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Pakistan expects China to fund a long-delayed Indus river mega dam project in Gilgit-Baltistan, part of disputed Kashmir, with work beginning next year, Planning Minister Ahsan Iqbal said in an interview.



Pakistan has been keen for years to build a cascade of mega dams along the Indus flowing down from the Himalayas, but has struggled to raise money from international institutions amid opposition from its nuclear-armed neighbour India.

Those ambitions have been revived by China's Belt and Road infrastructure plans for Pakistan, a key cog in Beijing's creation of a modern-day Silk Road network of trade routes connecting Asia with Europe and Africa.

© REUTERS/Caren Firouz Ahsan Iqbal Pakistan's Minister of Planning and Development speaks with a Reuters correspondent during an interview in Islamabad

The $12-$14 billion Diamer-Bhasha dam should generate 4,500 megawatts (MW) of electricity, and a vast new reservoir would regulate the flow of water to farmland that is vulnerable to increasingly erratic weather patterns.



Iqbal, the Islamabad lead on the China-Pakistan Economic Corridor (CPEC), said a Chinese company from a Beijing-picked shortlist and a local partner would build the dam over a 10-year period, and work should begin in the "next financial year", which begins in July.

"This water reservoir is most critical for food security in Pakistan, so is a very high priority project for Pakistan," Iqbal told Reuters late on Monday at his ministerial home in Islamabad.

China and Pakistan signed a memorandum of understanding in December for Beijing to help fund and develop Pakistan's Indus Basin dams, though no timelines have been released. Pakistan estimates there is 40,000 MW of hydro potential.

© REUTERS/Caren Firouz Power transmission towers are seen on the outskirts of Islamabad

The Diamer-Bhasha dam and reservoir would displace more than 4,200 families in nearby areas and submerge a large section of the Karakoram Highway to China, Pakistan's Water and Power Development Authority estimates.

Iqbal said Pakistani and Chinese engineers are also surveying other projects, including the 7,100 MW Bunji hydro power project that will be the first in the cascade that stretches down to the Tarbela Dam near Islamabad.

India's foreign ministry and ministry for water resources did not respond to requests for comment.

© REUTERS/Caren Firouz Ahsan Iqbal Pakistan's Minister of Planning and Development poses for a portrait after an interview in Islamabad

India has previously opposed any construction in the Indus Basin it claims as its own, and has criticized CPEC because the $57 billion corridor runs across disputed territory.

© REUTERS/Caren Firouz A bird flies past a power transmission tower on the outskirts of Islamabad

India this year fast-tracked $15 billion worth of dam projects on its side of Kashmir, despite fears from Islamabad that the power stations will disrupt vital Indus water flows into Pakistan.

Iqbal, a close ally of Prime Minister Nawaz Sharif, said India needs to "stop its myopic thinking towards CPEC" and accept the Chinese-funded project is going ahead. Better still would be for India to become part of Beijing's Belt and Road plans, he said.

"$20 BILLION PLUS"

Future CPEC plans are increasingly focussed on how Beijing can help build up Pakistan's ailing industries, creating special economic zones and opening up sectors from mining to agriculture to Chinese firms.

But Iqbal said infrastructure construction won't stop, with contracts set to be signed for roads and for mass rail transport systems in Quetta, Peshawar and Karachi.

© REUTERS/Caren Firouz Ahsan Iqbal Pakistan's Minister of Planning and Development speaks with a Reuters correspondent during an interview in Islamabad

He said about $10 billion in new deals should be signed in the next year on top of Chinese pledges topping $50 billion, and that was likely to double by 2020.

"I would say conservatively $20 billion plus (in new investment by 2020)," Iqbal said, adding this would also include private investment.

(Reporting by Drazen Jorgic; Editing by Ian Geoghegan)