamer-Bhasha) and not to leave it halfway through,” Dr Liepach said.

He tried to dispel an impression that ADB had asked Pakistan to get a No Objection Certificate (NOC) from India before going ahead with the project. “We did not ask for an NOC (from India). Others (multilateral) asked for that”, he said, adding the only thing the ADB desired was that India should not object when the project was taken up for financing and approval by
the ADB’s board of directors.

He recalled that in a recent transaction, the ADB financed Patrind Hydropower Project, which too was in disputed territory and India simply abstained from voting and did not raise any objection. He contended that although the Diamer-Bhasha dam was in disputed territory, the project was “in India’s interest since it will reduce pressure on New Delhi to rely on
other rivers”.

Another ADB official said recent reports in a section of the media about alleged distancing of ADB from the Diamer-Bhasha dam was a result of an infighting among some government officials. “These officials intentionally leaked an internal memo written by one official to another.”