ISLAMABAD, Feb 5 Builder of Islamabad-Lahore Motorway M-2, a South Korean company, has threatened to take the case before the International Chamber of Commerce for Arbitration over the non-payment of Rs607 million by the government of Pakistan.

Daewoo Pakistan Motorway Services Ltd (DPMSL), a subsidiary of Daewoo Corporation, claims that the National Highway Authority (NHA) of Pakistan owes this amount to the company, which the latter is denying to pay.

On Thursday vice-chairman and chief executive officer of Daewoo, Yang-Kyung Cho, called on Prime Minister Yousuf Raza Gilani and discussed the issue of payment, besides the possibility of his company's participation in hydel power projects in Pakistan.

Almost a couple of weeks ago, State Minister for Communication Ch Safari Warriach made a statement on the floor of the National Assembly that the Korean company had to pay Rs350 million to the government for which he was pushing concerned quarters to the limit.

He also mentioned the name of the South Korean ambassador, who had also been engaged by the DPMSL to resolve the issue. The minister argued in the house that under the agreement, DPMSL had to settle the said amount with the government, which it was denying under various pretexts.

Director General DPMSL Maj (Rtd) Abdul Mateen issued a denial in response to state minister's assertion that his company had suffered a loss of Rs607 million in running ten service areas on M-2 and under the agreement NHA owed this amount to the firm.

In his statement, which he e-mailed to this correspondent, said a concession agreement to finance, construct, operate and maintain these service areas was signed between DPMSL and NHA in 1998. As per the agreement, the DPSML bore entire construction cost, which it would amortise in first 15 years, in case of failure another term of 15 years will be awarded.

The NHA forecasted a traffic volume of 15,000 vehicles per day with annual 5 per cent increase. The NHA's assessment proved absolutely wrong and even in 2009 traffic volume is not more than 7,000 vehicles per day, he said.

He said profit sharing with NHA was agreed exclusively on the basis of annual average daily traffic (AADT), which could not improve, whereas the NHA was demanding money on the basis of its original assessment of 15,000 vehicles per day.

Further explaining nature of the agreement he said operation of services areas was based on Build, Operate, and Transfer (BOT). As per the commitment, the DPSML was running these service areas, but over the years had suffered a massive loss of Rs607 million.

He also claimed under the agreement the NHA was responsible to provide electricity, water, sewerage disposal and provision of telecommunication lines, which it never honoured. Instead, NHA forcibly occupied DPMSL's premises.

Overall, rent claims and utility charges have also exceeded Rs300 million to this date. Despite repeated reminders, there is no response from NHA's side.

Taking pride in construction of M-2, Mr Mateen said it was a unique project in South Asia, and the government of Pakistan still owed $700 million to Daewoo.