China Eximbank provides RMB 486.3 million government concessional loan for Non-Intrusive Vehicle X-Ray Inspection System (NVIS) Project

Project narrative

During the Pakistani President's visit to China on October 15-17, 2008, a Memorandum of Understanding (MoU) was signed between Pakistan's Ministry of Interior and Nuctech Company Limited for the procurement and installation of a Non-Intrusive Vehicle X-Ray Inspection System (NVIS) to interdict transportation of weapons, ammunition, explosives, narcotics and other contraband items. After the signing of the MoU, a committee -- headed by the Chairman of Pakistan's Atomic Energy Commission (PAEC) and including representatives from the Ministry of Science and Technology, Ministry of Finance, Ministry of Economic Affairs, Ministry of Health, Ministry of Interior, Pakistan Nuclear Regulatory Authority (PNRA), and the Planning Commission -- was constituted to examine the project proposal and provide recommendations. The committee recommended that the project be undertaken in two phases. The first phase was envisaged to be a pilot project in which equipment would be installed for demonstration and test purposes. If the equipment was determined to be stable, the remaining equipment would then be procured, and installed, in a second phase. Prime Minister Yousaf Raza Gilani, after receiving a summary submitted by the EAD, allowed the start of negotiations and signing of a loan agreement with China Eximbank. The pilot project was approved by Pakistan's Executive Committee of the National Economic Council (ECNEC) on March 30, 2009 for $12 million. Then, on December 17, 2010, the Chinese Government and the Government of Pakistan signed an RMB 486,339,000 ($71.206 million) government concessional loan (GCL) agreement [CHINA EXIMBANK GCL NO. (2010) 11 TOTAL NO. (308)] for a Non-Intrusive Vehicle X-Ray Inspection System (NVIS) Project. The GCL 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 (GCL) to finance an RMB 486,339,000 ($71.206 million) commercial contract between Pakistan's Interior Ministry and Nuctech Company Limited, which was signed on June 9, 2009. The project involved the acquisition and installation of 24 mobile scanners in an effort to strengthen security arrangements and fight terrorism. The scanners were designed to detect explosives and weapons. Nuctech Company Limited was the contractor responsible for project implementation. The project was plagued by various problems and delays. During the project's pilot phase in 2009, 2 scanners and 2 handheld detectors were imported and handed over to ICT police for installation in Islamabad. Later one of the scanners was shifted to Sindh Rangers for installation in Karachi. Then, in 2010, the Pakistani authorities delayed the installation of additional x-ray scanners in Islamabad after experts declared them 'a health hazard' due to high radiation levels. Also, after some additional scanners arrived in Karachi, they could not be brought to Islamabad until December 2014 due to a dispute over the payment of customs duties. On May 14, 2015, 2 additional scanners and 3 additional hand-held explosives detectors, which were imported on July 23, 2014, were handed over to Khyber Pakhtunkhwa (KP) Police. According to an Islamabad Capital Territory (ICT) police report submitted on July 15, 2013, the scanners did not meet their requirements as they could not detect explosives. ICT police proposed that the scanners could instead be handed over to Pakistan's Customs or Excise Departments for proper utilization as they had no utility for police force. However, since the scanners were determined to not be useful by the ICT police, Pakistan's Ministry of Interior decided not to pursue the second phase of the commercial contract and Nuctech Company Limited was informed accordingly. The project ultimately reached completion on March 17, 2016, according to a report published by the Government of Pakistan's Economic Affairs Division (EAD). There are some indications that the China Eximbank government concessional loan for the Non-Intrusive Vehicle X-Ray Inspection System (NVIS) 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 Non-Intrusive Vehicle X-Ray Inspection System (NVIS) 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 Non-Intrusive Vehicle X-Ray Inspection System (NVIS) 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 Non-Intrusive Vehicle X-Ray Inspection System (NVIS) Project. The debt service suspension (rescheduling) from July 2020-December 2020 is captured via Record ID#96254. The debt service suspension (rescheduling) from January 2021-June 2021 is captured via Record ID#96256. The debt service suspension (rescheduling) from July 2021-December 2021 is captured via Record ID#96253.