China Eximbank provides RMB 850 million government concessional loan for Safe City Islamabad Project

The Safe City Islamabad Project was conceived by the Pakistan Peoples Party (PPP) -led government, and it was approved on December 29, 2009, following an agreement between the Government of Pakistan and the Chinese Government. Then, on December 17, 2010, China Eximbank and the Government of Pakistan signed a framework agreement and an RMB 850 million government concessional loan (GCL) agreement [CHINA EXIMBANK GCL NO. (2010) 51 TOTAL NO. (348)] for the Islamabad 'Safe City' (平安城市) Project. The loan carried the following borrowing terms: a 20 year maturity, a 5 year grace period, and a 2% interest rate. The borrower was expected to use the proceeds of the loan to finance a $124,719,018 commercial contract with Huawei Technologies Co., Ltd., which was signed on December 29, 2009. The project supported the installation of 1,950 surveillance (CCTV) cameras in Islamabad (connected by 500 kilometers of fibre optic cable and operated through a 4G network); the installation of a 2900 square meter bomb-proof command center in Islamabad (سیف سٹی کیپٹل کمانڈ اینڈ کنٹرول سینٹر اسلام آباد) in a building at H-11 to monitor important buildings, entry and exit points, roads, commercial centers and a sizable portion of the city’s residential areas; installation of a modern 4GLTE communication system to connect the control room with the Rapid Response Unit (later renamed the Counter-Terrorism Department); the provision of 1500 handheld and vehicle based communication sets; and the acquisition and installation of a facial detection system, camera based facial recognition software, and video summary software. In coordination with Pakistan’s National Database and Registration Authority (NADRA), all of the videos and recorded data from the 1,950 surveillance (CCTV) cameras were to be used to ensure real-time monitoring of people and vehicles at important buildings, roads, key points and major portions of the city’s residential areas. All the data as received from installed surveillance cameras across the city were also to be transferred to a command and control center and all of the suspicious people and vehicles monitored in the surveillance cameras were to be checked in the big data in coordination of NADRA’s data bank. Then, if suspects were confirmed to be dangerous, the command and control center would be responsible for promptly conveying instructions to a ‘Rapid Response Force’ and allocating forces to the site within three minutes to minimize the possible destruction caused by suspect and to avert any terrorists activity. Huawei Technologies Co., Ltd. was the contractor responsible for project implementation. On November 11, 2011 the Executive Committee of the National Economic Council (Ecnec) approved the Islamabad Safe City Project. However, project implementation was delayed due to litigation before the Supreme Court. In January 2011, the legality of the commercial contract with Huawei Technologies Co., Ltd. was challenged by a petitioner (Shahid Orakzai ) who contended that a similar project was undertaken for Karachi in 2008-2009 for $8 million. On August, 23, 2012, a three-member bench -- consisting of justices Nasirul Mulk, Asif Saeed Khosa and Sheikh Azmat Saeed -- ordered the cancellation of the commercial contract with Huawei Technologies Co., Ltd. on the basis of it being issued in a non-transparent manner and its cost being artificially inflated. They noted that 'the contract was executed in violation of the Public Procurement Rules 2004, and the exemption purportedly granted under Rule 42 of the rules was based on extraneous and irrelevant reasons and, therefore, it is of no legal effect and consequence.' The Supreme Court also directed National Accountability Bureau Chairman Admiral Fasih Bokhari to initiate legal action against the Prime Minister and other top officials for committing irregularities in the deal. It also ordered the Government of Pakistan to re-initiate the procurement process in accordance with the provisions of the Public Procurement Regulatory Authority Ordinance, 2002 and the Public Procurement Rules (PPR), 2004 and the law. The commercial contract was renegotiated with Huawei Technologies Co., Ltd. after the Pakistan Muslim League (PMLN) came to power. Construction activities began (after the conclusion of the litigation and without any cost escalation) in 2014. The project was originally expected to reach completion in October 2015. The command center was operational by March 2016, and it was officially inaugurated in June 2016. 1,805 of 1,950 cameras had been installed as of August 2016. 95% of the cameras installed through the project were still functional as of November 2021. Then, in July 2022, senior police officers told a local media outlet (Dawn) on condition of anonymity that not a single incident or crime had been prevented through the CCTV system that was put in place through the Safe City Project. They also alleged that no criminals, suspects or proclaimed offenders were arrested through the CCTV system. The project also failed to assist the police in chasing and arresting culprits who escaped after criminal activities, according to the police officers. Then, in September 2022, the dead body of the Abdul Qadeer, the Director of Safe City Islamabad Project, was found by the police in a house in Margalla Town hanging from a ceiling fan with a rope. The police said the incident was an apparent suicide. There are some indications that the China Eximbank loan for the Safe City Islamabad Project financially underperformed vis-a-vis the original expectations of the lender. On or around July 1, 2020, China Eximbank and the Government of Pakistan signed a debt suspension agreement. Under the terms of the agreement, the lender agreed to suspend principal and interest payments due between July 1, 2020 and December 31, 2020 under the government concessional loan agreement for the Safe City Islamabad Project. Then, on November 19, 2020, China Eximbank and the Government of Pakistan signed another debt suspension agreement [No. DSSI2021PHASE1-030]. Under the terms of the agreement, the lender agreed to suspend principal and interest payments due between January 1, 2021 and June 30, 2021 under the government concessional loan agreement for the Safe City Islamabad Project. Then, on or around July 1, 2021, China Eximbank and the Government of Pakistan signed another debt suspension agreement. Under the terms of the agreement, the lender agreed to suspend principal and interest payments due between July 1, 2021 and December 31, 2021 under the government concessional loan agreement for the Safe City Islamabad Project. The debt service suspension (rescheduling) from July 2020-December 2020 is captured via Project ID#96254. The debt service suspension (rescheduling) from January 2021-June 2021 is captured via Project ID#96256. The debt service suspension (rescheduling) from July 2021-December 2021 is captured via Project ID#96253.

Additional details

1. The November 2020 debt suspension agreement [No. DSSI2021PHASE1-030] can be accessed in it entirety via https://www.dropbox.com/s/67n1oq44it27kvu/3.%20Debt%20Suspension%20Agreement%20for%20GCL%20Other%20Projects.pdf?dl=0

Number of official sources

8

Number of total sources

34