Political, economic instability interrupted growth in Pakistan: ADB

ISLAMABAD: The Asian Development Bank (ADB) stated that periods of strong growth in Pakistan were interrupted by episodes of political and economic instability.

“In Pakistan, periods of strong growth were interrupted by episodes of political and economic instability. In 1989, ethnic violence in Karachi, the only large port and the financial and industrial center, created uncertainty and held back investment. Development was also affected by frequent power shortages and difficulties in the agriculture sector,” it was stated in published book titled “Banking on the Future of Asia and the Pacific: 50 Years of the Asian Development Bank”.

Regarding connectivity of natural gas, the ADB is developing the Turkmenistan– Afghanistan–Pakistan–India (TAPI) Pipeline to transport natural gas from Turkmenistan through Afghanistan into Pakistan and India. The project, the total cost of which would exceed $10 billion, presents an opportunity for regional cooperation on an expanded scale linking the four economies.

With the opening up of new markets, landlocked Turkmenistan will be able to diversify gas exports to the east. Afghanistan, Pakistan, and India will gain a steady supply of affordable gas to power their growing economies. The project began in March 1995 with the signing of an inaugural memorandum of understanding between Turkmenistan and Pakistan. However, plans were held up because of Afghanistan’s unstable political situation. With improved regional security after the fall of the Taliban, the countries in the region decided to push ahead with the ambitious plans for the 1600-kilometer-long pipeline.

ADB has been the TAPI project’s secretariat since 2003 at the request of the relevant governments. The project is being implemented in four phases with Bank support. Phase 1 was completed in December 2010 with the signing of the gas pipeline framework agreement. Phase 2 ended with the signing of the gas sales and purchase agreement in 2012. The parties asked ADB to continue as secretariat in phase 3 for establishing a special purpose consortium company to operate the TAPI project, select a commercial company as consortium lead, and finalise operational agreements. The pipeline will be constructed in phase 4; construction began in Turkmenistan in December 2015. ADB, now involved in the project for 14 years, has been balancing the interests of the various parties. The Bank has organised minister-level steering committees and technical working groups. It has also financed technical studies and the drafting of agreements.

ADB was appointed the transaction advisor for the project in November 2013 and advised on the establishment of the TAPI pipeline company. In 2015, ADB facilitated the endorsement of Turkmengaz as the project’s consortium leader and the execution of the shareholders’ agreement. During the financial arrangement stage, ADB may also play a role of a financier to lend to governments for their equity investments, or to private sector partners.

The first loan was to the National Development Leasing Corporation in Pakistan. Elsewhere in South Asia, the prospects were mixed. Pakistan made progress during the 1950s but was hindered in the late 1960s by simmering internal political tensions that led to the secession of East Pakistan as Bangladesh in 1971. Development was faster in Ceylon (later Sri Lanka), which in the 1950s was widely regarded as a “model developing country, with functioning democracy, working institutions and good economic growth.” On a visit to Colombo in the early 1950s, Lee Kuan Yew, later Prime Minister of Singapore, commented that the capital was orderly, clean, and prosperous and that he wished Cherat Cement Company and the National Development Leasing Corporation of Pakistan.

The policy on lending to the private sector without government guarantee was approved in 1985. The following year, the first loan to a private sector enterprise without government guarantee was approved for the Cherat Cement Company in Pakistan to assist the company in doubling its capacity. The loan, given in Swiss francs, amounted to $5 million. The first loan to a financial institution without government guarantee was also approved in 1986 for an activity in Pakistan. The loan, $5 million provided in Swiss francs to the National Development Leasing Corporation, helped cover the foreign exchange cost of directly imported equipment. The equipment was intended to be supplied to the leasing company’s private sector customers, mainly in the manufacturing sector.