How to get Diamer-Bhasha Dam project going!

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How to get Diamer-Bhasha Dam project going!

EDITORIAL (July 08 2010): According to a Business Recorder exclusive, the government has decided to revise PC-1 of the Diamer-Bhasha Dam in an effort to deal with resettlement issues whose non-resolution was cited as the reason behind the World Bank's decision not to finance the project.

Two major impediments with respect to generating adequate financing for the Diamer-Bhasha project must form the focus of government's efforts to re-energise the project given that the country simply does not have enough resources to proceed with the project without external assistance. First and foremost, it must be borne in mind that the World Bank has a Board approved resettlement policy that seeks to ensure that adequate compensation is provided to affected people of all projects that it funds.

Thus the government's failure to resolve resettlement issues automatically constrained World Bank staff to proceed with the project. An example from the region would be Narmada dam, India's most controversial dam project in terms of its environmental impact and net costs and benefits. The World Bank had initially expressed a willingness to fund the project, but as in the case of Diamer-Bhasha dam withdrew its support in 1994.

In this context, the objective of the decision to revise PC-1 of Diamer-Bhasha is to ensure that all existing resettlement issues are appropriately dealt with. However, there are serious concerns that revising the PC-1 along such lines may well have a significant cost impact that would raise Pakistan's contribution to the project to an extent that it is not doable given our continued resource constraints.

The second major impediment to World Bank assistance may well be in successfully procuring the mandatory approval from the Bank's Board of Directors. International Financial Institutions (IFIs), including the World Bank, have harmonised their policy of dealing with disputed Kashmir: Occupied Jammu and Kashmir as well as Azad Kashmir are considered disputed territory and are not eligible for funding from any of the IFIs unless both India and Pakistan approve the project. With respect to Diamer-Bhasha dam, Indian support cannot possibly be taken as a given.

There is ample evidence suggesting that India as the upper riparian country is openly flouting the World Bank brokered Indus Water Treaty by building dams that have reduced the supply of water to Pakistan as the lower riparian country. India, unlike Pakistan, has not relied on foreign assistance to build dams; therefore it did not require any support from Pakistan at the IFI Board prior to starting their controversial dam projects.

Attempts by Pakistan to seek arbitration with respect to India's flagrant violation of the Indus Water Treaty however failed as they were ill prepared and delayed to such an extent that the dam was near completion. There are analysts who argue that India, given its recent track record in flouting the treaty has no moral authority to stop World Bank assistance for Diamer-Bhasha dam; however, it may be appropriate for the government to also look at other sources of financial support.

Where did India get money to build some of its controversial dams in the past from? In 2000, India secured funding for the controversial Narmada dam after a US energy company, Ogden Energy Group, agreed to meet nearly half the construction costs as bitter protests raged against the dam led by noted social activist Arundhati Roy. Executives from the Ogden Company flew in as part of the business party with President Clinton on his five-day state visit.

The projects pros were fairly obvious: the potential to feed as many as 20 million people, provide domestic and industrial water for about 30 million, employ about 1 million, and provide valuable peak electric power in an area with high unmet power demand. However, the Experts' Committee of the Ministry of Environment and Forests made a clear finding of the egregious failure of the government machinery on virtually all aspects of the planning and implementation of environmental safeguards of the project.

It is ironic that the much-hyped about Kerry-Lugar bill neither seeks to invest in large dams in Pakistan nor is the US administration focused on mobilising its private sector to support Pakistan's infrastructure development. True, that Pakistan's security environment leaves a lot of prospective investors unwilling to invest however our infrastructure sectors have an extremely high rate of return, which can be used as a lure to foreign investors both in the public and the private sector. This is where our government's focus is required.

Business Recorder [Pakistan's First Financial Daily]