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ADB rules out solo financing of Diamer-Basha dam

Ruling out the possibility of financing the construction of the $12 billion Diamer-Basha dam alone, the Asian Development Bank (ADB) said that a consortium of donors would be needed to arrange financing for this project.

“Don’t blame the ADB for walking away from this project as the Pakistani authorities knew our position very well. Alone, we cannot finance this huge project and contribution of other donors is required to make this project a reality,” the ADB’s country director Werner L Liepach said when journalists raised questions about ADB’s willingness to finance this project

He said that some officials of the government seemed desperate to go ahead on this project as early as possible but it could not be done as the ADB did not want to halve the project halfway.

He also made it clear that the ADB had never asked for funding of the Dasu dam. The ADB, he said, did not seek a No Objection Certificate (NOC) from India for the construction of Basha dam.

Explaining the issue of NOC, he said the two projects with ADB funding were approved for Azad Jammu and Kashmir (AJK), and being a disputed territory, the ADB’s board required that there should be no objection raised by anyone.

“India abstained when the ADB’s board approved two projects for AJK,” he added. “These are normal laid down procedures which are followed at time of approval of all projects funded by the ADB,” he maintained.

Sources said it was the World Bank that sought the NOC from India for paving the way for funding this project. The ADB’s country head was of the view that there was delicate difference between seeking the NOC, which practically means endorsement of other country publicly, and seeking nod at time of approving any project at level of board.

The public approval proves difficult for political regime in any part of the world. He also said that there was a need to work on the financing plan for Basha dam. “We cannot do it alone as we don’t have limit to finance such a huge project without involving other donors,” he added.

The ADB funding for Pakistan, he said, was standing in the range of $1 to $1.5 billion on per annum basis so the government would have to take a decision to shift all resources towards Basha but if done so, even then the bank could not finance the whole project.

He said the global financial crisis had also impacted the ADB and resource constraints were very much there.

The ADB is providing $700 million to $1 billion for power sector and other projects are also in the pipeline so it makes it crystal clear that the Manila-based institution is unable to finance it alone.

The government will have to involve other donors as well as the private sector to finance this project, he said, adding that there were some “big challenges” and cookie cut approach would not work here.

“We are not shying away from this project but we want that there should be clear cut institutional mechanism and financing plan so that this project can be completed without cost escalation,” he added.

However, according to sources inside the ADB, the Pakistani officials had discussed the possibility of Chinese funding for Basha dam. The ADB stated that it did not have any objection provided imported machinery ensured quality. If Pakistan can arrange financing from the US, Japan, China or any other country of the world, the ADB would be willing to contribute its share for this crucial project of the country.

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