Malir Expressway project in limbo as ADB backs out from financing

The Malir Expressway project seems financially unviable as the Asian Development Bank (ADB) has backed out from financing it and struck down it from its list of priorities following complaints from indigenous farmers who cited environmental damages and threat of displacement.

The ADB’s Accountability Mechanism office wrote a letter to Advocate Abira Ashfaq on Thursday, April 27, saying that the “Malir Expressway Project is no longer an ADB assisted project.”

The development came as a victory came to the farmers after they lost a petition against the project in the Sindh Environmental Protection Tribunal on April 15. The tribunal had disposed of the plea challenging the Environmental Impact Assessment (EIA) approval accorded to the Malir Expressway project by the Sindh Environmental Protection Agency (Sepa). It allowed the project but ordered the government to set up a committee to ensure that no environmental damage took place due to the project.

Indigenous farmers of Malir had lodged a complaint before the Asian Development Bank against the Malir Expressway on September 22, 2022 with the help of Abira, following which the ADB held an online meeting with the lawyer and others in October.

In the same month, an ADB team from Philippines along with its resident team of Pakistan visited Karachi and met Abira, Advocate Zubair Abro, who was fighting the case against the expressway in the tribunal, researcher Sadya Siddiqi and local resident Salman Baloch. The meeting lasted for four hours.

In November, the ADB, as part of their accountability mechanism, further listened to Abira and farmer’s complaints.

The Malir Expressway, as per its EIA report, is a 39-kilometre-long corridor connecting Defence Housing Authority (DHA) with the Karachi-Hyderabad Motorway. The project starts right from Jam Sadiq Bridge on Korangi Road and runs along the right bank of the Malir River ending near DHA City outside Karachi.

The project was initiated under public-private partnership, which means the provincial government had to seek private capital to build the six-lane road infrastructure. The project’s construction cost was estimated at Rs27.583 billion, according to the construction bid document and a press statement made by the Sindh chief minister at the financial close that was achieved in June 2022.

Of the Rs27.583 billion, the Sindh government pledged to share Rs4.137 billion, which was 15 per cent of the total cost. The private partner or concessionaire's share was Rs5.517 billion or 20 per cent, and the commercial loan to be borrowed from a group of banks was Rs17.929 billion which was 65 per cent.

The private partner is referred to as concessionaire or sponsor is the consortium of three construction firms which has been registered as a company, Malir Expressway Pvt Ltd, whose office is on Karsaz Road.

The concessionaire agreement was reportedly signed in April 2020. The commercial loans from a group of banks was sought to finance the remaining funding requirement since the Sindh government and private partner's resources were not sufficient for such a cost-intensive project.

As the provincial government could not easily manage the amount it had pledged for the project, it asked the ADB to finance it, which is referred to as the Viability Gap Fund (VGF) in the public-private partnership terminology. The VGFs are always used for the public financing part of such partnerships.

Basically, the ADB considered paying Rs4.137 billion under its umbrella project supporting public-private partnership investments in Sindh, of which one sub-project was the Malir Expressway. The provincial government was never in the position to fund even the Rs4.137 billion requirement through its annual development plan even prior to the Covid-19 economic slowdown and the floods of 2022.

As a result of the complaint filed in September 2022, subsequent online meetings held in October and November, and an in-person meeting held in October that year, the ADB has now decided to remove the Malir Expressway project from its portfolio.

This means, the ADB will not be providing Rs4.137 billion needed by the Sindh for its share of the construction cost.

This development may also not go unnoticed by the local banks that agreed to extend commercial loans for the project.

A member of Abira’s team told The News that the Malir Expressway Project was unfeasible now and it was also unlikely that the World Bank would fund it. “The ADB has found merit in the complaint filed against the project which is riddled with a faulty and fraudulent Environment Impact Assessment study, non-disclosure of the Land Acquisition and Resettlement Plan (LARP) survey that entails potential demolitions of homes and ecological destruction of the last-surviving river of Karachi, its riverbed and flood plains, and the fields of Malir.”