Maybe china should "betray" Pakistan, then it can stop looking for patrons and look to itself.
ISLAMABAD: A consortium led by the Industrial and
Commercial Bank of China
(ICBC) has run away
from providing financial
advisory services for the
Iran-Pakistan gas pipeline project apparently
because of the US
opposition to the plan and
forced the government to
look for alternative
financing options. It is apprehended that a
probable reason for not
signing the agreement (to act
as financial adviser for the
project) till date could be
geopolitical situation in the region, a summary presented
to the Economic Coordination
Committee (ECC) of the
cabinet on Tuesday said.
A meeting of the ECC presided
over by Finance Minister Dr Abdul Hafeez Shaikh was
informed by Petroleum
Secretary Mohammad Ejaz
Chaudhry that the Chinese
consortiums leader had run
away from the project. It was informed that on the
directives of decision-making
forums, a top class financial
adviser had been appointed
through international
competitive bidding following procurement rules.
The contract with Habib Bank
and Ernst & Young Ford
Rhodes Sidat Hyder (EYFRSH)
two other members of the
advisory consortium had been signed by Inter-State gas
Systems (ISGS), a state owned
company, in the first week of
January but the ICBC had been
delaying the signing of a
formal agreement. Now, the HBL and the EYFRSH were also
not giving a clear response,
the meeting was informed.
The petroleum ministry
informed that the existing
parties of the ICBC and HBL are showing less interest in the IP
project, so the ECC may go for
other options, an official
statement issued after the
meeting said.
The front-end engineering design feasibility and a
detailed route survey are
being done by a consortium
comprising the ILF of China
and Nespak and are expected
to be completed by June, on the basis of which bids will be
invited for the 800km pipeline
inside Pakistan for an
engineering, procurement and
construction (EPC) contract at
an estimated cost of $1.5 billion.
The project involves a debt-
equity ratio of 70:30 with the
government having a
majority share in equity.
Tender documents have been issued to pipeline suppliers and
EPC contractors so that the
contracts can be executed by
the third quarter of this year.
The contracts will form a
major portion of the funding requirement for the project.
It has been proposed that as
an alternative to the
arrangement with the Chinese
bank, the government should
route the Infrastructure Development Cess recently
imposed on gas consumers to
Pakistani banks who should
then create a fund with the
government. The funding can
be routed to the ISGS to meet financial requirements of the
project that would help
reduce the tariff for imported
gas. Initial estimates suggest
that the cess will be sufficient
to meet the projects funding requirements.
The ECC was requested to
allow cancellation of the ICBC
contract and to approach the
second bidder, comprising the
United Bank, Burj Capital Pakistan, Eco Trade
Development Bank, Fieldstone
Group and Islamic Corporation
for Development of Private
Sector, to sign a contract to
provide debt and private equity for the project on
similar terms.
The committee was also urged
to consider government-to-
government offers from
China, Russia and Iran for providing funds for the
project.
Iran has offered $300 million
and Russia has offered to
provide funding if the EPC
contract is given to its companies without bidding.
To accept the options, the
government will have to
bypass the Public Procurement
Regulatory Authoritys rules.
The ECC constituted a committee comprising
ministers for petroleum and
water and power, State Bank
governor, deputy chairman of
the Planning Commission and
secretaries of economic affairs, finance and petroleum to
prepare recommendations
within four days so that
work on laying the pipeline
could be started by September
to meet the completion deadline of December 2014.
