ADB lends $600 mln to Pakistan for infrastructure development

Singapore, Nov 22 (UNI) The Asian Development Bank (ADB) will lend 600 million dollars to Pakistan to help increase private sector participation in infrastructure development.

The programme will attract private investment in the power, transport and water sub sectors by helping establish a comprehensive framework that would address key policy, legal, regulatory, and institutional constraints to private participation in these areas, the Manila-based ADB said today.

The Pakistan Government recognises that infrastructure development is a key factor in sustaining economic growth and reducing poverty. However, given fiscal constraints, alternative approaches are needed to finance these investments, including participation of the private sector, it noted.

The Government has identified 81 billion dollars in investments as likely coming from the private sector over 2005-2010, but nearly 70 per cent of this is expected to go to manufacturing, agriculture, and housing.

The Government wants to boost private participation in infrastructure, such as for power provision, transport services, and access to drinking water.

''The ADB programme will support the Government in creating an environment that encourages and supports private participation in infrastructure, rather than building the needed infrastructure exclusively with public funds,'' said Jurgen Conrad, an ADB senior Financial Economist.

''Given the scarcity of financial resources, this is the only feasible approach for addressing the mismatch between limited supply and increasing demand for infrastructure.'' The programme comprises two subprogrammes, the first of which involves a 400 million dollar loan from ADB's ordinary capital resources and carries a 15-year term, including a grace period of three years.

The interest rate will be determined according to ADB's LIBOR-based lending facility.

Subprogramme II for the remaining 200 million dollars will continue the reforms after successful implementation of the first subprogramme.

About 40 projects are expected to materialise under the subprogramme, with private resources financing more than 80 per cent of overall investment costs.

A high level policy task force has already been established to oversee programme implementation.

A technical assistance grant of 1 million dollars from the Japan Special Fund, funded by the Government of Japan, will help the Government carry out the reforms called for under the loan.

The Ministry of Finance is the executing agency for the first subprogramme, which will be carried out over three years. The second subprogramme will be processed toward the end of the first and run for another four years to 2013.

Under the first subprogramme, pilot projects will be carried out to demonstrate how infrastructure projects involving private participation can be successfully prepared and implemented in previously unregulated areas.

Several government agencies have started to build strong pipelines of projects to be tendered to the private sector, and the programme will provide a mechanism for arbitration to protect investors and standardise bidding procedures and documents to increase transparency.

UNI XC PV HS1406