South Asian Investment Fund

A Business Recorder exclusive notes that three companies namely Three Gorges Corporation, International Finance Corporation (a World Bank arm) and Silk Route Fund would establish a dedicated fund titled South Asia Investment Fund (SAIF) which will provide financial resources for the construction of the 4500MW Diamer-Bhasha dam. While all are agreed that hydel electricity is the cheapest form of generation yet Western donors and multilaterals, hitherto Pakistan’s main source of funding for construction of dams, have made investment in hydel dams subject to extremely stringent environment and resettlement policies which, in turn, inhibited the inflow of loans/grants from the usual sources.

In this context, it is relevant to note that the Chinese company, Three Gorges Corporation, defied world opinion and built state-of-the-art hydroelectric dam with an installed capacity of 22,500MW, the world’s largest, increased the Yangtze River’s shipping capacity and last but not least, reduced the potential for floods downstream by providing flood storage space. In addition, the dam was constructed to minimise greenhouse gas emissions. It successfully limited these emissions but was nonetheless criticised by the West and the multilaterals for displacing 1.3 million people, flooding archaeological and cultural sites and what was termed as significant ecological changes including a risk of landslides.

The establishment of the Silk Route fund of 40 billion dollars was announced by Chinese President Xi Jinping in November 2014. Its objective is to boost connectivity across Asia and the Pacific including South Asia. Pakistan’s stated policy spanning several governments has been to proactively support greater road connectivity between Pakistan and Central Asia – a connectivity that would fuel trade and economic activity within the region, including Pakistan. Thus this fund, when established, would no doubt play a pivotal role in financing components of the economic corridor, particularly roads, envisaged between the governments of China and Pakistan. The fact that it may be used for financing the Diamer-Bhasha dam, a project that does not envisage connectivity within the region, may be a reflection of the deep commitment by the Chinese government to ensure that its long-term friend Pakistan would emerge from the crippling prevalent energy crisis.

IFC is subject to multilateral protocols, including adherence to environment and resettlement policy; however, Federal Finance Minister Ishaq Dar, who is currently in Washington to attend the spring annual World Bank/IMF meetings, reportedly met the IFC Executive Vice President (EVP) and discussed its programme portfolio in Pakistan. The IFC EVP noted IFC is actively involved in Pakistan’s power sector and more tellingly revealed that it was investing 125 million dollars in the Three Gorges Company for investment in South Asia which will finance quality projects though he did not mention Diamer-Bhasha dam.

Sceptics caution that there may be many a slip between cup and lip, in terms of committing to finance Diamer-Bhasha dam and actual disbursement; however, one would be compelled to assume that the Chinese government is lining up all the ducks in a row to ensure that a power project that could well be a game-changer for Pakistan (in terms of generating electricity to meet the country’s power needs and thereby tackle the major impediment to productivity in the country) is completed.

However, what remains a source of concern is the rather slow pace of approvals by the highest economic decision-making body of the country, Economic Co-ordination Committee (ECC) of the Cabinet. Furthermore, we had suggested earlier and we again do, that the finance minister should be spared the responsibility of troubleshooting whenever the government is in a bind so that he can concentrate on the economy that is still very fragile. After all there are only 24 hours in a day and his involvement in such parleys/committees is only at the expense of his work in his ministry. Many a critical policy decision remains pending due to numerous responsibilities of the Finance Minister with his chairing of more than 35 committees, including what Wapda sources claim is approval of the policy to develop hydel resources expeditiously by the ECC. This needs to be urgently tackled and given the scale of the country’s economic problems perhaps his focus should be limited to dealing with the economy.