IT tower project dispute: KMC, Malaysian firm try to reach ‘amicable’ settlement
KARACHI, Nov 11: The Karachi Metropolitan Corporation and a multinational Malaysian company are negotiating to try and reach an amicable solution regarding the IT tower project which was to be built adjacent to the Civic Centre in Gulshan-i-Iqbal at an estimated cost of $200 million.
Dawn learnt on Sunday that if a settlement was not reached between the Karachi Development Company (set up by the KMC) and the IM Technologies (IMT) Pakistan by Dec 5, then under the agreement signed between the KMC and the IMT, the matter would be referred to a Singapore-based arbitration body whose decision would be final.
According to sources, if the matter was decided by international arbitration, the KMC would most probably end up paying a lot more because the Singapore-based body would follow the agreement to the letter which is already heavily tilted in favour of the IM Technologies.
However, sources revealed that the project, which was to be 47-storey high and would have housed call centres, offices, hotels and other facilities, has been facing hurdles right from the start and the terms of the original agreement had also been changed.
Under the initial agreement, the IMT was to bring in $200 million worth of foreign investment besides constructing the building and operating it for the first 30 years. After this period it would have been handed over to the defunct City District Government Karachi which provided its plot as a share in the investment. Also, under the initial agreement, the IMT would not pay anything to the defunct city government for the first seven years, but after that it would pay an amount which would increase gradually over the years.
According to sources, the local security agencies had objected to the involvement of one person in the project who was an Indian national. Hence, the Indian was chucked out, the agreement was amended and the KDC agreed to arrange around $198 million with the IMT alone responsible for constructing the building. The project was stuck once again, when the KDC could not arrange the required funds.
Meanwhile, Pakistan chief of the IMT Sarfaraz H. Rizvi said that the company had abandoned the project and was looking for an amicable settlement. According to Mr Rizvi, his company, after investing so much time and resources in the project, the IMT had abandoned it and was hoping for an amicable settlement for which negotiations were under way.
If the negotiations failed, he said, the Singapore-based body would be approached for a decision. Mr Rizvi said he hoped that it
would take only a few hearings for the body to settle the matter in favour of the IMT because the agreement was clear enough.
He said the company’s claim, according to the agreement, was for about $40 million while it would also make claims for the waste of time and loss of credibility because of the project.
He said, the IMT received nothing in advance from the KDC. He said his company had invested around $2 million in designing and planning the project. Besides, he said, over 200 pilings had been dug into the land at a cost of $7 million. He said there were many other expenses, including a two-hour visit of Pakistani officials to Malaysia in connection with the project.
Mr Rizvi said he hoped that the matter would be solved amicably here. However, he said he was confident that if the matter went to the arbitration body, the IMT would be compensated several times over.
Talking to Dawn, development company (KDC) chief Agha Maqsood Abbas said the IMT had been approached via diplomatic channels to settle the matter by December. He said the company had submitted its claims of around $15 million, which the KDC considered to be on the higher side. “Our accountants are cross-checking their expenses and other claims filed by them,” said Mr Abbas. “As soon as this process is completed, the final round of talks will begin.”
He said he hoped that the figure would come down considerably and that if a settlement could not be reached, the next step would be to approach the arbitration body.
When asked if the KDC had funds for the settlement, Mr Abbas replied that it did not. “However, once a final amount is settled upon after negotiations, the project will be launched as a public-private initiative with the help of the Sindh government,” he said. “Money would be raised by the private sector and will then be used for not only paying the settlement amount but also the building’s construction.”