The Economic Coordination Committee (ECC) of the Federal Cabinet approved exemptions from standard procurement rules to directly award a $2 billion contract to China for constructing a section of the Karakoram Highway.
The same exemptions were granted for the construction of the Chakdara-Timergara Highway with South Korea.
The committee expressed concern that while both projects are of strategic importance, they are unlikely to generate sufficient revenue to service their foreign debt. However, these projects were cleared due to longstanding commitments with China and South Korea.
The ECC meeting, chaired by Finance Minister Muhammad Aurangzeb, also decided that foreign-funded projects should not be undertaken unless they can generate sufficient revenue in foreign currency to cover debt servicing.
For the KKH and Chakdara-Timergara Highway projects, the ECC authorized the National Highway Authority (NHA) to invoke Rule 5 of the Procurement Rules 2004.
This rule allows the bypassing of international competitive bidding when procurement rules conflict with international treaties or agreements, effectively limiting competition to contractors from the partner countries.
The Thakot-Raikot section of the Karakoram Highway, which will be impacted by the construction of the Diamer-Basha, Dasu, Azad Pattan, and Thakot dams, is covered under a framework agreement signed in June during Prime Minister Shehbaz Sharif’s visit to Beijing. The project, valued at 13.1 billion Chinese Yuan (approximately $2 billion), has already received approval from Pakistan’s top project authorisation body.
Under the agreement, Chinese companies will handle engineering design, procurement, construction (EPC), and supervision of the project.
China will provide a list of recommended companies, from which Pakistan will select one or a consortium after thorough negotiations on technical and financial terms with the relevant Pakistani institutions. The project will also utilise Chinese equipment for construction.
