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ISLAMABAD: The Federal Cabinet has reportedly set aside concerns of Public Procurement Regulatory Authority (PPRA) on Inter-Governmental Framework Agreement between the Governments of Pakistan and Denmark, which claims that the pact would benefit Danish suppliers only, well informed sources told Business Recorder.

On August 10, 2022, acting Secretary Economic Affairs Division, Humair Karim and Danish ambassador to Pakistan Lis Rosenholm signed the agreement.

On August 4, 2022, Economic Affairs Division (EAD) noted that Pakistan and Demark had been partners in successful development cooperation since 1969. Denmark had provided technical and financial support to the Government of Pakistan in Disaster Management, Peace Building, Governance and Human Rights sectors in the past through public and civil society channels.

The last Framework Programme Agreement amounting to $ 50 million between the Governments of Denmark and Pakistan was signed on September 30, 2013 to mark the start of a new programme cycle for 2013-2016.

However, since 2017 there was no active bilateral financial engagement through Government- to-Government channels, rather most of the Danish assistance was being channelled off-budget through UN and other International Development Organizations.

After considerable efforts from both sides, Denmark agreed to revive economic cooperation with Pakistan through G-to-G channels.

Framework agreement signed: Denmark to provide interest-free loans in four sectors

In this regard, an Inter-Governmental Framework Agreement between the Governments of Pakistan and Denmark was shared by the Danish side for signing.

The Inter-Governmental Framework Agreement offered the Danida Sustainable Infrastructure Finance (DSIF) Facility which would provide interest free, but tied loans up to but not limited to Euro 100 million in renewable energy, energy efficiency, water supply and wastewater treatment sectors, aimed at transfer of technology and know-how.

The Danish loans would be tied aid and would have a 35% concessional element to reduce the total amount of loan for Pakistan. DSIF subsidy would cover the interest on the loan, export premium, bank margin and an upfront grant if these expenses did not arrive at 35% of the contract amount.

The loans would have a 10-year maturity period generally and 15 years can be accommodated in exceptional cases. Loan Agreements including the fees and costs of the lender for each project would be negotiated on a case by case basis between the lender (Commercial Bank or a Financial Institution with a representation in Denmark) and the Borrower (buyers with a guarantee from the Government of Pakistan).

The Inter-Governmental Framework Agreement would remain effective for 15 years from the date of signing.

The draft Framework Agreement was circulated and had been cleared by Finance Division, Ministry of Foreign Affairs, Federal Board of Revenue, Ministry of Planning Development & Special Initiatives, Ministry of Law & Justice, Auditor General of Pakistan and Attorney General for Pakistan except the Public Procurement Regularly Authority (PPRA) which had raised concerns on the loan facility being tied aid and that it would be limited to Danish suppliers only.

The Economic Affairs Division was of the view that the potential benefits of this Agreement included an interest free loan, 35% subsidy, and 75% cost of the feasibility study would be a grant and transfer of Danish technology to Pakistan.

These benefits outweighed the cost of limiting competition to Danish suppliers only. Moreover, since 2017 there was no active development cooperation going on between the two countries; hence, this Framework Agreement marked the beginning of a new chapter of economic relations between the two countries. Therefore, in the greater national interest, approval of the Cabinet was solicited as per Rule 16(1) (h) of Rules of Business 1973 for signing of Inter-Governmental Framework Agreement between the Governments of Pakistan and Denmark.

The Cabinet approved the draft agreement despite concerns of the Public Procurement Regulatory Authority.

Copyright Business Recorder, 2022

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