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  • Hamsini Hariharan

Pakistan finds a funder for Diamer-Bhasha dam

This article first appeared in CNBC TV-18 on May 18, 2020 and can be accessed here.

In 2028, the tallest roller compact concrete dam in the world will become the main storage dam for Pakistan, alleviating water shortages, and reducing floods. Or at least, that’s what a recent agreement between China and Pakistan has proposed to achieve. The Diamer-Bhasha dam, which was supposed to have been completed in 2017, has faced delay upon delay since its original proposal 40 years ago.

The dam has been an important project for Pakistan, considering that its acute water shortage could be an even bigger threat than terrorism for the country. The Pakistan Council for Water Research reported that the country would reach absolute water shortage in 2025 and predicted that, “Pakistan is on its way to becoming the most water-stressed country in the region by the year 2040.”

It is, therefore, no wonder that the Pakistani government is keen to get the Diamer-Bhasha dam up and running as soon as possible. It approached different stakeholders to fund the project in the past. In 2011, the United States mulled providing 12 billion dollars for the project but withdrew. Saudi Arabia agreed to provide 100 million dollars—a mere drop for the project that is set to cost more than 14 billion dollars.

The Asian Development Bank approved of the dam internally but then withdrew its funding in 2016. The World Bank agreed to finance the Dassu Hydel Project on the Indus river but refused to provide financing unless Pakistan obtained a no-objection certificate from India. There’s a lot of blame to go around—Pakistan blames India for reneging on the 1960 Indus Waters Treaty and influencing international institutions, the multinational institutions blamed the Pakistani government’s policies, while farmers and bureaucrats blame each other.

The cash-starved government even came up with the novel of crowdfunding the dam, with Supreme Court judges encouraging the Pakistani diaspora around the world to contribute to the fund. However, this initiative failed to drum up the enormous amounts of money that were required to build the dam.

Even the Chinese agreed to fund the project once before. In 2016, the project was included under the China-Pakistan Economic corridor. However, in 2017, Pakistan backed out of the deal when the Chinese laid down terms that they would own the project upon completion. The current agreementallows for the China Power (a Chinese State-owned enterprise) to hold 70 percent. The Frontier Works Organization (the commercial wing of the Pakistani military) will hold the remaining 30 percent share of the consortium.

Now, the project is set to go forward. India is presumably protesting against this project because it legitimizes Gilgit-Baltistan as a part of Pakistan’s territory. Voices within the country have raised concerns about the displacement of locals, and the fact the dam site is located in an earthquake-prone zone. Dr. Suleman Najib Khan, the convenor of the Water Resource Development Council, notes, “In the history of the world, no RCC dam has ever been built of even comparable height in such unforgiving conditions. In the event that the dam bursts at its proposed height of 908 ft during a routine seismic movement, eight million acre-feet of water, with the destructive power of a hydrogen bomb, will wipe out everything on the Indus all the way down to Sukkur.”

All of this begs the question: what makes this fresh attempt between China and Pakistan feasible when others have failed? The new terms of the dam are certainly better than the previous ones, but it remains unclear how Pakistan is going to pay China back for all of its development loans. While the China-Pakistan Economic Corridor promises to bring jobs, economic growth, and prosperity to the country, only time will tell how these projects pan out.

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