By IANS
Kathmandu : The Asian Development Bank (ADB) Tuesday pulled out of Nepal's largest development project, saying it would not be able to meet the deadline.
The move comes less than a week after the World Bank warned Prime Minister Girija Prasad Koirala's government that it would stop project assistance if employees' safety was jeopardised.
The $500 million Melamchi water supply project, which had planned to end Kathmandu's chronic water scarcity by bringing 170 million litres of water per day from the north, has been highly controversial and mired in politics.
It was used by King Gyanendra during his 15-month regime to target opponents. Sher Bahadur Deuba, the prime minister the king deposed in 2005 after a bloodless coup, was accused of graft while awarding contracts in the project and jailed along with his physical planning and infrastructure minister Prakash Man Singh.
Though scheduled to be completed by 2000, it was given nine extensions by the ADB and other donor agencies after the work was halted first by the Maoists, who were targeting infrastructure during their 10-year insurgency, and then during the royal regime.
Even after the king's government fell and a multi-party government headed by Koirala came to power, Melamchi continued to be in the doldrums with a Maoist minister refusing to honour a contract given to a private company.
A British company, Severn Trent, was shortlisted to manage the water supply. However, after the Maoists joined the government last month and the ministry concerned – physical planning and infrastructure – went to a Maoist leader, Hisila Yami, he refused to honour the commitment, saying the British firm had a bad reputation.
In a statement Tuesday, Paul J. Heytens, ADB's country director in Nepal, said though the bank had remained steadfast in its commitment to the project and shown maximum flexibility to sustain it at several critical times in the past six years, the government's inability to sign the duly negotiated management contract had creates considerable uncertainty.
"As it stands now, it would not be possible to carry on with project activities, with the project due to close on 30 June 2007," Heytens said. "In such difficult circumstances, it is now for the government to decide how it wishes to proceed."
The ADB move comes as a snub for Yami, who had locked horns with senior politician Finance Minister Ram Sharan Mahat over the contract and exuded confidence that the ADB would accept scrapping of the negotiations with the British firm.
The ADB episode is going to tarnish the new government's image in the international community with foreign companies likely to shy away from projects in Nepal.
Besides dissenting notes in the government itself, projects have also to deal with worsening security situation with shutdowns and abductions rising.
A group of engineers and government officials working on a World Bank aided project were kidnapped by an armed group in Siraha district in southern Nepal earlier this month with one of the engineers being killed.
The episode made the World Bank issue a public warning that it would not assist projects where the lives of staff were at risk.