Govt clears $2b CPEC road project

On Thursday, the government approved a $2 billion road project under the China-Pakistan Economic Corridor (CPEC), setting the stage for its framework agreement to be signed during Prime Minister Shehbaz Sharif’s upcoming visit to Beijing.

The Central Development Working Party (CDWP) sanctioned the construction of the 241-kilometer Thakot-Raikot section of the Karakoram Highway, as announced by the Ministry of Planning. The project, costing Rs567.5 billion ($2 billion), is to have its expenses further reduced by rationalizing overhead costs.

Originally built with Chinese assistance about 50 years ago, the Karakoram Highway is crucial for China-Pakistan economic and commercial relations. This project represents the third major road infrastructure initiative under CPEC, following the Multan-Sukkur motorway and the Havelian-Thakot section of the Karakoram Highway.

Deputy Chairman of the Planning Commission, Dr. Jehanzeb Khan, chaired the CDWP meeting. Khan’s role in the government is expected to strengthen post-budget due to potential administrative changes being considered by PM Sharif’s administration.

Pakistan and China previously agreed to complete the remaining over 800 kilometers of the Karakoram Highway at the 10th Joint Cooperation Committee meeting. The 241-kilometer section will be constructed with a Chinese soft loan, according to Ministry of Planning officials.

Out of the $28 billion CPEC investment, $6.7 billion has been allocated to infrastructure projects. Recently, Pakistan requested Beijing to fund nine additional CPEC projects worth $17 billion, including the road missing link.

The project has been approved without its economic and financial analysis, as the planning ministry expedited the process after receiving the project documents a day before the CDWP meeting. While China shared a joint feasibility study last month, detailed item-wise rate analysis and quantity backups were not provided, according to Ministry of Communication officials.

Planning Minister Ahsan Iqbal had instructed the National Highway Authority (NHA) to get a third-party validation of the project cost from a Pakistani consultant. However, the CDWP was informed that this could take up to five months. As the project approval was needed for signing the framework agreement during the Prime Minister’s visit, the NHA deemed the project reasonably priced, with bidding to occur post-validation.

The CDWP approved two projects worth Rs609.5 billion, including the road scheme, which now awaits the final endorsement from the Executive Committee of the National Economic Council (ECNEC).

The project involves upgrading, improving, and realigning the Karakoram Highway from Thakot to Raikot Bridge. It includes a bypass road from Thakot to Dasu, relocation of the KKH at Dasu Dam by WAPDA, upgrading the road from Sazin to Thor Nullah & R-1, and new construction after Basha. The project, expected to take five years, will proceed on an engineering procurement and construction basis if China agrees to finance it, with federal cabinet approval also required.

Funding the project through the Public Sector Development Programme (PSDP) poses challenges, as the NHA’s ongoing project requirements already total Rs1.7 trillion, and Rs250 billion is needed annually to complete the Mainline-I project of CPEC in eight years.

Additionally, the CDWP approved increasing the cost of the Golden Gol Hydropower Project to Rs42 billion. This 108-megawatt project is financed by the OPEC Fund for International Development, the Saudi Fund for Development, the Kuwaiti Fund for Arab Economic Development, and USAID, aiming to produce an annual energy output of approximately 476 GWh.