Pakistan relaxed bidding rules to award $2 bn Karakoram Highway contract to China: Pak media

Pakistan reportedly relaxed bidding rules to directly award a $2 billion contract to China for the construction of the strategically important Karakoram Highway, according to a Pakistani media report on Friday. 

The Finance Minister Muhammad Aurangzeb-led Economic Coordination Committee of the cabinet on Thursday approved a special rule to exempt the requirement for international competitive bidding. This decision allows the contract to be awarded to Chinese firms for the construction of a section of the Karakoram Highway, The Express Tribune newspaper reported.

The Thakot-Raikot section of the highway is vital for maintaining the land route connection between China and Pakistan. The Ministry of Finance stated that the committee reviewed a summary from the Ministry of Communications about executing the Framework Agreement between China and Pakistan on the realignment of KKH (Thakot-Raikot) under the China-Pakistan Economic Corridor (CPEC). After thorough discussions, the committee permitted the Ministry of Communications and National Highway Authority to proceed with the provisions of the Framework Agreement as per rule-5 of Public Procurement Rules, 2004. 

Pakistan signed a framework agreement for the construction of the Thakot-Raikot section of the Karakoram Highway. The agreement was signed during Prime Minister Shehbaz Sharif's visit to Beijing in June. China will provide a $2 billion loan for the project. The existing road portion will be submerged due to the construction of the Diamer-Basha, Dasu, Azad Pattan, and Thakot dams along the road. 

According to the agreement, Chinese companies will handle the engineering design, procurement, construction, and supervision work. The selection of the Chinese companies will take place after negotiations on all technical and financial aspects with the Pakistani institutions responsible for the project.

China will provide a list of recommended Chinese companies for a construction project in Pakistan, and Pakistan will select one of these companies. The project will use Chinese equipment. According to the Public Procurement Regulatory Authority (PPRA) law, contracts must be awarded through competitive bidding. 

However, PPRA rule 5 allows exceptions if there is a conflict with an international treaty or agreement. The committee also approved the relaxation of competitive process conditions for hiring foreign consultants for the Chakdara-Timergara road project, which will connect Peshawar with Chitral. 

The Export-Import Bank of South Korea provided a $49 million loan for the project, with the condition that consultants be hired according to its preferences. Chairman ECC Senator Muhammad Aurangzeb directed that in the future, no foreign loans should be taken for road projects that cannot generate enough revenue to repay the liabilities. Pakistan's external financing position remains weak, and the government has taken steps to ease pressure on foreign exchange reserves.