ISLAMABAD, 20 August — Pakistan will construct Rs.200 billion mega projects ranging from irrigation dams, power houses, motorways and urban roads to tourism facilities with Middle East and Chinese financing.
It has lined up, or finalizing, financing of these projects from its traditional friends including Saudi Arabia, United Arab Emirates and China, President Pervez Musharraf, has said while unveiling a fast track development and construction plan. The program opens up major opportunities for construction and engineering firms, suppliers of heavy machinery and equipment and financial institutions, particularly those which have experience of working in the Middle East and Islamic countries.
Gen. Musharraf estimates, the projects will generate employment for one million people. The National Economic Council, the nation’s highest economic decision-making body, has approved 20 major projects, that include the nine mega projects to be completed on a priority basis. Most of the these are large infrastructure projects. These are part of the ten-year perspective economic development plan covering 2001 to 2011.
Islamabad, now, is in the first year of the program. The entire plan will cost Rs.11 trillion in current prices over its 10-year span. The cost includes the prospective investment to be made both by the public and the private sectors. However, all the nine priority projects, immediately taken into hand, are to be financed by the public sector itself. These are also part of a 3-year priority Public Sector Development Program (PSDP) currently in hand, that will cost Rs.460 billion, including Rs.200 billion on the nine mega projects.
The nine projects are: Gomal Zam Dam, Mirani Dam, Greater Thal Canal, Right Bank Outfall Drainage, Northern Areas Tourism Development, Quetta Greater Water Supply Project, Gwadar Coastal Highway, Chashma Right Bank Canal and Turbat Road Project. The other 11 projects to be started before March 23, 2002 include: Kachi Canal in Baluchistan, Rainy Canal in Sindh, raising of Mangla Dam height by 40 feet, Water Supply Scheme for Karachi, Karachi Northern Bypass, Lyari Link Road, Motorway M-3, Motorway M-4, Gwadar-Turbat Road, Gwadar Port, and Thar Coal Power Project.
The estimated price tag of Rs.200 billion will include 25 percent or more in forex. The expected financing includes financing by Saudi Arabia, the United Arab Emirates, China and other non-traditional or non-Western sources. China has already indicated, it will finance the $200 million Gwadar Port project, located close to the Gulf of Oman, to which Pakistan may contribute a quarter of the amount. Finance Minister Shaukat Aziz has just returned from Beijing after discussing the details and financing of Gwadar Port with the Chinese government. Aziz is quite upbeat on the prospects of completion of the project, and future assistance.
Because of the $38 billion outstanding foreign debt, Pakistan owes, Gen. Musharraf says, “the government has decided to keep reducing borrowing from abroad.” But, it will prefer financing from its friendly countries.
How far will local resources be mobilized to fund the Rs.460 billion program in the next three years? Government sources are hopeful that it will be possible to raise this money. Islamabad officially allocated a Rs.100 billion for development projects in the just-ended fiscal 2001. Aziz has raised it to Rs.130 billion for the current fiscal 2002. It will be raised to Rs.150 billion in 2003 and Rs.180 billion in 2004, senior officials of the Ministry of Finance (MoF) say.
As a result of the present environment of twin deficits — the growing budgetary deficit and the widening balance of payments gap, which the government is trying to narrow down, the domestic funding will involve some arduous work, and many sacrifices. The government is trying to bring down the budgetary deficit that was 5.3 percent of GDP or Rs.186 billion in fiscal 2001. It will have to raise the official development expenditure — which was merely 3 percent of GDP in fiscal 2001— to close to 6 percent that was the average in 1990s. The economic slowdown started thereafter.
The problems facing the country, especially the economy, are in front of everyone. Gen. Musharraf is candid enough on the subject. He says that his government has been unable to achieve all the goals, he himself had set on Oct. 12 1999. Revival of the economy, improvement of investment climate, and investor confidence, were among the seven key objectives, he had outlined after he came into power 22 months ago. A number of these objectives have not been achieved, so for. “The economy is not out of the woods. We have overcome innumerable hurdles to a considerable extent. But, our troubles are not yet over. We will have to work hard to overcome them. But, we are back on the road to recovery. Apparently we are in the gulf of despair and hopelessness. But something tells me that bold spirit is not dead at all,” he says. Launching of mega projects at this point of time will be highly beneficial to the economy. It fits in to the Kynesian concept that was tried and tested at the time of the historic serious global economic recession, in the 1930s. Injection of public funds in big projects, Kynes called “pump priming,” was the key element of providing jobs, creating purchasing power, pushing up demand and, thereby enabling growth of the economy. The concept has often been tried in many countries and in varying situation, and has been successful, to overcome recession and kick-start the economy.