LAHORE, Aug 31: The expected foreign investment of nearly eight billion US dollars in the Lahore Mass Transit System is reportedly at stake due to the lack of interest in the project on part of the Punjab government.

Sources claimed on Sunday that the elevated expressway being proposed by the government, instead of the mass transit system, had been opposed by the Middle Eastern group building a $800 million multi-purpose commercial centre on Ferozepur Road. The group has reportedly conveyed to the government, “we are out if it (elevated expressway project) is taken up.”

Sources also claimed that the group had synchronised the commercial centre with the underground rail system, and the overhead expressway did not suit them.

Everything was ready early this year for launching the first phase of the project involving Rs1.4 billion loan from the Asian Development Bank, and an expected $1 billion direct investment from the private sector. But, the government’s priorities appear to have changed.

The project was conceived in 2004, and $9 million had been spent on getting prepared its detailed feasibility and reference design. The ADB, which had agreed to advance the soft loan for the project, too had spent a lot of money in getting the feasibility reports verified through its own international sources.

“The ADB which was about to fund the project is considering to put it on hold,” the sources said.

According to the sources, after the completion of the basic homework early this year, both the previous government and the ADB were expecting that physical work on the project would begin by April or May 2009. And keeping this in view the bank had started seeking transition advisors from the international market.

They added the leading international financial institutions had shown interest in becoming the transition advisors, and the ADB wanted the provincial government to now make institutional arrangements for executing the project.

The sources said the government, however, did not make any institutional arrangements which also proved a turn-off for those showing interest in becoming the transition advisors, making them move away from it.

They said under the project, said to be having a 100-year investment potential, the city was to be given a modern train system in four phases. In the first phase, expected to be started early next year, the Punjab government was to build tunnels, viaducts and stations at a cost of $1.4 billion to be provided by the ADB in the shape of a 32-year loan. Another $1 billion direct investment was expected to come through the private sector, which was required to build the system, bring rails and run them on BoT basis for 15 to 20 years.

The project was estimated to bring in $8 billion, half of which in the shape of direct foreign investment. “But it looks the government is not interested in it,” the sources said.

They said the government was abandoning the project at a time when even cities having three million population were being given mass transit metro systems. Delhi was having its third such system, which was also being given to Bombay and Bangalore because it was reliable, decent, and economically viable.

The sources claimed that the economic rate of return of the Lahore’s mass transit system was 13.5 per cent. The system was expected to change the fate of Lahore along with its more than seven million people by giving the city a modern transport system, besides badly needed jobs.

Pointing out flaws in the elevated expressway the government reportedly intended to give to the city covering Lower Mall and the Ferozepur Road, the sources wondered from where the funds would come for it.

“They (express ways) have been discredited all over the world because they create urban blight. And their construction means the city is losing all chances to go underground forever,” the claimed.