Chinese and Pakistani flags at the entrance to the Karakoram Highway | Photo Credit: Getty Images
Pakistan has relaxed bidding rules to award a $2 billion contract directly to China for building a strategically important road, according to media reports on Friday.
The Cabinet’s Economic Coordination Committee, headed by Finance Minister Muhammad Aurangzeb, on Thursday approved the imposition of a special rule to exempt Chinese companies from the requirement of international competitive bidding for awarding contracts for construction of a section of the Karakoram Highway. The Express Tribune The newspaper reported this news.
The Thakot-Raikot section of the highway is important for maintaining land link between China and Pakistan.
According to a Finance Ministry statement, the committee considered the summary of the Ministry of Communications regarding execution of the framework agreement between China and Pakistan on reconstruction of KKH (Thakot-Raikot) under the China-Pakistan Economic Corridor (CPEC).
After detailed discussions and deliberations, and in order to adhere to the codal requirements, the Committee permitted the Ministry of Communications and National Highways Authority of India to proceed with the procurement of construction of reconstruction of KKH (Thakot-Raikot section 241 km) project under CPEC (Phase-II) in accordance with the provisions of Rule-5 of the Public Procurement Rules, 2004 for the signing of the framework agreement.
Pakistan signed a framework agreement for the construction of the Thakot-Raikot section of the Karakoram Highway during Prime Minister Shahbaz Sharif’s visit to Beijing in June. China will provide a $2 billion loan for the project.
Portions of the existing road will be submerged due to the construction of Diamer-Basha, Dasu, Azad Pattan and Thakot dams along the road.
According to the framework agreement, Chinese companies will be responsible for engineering design, procurement and construction (EPC) and supervision work. According to the agreement, the identification of Chinese companies for the project will culminate in the selection of a company or a consortium after due negotiations on all technical and financial considerations with the Pakistani institutions responsible for the project.
China will provide a list of recommended Chinese companies and Pakistan will select one of them for the construction work. Pakistan will use Chinese equipment to build the project.
The Public Procurement Regulatory Authority (PPRA) law mandates the government to award contracts through competitive bidding. However, PPRA Rule 5 states that whenever these rules are in conflict with an obligation or commitment of the Federal Government arising out of any international treaty or agreement with the State or any international financial institution, the provisions of such international treaty or agreement shall prevail to the extent of such conflict.
The committee also approved relaxation of conditions of competitive process for appointment of foreign consultants for construction of Chakdara-Timargara road linking Peshawar with Chitral.
The Export-Import Bank of South Korea has provided a loan of US$49 million for the project, but on the condition that consultants will be appointed as per its wishes.
ECC Chairman Senator Muhammad Aurangzeb directed that no foreign loans should be taken in future for road projects that cannot generate enough revenue to pay off these liabilities.
According to the paper, Pakistan’s external financing position remains weak and the government has taken some stimulus measures to ease pressure on foreign exchange reserves.