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Belt and Road

Pakistan dam in spotlight as contract goes to former China critic

PM Khan's adviser faces conflict of interest cries after family company wins bid

A controversial bidding process has resulted in a contract for a dam project in Pakistan going to a consortium that includes a company founded by one of Prime Minister Imran Khan's advisers. The dam seen here is from a file photo.   © Reuters

LAHORE, Pakistan -- Imran Khan's government has come under scrutiny after it awarded a dam construction contract to a Chinese company and a Pakistani entity owned by the family of one of the prime minister's advisers.

The government awarded a contract of 309 billion Pakistani rupees ($2.21 billion) to build Mohmand dam in the northern part of the country to a consortium of China Gezhouba and Descon, a company founded by Abdul Razak Dawood, the prime minister's adviser on commerce and industry.

The bidding process for the project was also controversial with the government considering only the consortium's bid, after disqualifying another from a different joint venture, according to local newspaper Dawn.

The country's leading opposition party, Pakistan People's Party, has demanded a probe into the process. "The award of Mohmand Dam contract to Descon-Pakistan belonging to the [commerce adviser] is sheer conflict of interest, most unethical and [the] tip of the iceberg of a monumental scandal that must be probed transparently," said PPP leader Farhatullah Babar.

Dawood is the scion of his family, one of the country's most successful and well-known business owners. He founded Descon in 1977, and the company now operates in the engineering, power and chemical sectors and is one of the most successful multinational companies of Pakistani origin.

Although Dawood resigned from the Descon board before joining Khan's cabinet, his three sons are still members of the board, and one of them is CEO.

Dawood had been a vocal critic of Chinese companies and their heavy involvement in Beijing-led Belt and Road projects in Pakistan. In an interview in January 2018, Dawood complained that Pakistani companies did not share a level playing field with Chinese companies for Belt and Road projects in the country. He complained that Chinese companies were able to make lower bids because of tax benefits they enjoy that are not available to Pakistani counterparts.

After joining the cabinet, Dawood continued to publicly criticize the China-Pakistan Economic Corridor, a series of Belt and Road Initiative projects that include a network of highways, railways and energy infrastructure that span the entire country. He demanded CPEC projects be put on hold for a year for review to protect the interests of Pakistan.

Some allege now that the Mohmand dam construction was awarded to Descon so that Dawood would refrain from further pouring scorn on CPEC projects.

Water and Power Development Authority Chairman Muzammil Hussain has rejected that allegation. Michael Kugelman, deputy director of the Asia program at Wilson Center, an independent U.S. think tank, agreed with Hussain. "If the government had been really concerned about the comments of Dawood, he would have been removed by now," Kugelman said.

The government is also hitting back against such criticism. "Those demanding cancellation of the [Mohmand dam] contract are hatching conspiracies. Such elements want to halt the country's progress by making dams controversial," Minister for Information and Broadcasting Chaudhry Fawad Hussain said on Jan. 4.

But critics' concerns haven't been assuaged. Farrukh Saleem, former government spokesperson on the economy, claimed that Dawood facilitated a meeting between the prime minister and representatives of China Gezhouba during Khan's last visit to Beijing. "Getting important contracts while being in government is a classic case of clash of interests. The profits are also a form of corruption," said Saleem.

As the controversy rumbled on, the groundbreaking ceremony for Mohmand dam on Jan. 13 is rumored to have been postponed, for the second time.

Critics also said that the Mohmand dam contract shows Chinese companies' influence and reach in winning bids even for non-CPEC projects.

In 2017, Pakistan withdrew from a $14 billion CPEC-related project -- construction of the Diamer-Basha dam, along the Indus River in the north of the country. It did so after the Chinese side demanded ownership of the dam be transferred to it afterward.

"Chinese conditions for financing the Diamer-Bhasha dam were not doable and against our interests," the chairman of Pakistan's Water and Power Development Authority told parliament's public accounts committee in November 2017.

Pakistan is now trying to crowdfund the project.

"The fact that a Chinese company got a contract on [Mohmand] dam deal underscores the extent of Beijing's economic influence in Pakistan," said Kugelman. He claims that China's investments and assets in Pakistan go beyond those that come under the CPEC banner. "On some levels, Chinese investments pegged to CPEC are just the tip of the iceberg."

The Mohmand dam is designed to control flooding and also provide water for the surrounding area, a key infrastructure for Pakistan which suffers from acute water shortage.

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