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China to help Pakistan build hydro-electric project PDF Print E-mail
Wednesday, 26 March 2008

Pakistan is expected to conclude soon reinsurance deals with a Chinese consortium for the strategically important Neelam-Jhelum hydro-electric project being built by it at a cost of USD 1.5 billion in Pakistan- Occupied Kashmir (POK), over which India has voiced concerns, reports PTI.

“The talks are in very advanced stages and close of the deal is expected by April end or early May,” a senior executive of Adamjee Insurance Company, Pakistan-based insurer, who is tying up the deals, told PTI.

A consortium consisting of China’s Gezhouba Water and Power Company and China National Machinery and Equipment Import and Export Corporation (CMEC) were awarded contracts by Pakistan in December last year to build the Rs 78730 milllion project in eight years.

Chinese insurance companies PICC, Ping An, China Pacific and AIG (China) have experience in insuring the works carried out by the Chinese contractors in China-based domestic projects, Zersis Rustom Birdie, General Manager (Development) of the Karachi-based insurance company, said.

“We feel they (Chinese firms) are better experienced than European-based reinsurance companies to cover the works carried out by Chinese contractors in Pakistan,” he said.

Asked if the premiums from the international reinsurance companies were high because of war and terrorism-related risks, Birdie did not comment directly but said European firms were tough on terms for such a project as they did not have Chinese domestic experience directly and used PICC or Ping An in the past.

Also, Birdie said, there was “the country risk” of Pakistan and the area is in an earthquake-prone belt. “Severe earthquake of October 2005 is still fresh in memories”. The insurance is for contract value plus 15 percent with the total sum at risk being 12.075 billion yuan (USD 1.63 billion). The total cost of the project is 10.50 billion yuan.

Birdie said the project was of “national importance” to Pakistan as upstream India has completed 80 percent of work on the Kishenganga Dam and Hydro project. “If Pakistan does not construct the Neelum-Jhelum project, they shall loose the rights over the waters of this river”, he said. The project was “very safe,” he said.

The river diversion tunnel is to be built 98 percent underground ensuring it is safe from natural hazards except earthquake for which design has been inbuilt. After being in doldrums for years, the project, viewed as “strategically important” by Islamabad as it would help secure Pakistan’s rights over Neelum-Jhelum waters, received clearance from the cabinet in December.

According to Pakistan media reports, Beijing gave the go- ahead to the Chinese consortium to begin the construction work after its interior ministry had earlier voiced apprehensions over initiating the work due to militant activities in Swat and Shangla. The project involves a large number of Chinese workers.

The Neelam river originates from India as Kishenganga and flows into Pakistan across the Line of Control. India is building the 330 MW Kishenganga hydropower project. India has expressed reservations over the Neelam-Jhelum project, saying it was not in line with the treaty, while Pakistan is trying to create roadblocks for the Kishenganga power project in Baramulla in Kashmir.

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