Can Saudi money rescue Pakistan’s crowd-funded Diamer-Bhasha dam from funding limbo?
Islamabad: It doesn’t look like Pakistan’s water scarcity woes are going to be resolved anytime soon. The country’s long-pending Diamer-Bhasha Dam has got a shot in the arm, but it’s not a strong one.
Saudi Arabia has agreed to provide 375 million Saudi riyals ($100 million) to fund the project; however, given its mammoth size (the total estimated cost of the project is $14 billion, which is 10% of Pakistan’s GDP), this contribution doesn’t match up. Pakistan and Saudi Arabia signed a Memorandum of Understanding on this during Crown Prince Mohammad bin Salman’s visit to the country. In all, the two nations signed agreements worth $20 billion.
Experts in Pakistan believe building the dam, which was announced 14 years ago, is a herculean task and unlikely to be accomplished. Yet Pakistan is expected to inaugurate work on it in May, despite not being close to achieving its fund target for it. Global financial institutions, namely Asian Development Bank (ADB) and World Bank, have refused to fund the project, while China, Pakistan’s long-time all-weather friend, too, pulled out of financing it last year.
Why are global institutions reluctant?
Off-the-record conversations with Pakistani officials privy to the development and background interviews have revealed several reasons why the Bhasha Dam is not feasible, not least because it is worth one-tenth of the financially unstable country’s GDP. World Bank and ADB among other reputed institutions have kept the project at arm’s length because of its proposed location — Gilgit-Baltistan, the disputed territory that is a major bone of contention between India and Pakistan.
India has already registered its objection to the project’s location on the grounds that the region is a part of Kashmir, which is a part of India.
A few years ago, the World Bank had asked Pakistan to seek a No-Objection Certificate from India for the project, but it refused to do so. This then made the global institution, as well as ADB, refuse funding for the project. Since then, the status of the dam, which has a potential reservoir capacity of 10.5 cubic km and would be able to generate 4.5 GW of electricity, has been in the doldrums.
Pakistanis ‘crowd to fund’ project
Unable to securing funding, Pakistan took matters into its own hands last year and decided to raise funds itself. Former Chief Justice of Pakistan, Saqib Nisar, set up an initiative on July 6, 2018, to crowd-fund the project, after failing to get the financial institutions on board. Later, Prime Minister Imran Khan, too, joined, making it a joint venture.
As on February 18, 2019, Pakistanis had deposited PRs 9.9 billion in ‘the Supreme Court of Pakistan and Prime Minister of Pakistan Diamer-Bhasha and Mohmand Dams Fund’. This is still woefully insufficient in the face of the dam’s estimated cost of PRs 2 trillion (as per the exchange rate in December).
Data collected from the State Bank of Pakistan (SBP) revealed that local Pakistanis have deposited PRs 7.47 billion through cheques, cash, and SMSes; the rest has come from Pakistanis living overseas — they sent their donations through debit and credit cards, while many others deposited money directly in the accounts of SBP and commercial banks overseas.
Most of the foreign donations — around PRs 362 million — came from Pakistanis living in the US, followed by around PRs 214 million from those living in the UK; Pakistanis living in Canada donated PRs 107 million. Other major donations from Pakistanis living abroad have come from the United Arab Emirates (PRs 65million), Saudi Arabia and Qatar (around PRs 40million each), and Switzerland (PRs 32 million). Generous contributions have also come from Pakistanis staying in Norway, Turkey, Japan, China, Sweden, Russia, Brazil, Malaysia, and New Zealand.
In spite of all this, experts remain sceptical of Pakistan being able to raise the full amount.
The break-up with China
Also, last July, Pakistan pulled out of its bid to include the dam in the China-Pakistan Economic Corridor framework, after China placed strict conditions, including on ownership of the mega-project, according to senior officials. “Pakistan had to pull out as China wanted ownership of the project, which Islamabad didn’t agree to,” a senior official from the Ministry of Water and Power told this correspondent.
Multiple inaugurations notwithstanding, construction of this project has not moved forward. Even engineers associated with Pakistan’s Water and Power Development Authority (WAPDA) agree that the dam is a high-risk proposition. And in what can be considered as salt on the country’s wounds, WAPDA’s own data has revealed that there anyway isn’t enough water in the system to sustain large dams.