DIAMER-BASHA DAM PROJECT LIKELY TO BE DELAYED

The nation can ill-afford any further delay in Diamer-Basha dam's construction.

ENGR HUSSAIN AHMAD SIDDIQUI
Apr 02 - 08, 2007

Since its groundbreaking on April 27 last year, the work on Diamer-Basha dam and hydropower project, estimated to cost US$ 7 billion, is going on expeditiously as far as the Water and Power Development Authority (WAPDA) is concerned.

Land acquisition for the project has already been completed, utilizing an allocation of Rs 67 billion made by the government sometime in September last year for the purpose, including the compensation for re-settlement of the displaced and affected population. Currently, the drilling material, in bulk, is being procured by the WAPDA from foreign sources, whereas activities regarding pre-qualification of project contractors will start soon. At present a number of geologists and civil engineers are busy at the dam's site for the investigations and preparation of updated feasibility study and detailed engineering design by Lahmeyer International GmbH of Germany.

Diamer-Basha dam project is part of President General Musharraf's Water Vision-2015 (now revised to Water Vision-2030), implementation of which will result in augmenting water supply for irrigation (it will have a mega reservoir to store 7.2 million acre feet of water, live storage of 6.4 MAF) and creating power generation capacity of 4,500 MW. With the proposed height of the dam as 270 meters, it will be the highest roller-compacted concrete dam in the world. President Musharraf had announced the mega project in January 2006, which was followed by the foundation stone laying ceremony in April 2006. The construction of the dam would commence in the year 2009.

The mega national project had been scheduled for completion by 2015 and President Musharraf had repeatedly emphasized the significance of its timely completion. Later on December 01, 2006, while reviewing the progress of various hydropower projects in the country, he had directed the authorities to speed up the work on the Diamer-Basha project. While the project consultants are required to submit the revised feasibility report by early March 2008, there are indications that they would not meet the deadline, thus adversely affecting the project implementation milestones to be achieved.

The authorities have recently announced that the project would be completed in the year 2016, according to the revised timeframe. The government, however, has already initiated the processing for project financing, which has a foreign exchange element of $ 2.964 billion, with the international donor agencies. In September 2006, the government has asked for the World Bank (WB) funding that has received positive response subject to the WB analyzing the feasibility-cum-detailed engineering report as per procedure. Likewise, the Asian Development Bank (ADB) delegation visiting Pakistan during February this year has assured strong support for financing the mega project. According to the latest reports, Pakistan will seek soft loans from China Development Bank for the construction of Diamer-Basha project.

It may be recalled that the Executive Committee of the National Economic Council (ECNEC) had decided in October 2000 to upgrade and update the initial feasibility conducted in 1984 by the Montreal Engineering Company (MONENCO). This assignment was given to NEAC Consultants, a joint venture of National Engineering Services Pakistan (NESPAK) and Associated Consulting Engineers (ACE), under the technical umbrella of Binnie and Partners of the UK. The feasibility study was completed at a cost of Rs. 350 million in June 2004. A panel of international consultants appointed by the government made in-depth review of the feasibility study and endorsed the same, sometime in August 2004.

The Expression of Interest (EOI) for carrying out detailed design and preparation of tender documents for the construction of the project was advertised by WAPDA in September 2004, which was responded by four groups of consultants, including NEAC Consultants. As a normal practice adopted for such gigantic projects, the consultants who carried out detailed feasibility studies are preferred for designing the project, for obvious reasons of maintaining parameters of earlier investigations and of short lead-time. In this case, however, the consortium led by NESPAK, a national public sector company emerging fast as an international consultant with vast experience in energy sector, was not awarded the contract, though evaluated as technically comparable to Lahmeyer. Thus, on July 17, 2005, the German consultants secured this contract for detailed design, engineering and preparation of tender documents, asking for a period of 30 months to complete the job.

The recent decision of the World Bank to blacklist Lahmeyer upon being convicted of corruption and bribery would have serious implications on the progress of the Diamer-Basha dam project. Resultantly, Lahmeyer stands debarred, effective November 03, 2006, from the award of any World Bank-financed contract, anywhere in the world, for a period of seven years. Lahmeyer has also been fined US$ 1.63 million. The stern action by the World Bank came as a result of the involvement of the company in paying huge bribes and other punishable measures in the context of the Lesotho Highlands Water Project, a multi-billion dollar project partially financed by the World Bank. Consequently, there is a potential risk of delay in completion of the Diamer-Basha dam project, which may result in inflated project cost as well.

Understandably, the consultancy and engineering firms are expected the world over to demonstrate high level of integrity and to observe highest standards of professional ethics and conduct. In this business, misrepresentation and/or omission of facts in order to influence the selection process are considered fraudulent practices by global donor agencies and development banks, thereby warranting punitive action by the donor as well as by the borrowing country. It is obvious that Lahmeyer, while filing EOI for Diamer-Basha project in September 2004 concealed the fact that a Lesotho court convicted it in April 2004, which could render the company disqualified for the award of the contract. Misrepresentation and omission of facts had indeed material influence on the tender evaluation and outcome in this case.

Planning and development of a project of the characteristics of Diamer-Basha dam project is complex and critical, more so for the reason of its location in a highly seismic zone, and it is imperative that the project be completed on time and within budget, given its strategic importance. Entrusting project design and its construction supervision to a company involved in corrupt practices and having been blacklisted by the World Bank is likely to have many far-reaching adverse implications. Having lost credibility in the international market, Lahmeyer is likely to suffer not only morally and ethically but also financially in the near future.

This situation may result in reducing the company's manpower globally, as a multiplier effect of its blacklisting by the World Bank. The company's bids in pipeline for various international projects may not materialize in its favor for this reason. For instance, the World Bank has recently cautioned the Ethiopian government regarding Lahmeyer while awarding the US$ 4.50 million contract for feasibility of a 460-MW hydropower project, for which tenders were opened on November 13, 2006.

All the donor financing agencies, including ADB and others, normally follow the World Bank decision on corruption-related matters; industrialized countries having already ratified "OECD (Organisation for Economic Co-operation and Development) Anti-bribery Convention". It is, therefore, of great significance that the government accepts the validity of the World Bank verdict thereby taking corrective action so as to ensure project completion as envisaged. Diamer-Basha dam is life to the future generation and the nation can ill-afford any further delay in its implementation and construction.