PESHAWAR: The Khyber Pakhtunkhwa planning and development department has conveyed serious reservations to the Economic Zones Development and Management Company about its ‘faulty’ planning for the establishment of Rashkai and Hattar special economic zones.
A meeting took place on Sept 9 regarding the documents submitted by the provincial government-owned EZDMC to the Board of Investment and Special Economic Zone Secretariat, Islamabad, regarding Hattar and Rashkai zones.
The provincial additional chief secretary chaired the meeting, which was attended by senior P&D and EZDMC officials.
On Sept 11, the P&D department wrote a letter to the company’s chief executive officer insisting that detailed presentations were given in the Sept 9 meeting highlighting serious shortcomings and inconsistencies in Rashkai and Hattar EZDMC plans but the company’s representatives didn’t give any explanation for them.
It asks company to address plan shortcomings, inconsistencies
The 20-page letter dissected the company’s plans for setting up Hattar and Rashkai SEZs under the CPEC project and noted that both documents were reflection of weak and inexistent intra-organisational quality assurance and quality control system.
“The submittals are characterised by poor narration, which is most of the time difficult to comprehend and make sense of,” it said, adding that documents had data conflict and mistakes in simple mathematic calculations.
The P&D department went on detailing mistakes and inconsistencies in the company’s financial analysis, cost estimates, foreign direct investment, field investigations, master plans, project schedule, operational plan, data, power plant capacity, special purpose vehicles and land transfers to it.
It pointed out that the company’s internal rate of return and net present value calculations were not correct.
“The submittal shows a negative NPV of 6.7 per cent only $4.7 million which is grossly misrepresented and application of given IRR of 6.7 per cent to project cash flows gives a negative NPV of $65 million under the most optimistic scenario,” it said.
The department said the project was based on flawed financial model that is expected to cause a huge loss to the national exchequer and therefore needs to be reviewed.
It said the submittal lacked geological and topographical data and non-conduct of field and laboratory investigations.
“A project with such a large financial outlay must be based on proper, detailed filed investigations,” the letter read.
Regarding the industrial estate master planning, the department said the plot sizes hadn’t been defined and there was no size wise distribution of the plots and plan lacked required length of detail.
It said there was no master schedule for such a major project and project proposal submitted to the SEZ Secretariat rather contained six separate schedules.
“While the CSEZ was expected to integrate two geographically separated SEZs into one, the submitted schedule divided a single CSEZ into six separate projects due to a lack of integrating master schedule,” it said.
The department said the project’s operation period was about 27 years but no operational plan had been worked out.
It said values of directly created job 15,000 to 300,000 which represent a divergence of 2000 percent. The plans also lacked detailed drawings.
The department said though the document said SEZs were being designed to attract foreign direct investment, an appendix showed that Pakistan as highly dangerous country ranked on 4th in global terrorism index and ascribed high demand for pharmaceutical products due to a large number of causalities resulting from terrorist attacks.
It asked the company to rectify the shortcomings and inconsistencies in planning for two economic zones.
Sources told Dawn that the observations of the P&D department raised grave concerns about the competency and commitment of the company’s management as well as the governing team about the flagship project for the region.
They said the company had already lost one year and signed a memorandum of understanding with a Chinese company, CNEEC, without having formal documentation and assessment of the project.
“The CNEEC is understood to have claimed $1.0 million as indemnities for the project’s cancellation,” an official said.
He said the board of directors had seriously evaluated the project’s feasibility or key terms under which the special economic zones would be developed on war footing.
The EZDMC CEO wasn’t available for comments.
Published in Dawn, October 14th, 2018