By Saeed Shah
The proposed Daimer
Basha dam would be built on
the
|
The
US is considering
financial support for a $12bn dam in Pakistan in an attempt to improve its battered
image in the country.
The Daimer Bhasha dam would provide enough
electricity to end Pakistan 's crippling shortages. It is said its
reservoir would hold so much water it could have averted last year's
devastating floods.
"Getting involved in a long-term project like this is very
compelling for us," said a senior US official. "This is the project
we're spending our time assessing.
"This would demonstrate that Pakistan is the kind of country where you can do
large, complex infrastructure projects. It's not all flood relief and sacks of
flour."
At the end of last week, President Asif Ali Zardari met a team from the
Asian Development Bank "to start the process of financing Daimer Bhasha
dam as the project has been approved at all internal fora of the country",
according to a statement from his office.
Although Washington is Pakistan's biggest international donor by far,
the support has done little to improve perceptions of the US, which is seen as
the enemy by many Pakistanis – a view exacerbated by continuing drone attacks
in tribal areas and the killing of Osama bin Laden earlier this year. The dam,
which harks back to similar projects supported by Washington in the 1960s and 1970s, could help reset
relations between the two countries.
The dam, on the Indus river, would provide 4,500MW of cheap,
green energy,
making up for a shortfall causing up to 12 hours of power cuts a day across Pakistan . The reservoir would be 50 miles long.
Shakil Durrani, chairman of the water and power development authority,
said Islamabad had approved the dam project and he was
confident of US backing.
"If we had a reservoir the size of Daimer Bhasha the floods last
summer would not have occurred," he said. "This would be the largest
project ever undertaken in Pakistan . It is our top priority."
Analyst Mosharraf Zaidi agreed the dam could boost relations.
"The overwhelming aid transfers from the US have been to the military and whatever
little has come for the civilian sector has not developed as far as the
rhetoric has," he said.
"Daimer Bhasha would be tremendously good for Pakistan and would show that the US is invested in a long-term relationship
with Pakistan , no matter how bad things look
today."
"US aid is neither visible nor
tangible," said Tariq Fatemi, a former Pakistani ambassador to Washington . "Unless the people of Pakistan can identify large, visible projects that
make a difference to people's lives, the US is not going to get the kind of
appreciation that it believes it deserves."
The US official said Washington had spent $2bn on civilian assistance
since October 2009, including $550m on flood relief last year, though that came
from a separate fund.
Daimer Bhasha would take around eight years to build. Pakistani
authorities plan to shortlist contractors later this year.
The Indian embassy in Islamabad pointed to a statement issued by the
Indian government in 2006, after the project was first proposed, which insisted
that the dam was "in territory that is part of the State of Jammu and
Kashmir, which is an integral part of India by virtue of its accession to it in
1947".
Relations between the US and Pakistan have been plagued by accusations
in Washington that Islamabad is playing a "double game" by supporting
Afghan insurgents, while Pakistan believes it has been bullied into acting
against its own interests.
The
unilateral US raid that killed Bin Laden in May humiliated Pakistan 's powerful military, all but halting anti-terrorism
co-operation between the two countries.
@ The Guardian
GRAFT CRISIS MAY HAND
@ The Guardian
GRAFT CRISIS MAY HAND INDIA "EUREKA " MOMENT ON REFORM
["The Anna Hazare movement itself is a reflection that things are not moving. Some positive things must happen now otherwise it will be a disaster," said a finance ministry adviser, who asked to remain anonymous.]
By Alistair Scrutton
NEW DELHI (Reuters) - If the optimists are to be believed,
India's huge anti-corruption protests may give impetus to a beleaguered
government to push its reform process and help ailing economic growth and
plummeting business confidence.
If so, it
comes not a moment too soon. Hit by high interest rates and policy paralysis,
economic growth in April-June looks set to slow to its worst in six quarters.
August business confidence by one leading survey has plummeted to a two-year
low.
The fast by
social reformer Anna Hazare not only forced parliament to move on an anti-graft
bill, it may have woken the ruling Congress party to the fact governance is
more important than playing populism with regional and caste-based votes.
"The
last year has been one of drift and policy paralysis and the pummelling of the
government by Hazare was the last straw," said V. Ravichandar, chairman of
Feedback Consulting in Bangalore , which advises multinationals.
"The
government just cannot afford to play dead any more."
In power for
most of India 's independence and with its roots in
Soviet-style five-year plans, the left-of-centre Congress emerged as the party
of the poor villagers. The rising middle class has often played second fiddle.
Hazare, who
ended his fast on its 13th day on Sunday, may have been a turning point.
Hundreds of thousands of the urban, middle class took to the streets,
confounding those who saw the sector as a political footnote compared to the
rural majority of India 's 1.2 billion population.
The way to
win over that urban, young middle class behind Hazare may be to boost the urban
economy and reforms like foreign investment in the modern supermarket sector,
making it easier for industry to acquire land and the creation of national,
streamlined taxes.
"Now
the government may want to take the high ground, and reforms may be one way to
achieve that. Congress may realise it can no longer just pander to rural and
poor votes," said Ravichandar.
And pander
it has -- for years.
The
government spends a huge amount on subsidies for the mainly rural poor,
including a rural employment scheme that is widely seen as allowing it to win
its second term in 2009. That now accounts for more than three percent of the
annual budget.
The cost of
food subsidies has roughly tripled since Prime Minister Manmohan Singh first
came to power in 2004, to 600 billion rupees ($13 billion), according to a
report by Standard Chartered Research.
At the same
time, the government has gone slow on reforms like opening up supermarkets to
foreign investors, a move that would help India 's stubbornly high inflation rate and ease
the burden of India 's urban classes hurt by rising food
prices.
ECONOMY SLOWS
"At the
moment India suffers from a double whammy of policy lethargy
and high interest rates," said D.K. Joshi, principal economist at Crisil
in Mumbai. "Confidence will be boosted if the government moves on reforms.
People want to know that it is smoother to invest on the ground."
Ominously,
car sales fell in July by nearly 16 percent, the first drop in two and a half
years, as fewer consumers can afford to get affordable car loans. China 's sales rose nearly 7 percent in the same
month.
The Reserve
Bank of India (RBI), which has been one of Asia 's most aggressive central banks by
raising rates 11 times since last March, has warned against accepting inflation
as a "new normal".
Some
analysts say economic growth may slow to seven percent if there are no reforms,
not enough for Asia 's third-largest economy that needs to
grow nearer double digits to compete with the likes of China and deal with its widespread poverty.
"The
Anna Hazare movement itself is a reflection that things are not moving. Some
positive things must happen now otherwise it will be a disaster," said a finance
ministry adviser, who asked to remain anonymous.
The last
week of parliament will see investor eyes on whether Congress pushes through
reforms, with only a week of the session left.
These
measures in themselves are no magic wand. But what they may install --
relatively quickly -- is business confidence, and with it a more benign
investment climate.
The August
report on business confidence by the Federation of Indian Chambers of Commerce
and Industry came before Hazare's anti-graft campaign transfixed India . The survey said weak demand and high
rates were two of their biggest concerns.
The survey
said business was looking for big-ticket items, including a reform to
streamline taxes that may be introduced by the 2012 fiscal year
PESSIMISTS - HISTORY ON THEIR SIDE
If the
pessimists are to be believed -- and they have history on their side -- a
rudderless leadership may hold India back.
The
government's fumbling response to Hazare, briefly arresting him before
releasing him after a protest backlash, only underscored how out-of-touch Singh
and his elderly ministers are.
Finance
Minister Pranab Mukherjee is the wily political firefighter of the government
and was key to reaching a compromise with Hazare. But there were frustrations
his gaze was not on the $1.6 trillion economy.
"Yes,
unfortunately, the government has been caught up in defusing this crisis. I
must admit even here in the finance ministry, policy decisions have been held
up," said another senior finance ministry official who declined to be
named.
"I have
not met the finance minister for more than three days and decisions on the
table have been held up."
The Congress
party is also without Sonia Gandhi after she underwent surgery in the United States for an undisclosed illness. Her son,
Rahul Gandhi, has shown little leadership qualities, remaining mostly sidelined
during the Hazare dispute.
Singh may
have been responsible for the 1991 reforms that set the stage for India 's two-decade boom, but he has shown an
inability to push aggressive reforms in his second term.
Still, the
deal with Hazare saw unusual parliamentary consensus between the Congress and
opposition, and some analysts say there is a chance this will feed into the
reform bills.
The Hazare
crisis may also soon spark the rise of Rahul Gandhi and some younger
politicians unshackled by the decades-long statist history of Congress.
"Now it
is all behind us, the government will be able to concentrate on reforms,"
said Shubhada Rao, chief economist at the Yes Bank in Mumbai.
"These
may have a medium-term impact, but what is important is to boost business
confidence."
(Additonal
reporting by Manoj Kumar, Abhijit Neogy and Nigam Prusty; Editing by Paul de
Bendern and Nick Macfie)