China welcomes Italy’s participation in BRI: foreign ministry

The Belt and Road Initiative (BRI) has received more and more support from the international community and meets the needs of world development, Chinese Foreign Ministry spokesperson Lu Kang told a regular briefing on Monday, adding China welcomes Italy’s active participation in the BRI.

While answering a question about Italy potentially joining the BRI, Lu said expanding cooperation is in the interests of the two sides.

Cooperation between China and Italy in recent years has achieved fruitful results in various fields and provided tangible contributions to both sides’ development, Lu said.

Italy has planned to sign a memorandum of understanding to become part of the BRI, the first G7 country to formally endorse it, the Financial Times (FT) reported last Tuesday.

“The negotiation is not over yet, but it is possible that it will be concluded in time for Xi’s visit,” reported the FT, quoting Michele Geraci, undersecretary in the Italian economic development ministry.

Last Friday, Italian Prime Minister Giuseppe Conte said he is willing to attend the second Belt and Road Forum for International Cooperation (BRF) in late April in Beijing.

Conte said he sees the BRI as “an opportunity for Italy and for Europe,” and that his coalition government is “studying and analyzing” the implications of formally endorsing the initiative.

China was the starting point of the ancient Silk Road, and Italy was the destination. Now Italy is also the intersection of the land and sea route of the modern Silk Road.

According to Luo Hongbo, a senior researcher at the Institute of European Studies at the Chinese Academy of Social Sciences, if Italy joins the BRI in the near future, it would be a win-win choice for both countries.

Earlier in August 2018, the Italian government set up a “China Task Force,” a team aiming to boost trade and investment relations with China. Luigi Di Maio, Italy’s deputy prime minister, told CGTN that the objective of this team is to realize the BRI.

In December 2017, China’s foreign ministry called on Italy to add fresh vitality to its role as a crucial hub on the new Silk Road, and called for more efforts to integrate “Made in China 2025” with Italy’s “Industry 4.0,” and to connect China’s “Internet plus” strategy with Italy’s technological innovation plans.

Source: CGTN

Date: 11th March, 2019

The 2nd Belt and Road Forum: What To Expect From 2019’s Main Event?

Following the inaugural Forum in May 2017, President Xi Jinping announced last month that the Second Belt and Road Forum for International Cooperation will be held in April 2019. Exact dates are yet to be confirmed, but the Forum will very likely be the major event for the Belt and Road Initiative (BRI) in 2019. The Chinese government are predicting that around 40 Heads of State will attend the Forum versus 29 in 2017. The first batch of guests have already been confirmed, and Russia’s President Vladimir Putin has unsurprisingly been confirmed as the most important foreign guest. Philippines President Duterte has also confirmed his attendance.

What can we expect

The Forum will provide an opportunity to take stock of the Belt and Road Initiative five years on and lay out a new roadmap for the coming years. Much has happened since the inaugural Forum, including the BRI being enshrined into the constitution of the Chinese Communist Party and Xi Jinping removing Presidential term limits. Both moves ensure the longevity of the BRI. The Forum will also present an opportunity to refute growing international criticism of the initiative and garner further support. Based on conversations with our sources, we are expecting the following from the Forum:

1)      A more concrete roadmap for Belt and Road’s development

The inaugural Belt and Road Forum in 2017 certainly gave BRI global attention, but was short of details and instead packed with high level and ambitious statements. Xi spent a significant proportion of his speech romanticizing over the old silk road and stressing the importance of connectivity and globalization. The speech was full of ‘we should do this’. In 2019, because BRI is by now well-known globally, there is less of a need to engage in self-promotion. As a result, we expect the Forum to focus more on implementation of BRI and to include more of ‘we have done this’ and ‘we will do this’.

This focus on implementation and accurately setting expectations will help to mitigate risks around the realities of BRI not living up to the rhetoric; something which recipient countries have often complained about. They sometimes claim that China promises large sums of investment, and brands BRI as a panacea in global development, but the actual sums invested are only a fraction.

We expect this specificity to extend to individual economic corridors and projects, outlining their future trajectories with more concrete (and quantitative) targets that they can be assessed against.

 

2)      An evaluation of Belt and Road 5 years on

In its first five years, the BRI has progressed through an evolutionary process, and we have seen its metamorphosis from an initiative solely focused on infrastructure to one which now also incorporates industry, technology, cultural, legal and environmental components. At the same time, the BRI has been increasing its geographical scope by shifting its focus from the historic Silk Road region to the entire globe. Chinese policy makers have also been setting increasingly ambitious goals for BRI; from economic development to constructing a community of “shared destiny for all mankind”.

Our sources who have been invited to participate in the Forum tell us that there will be a focus on evaluation of the BRI in its first five years. Think tanks and governmental departments have been asked to put together country and sector specific evaluations, identifying areas of success and areas for improvement. Rankings on the countries most aligned with the BRI are likely to be published.

 

3)      Focus on implications for business

When Xi announced that the second Forum will be held in April 2019, he was at the APEC Summit in Papua New Guinea. Xi specifically mentioned that members of the Asia-Pacific business community would be welcome to attend the Forum. This marks a change from 2017 where attendees came mostly from governments and think tanks.

There has been a growing appetite from business, both Chinese and foreign, to tap into the commercial opportunities that BRI presents. The Chinese government says over 80 State Owned Enterprises have undertaken 3,116 investment projects in Belt and Road countries to date. But the scale of BRI has also led more and more foreign firms thinking about how they can benefit from the BRI. For example, Western banks have also been betting big on BRI. Following HSBC, Citigroup announced it had appointed a veteran investment banker its head of Belt and Road Initiative-related banking and origination businesses.

We expect the Forum to stress that the BRI is open to foreign company involvement and highlight examples of foreign companies already benefiting from BRI.

4)      The direction of globalization

With the backdrop of the US-China trade war, Chinese companies have become increasingly anxious and are trying to understand what an internationalization strategy excluding the US might look like for them.

While negotiations between the US and China are ongoing, we are not sanguine about the prospects for a meaningful deal being reached by the March 1st deadline that both sides have agreed. As a result, China will likely use the Forum as another opportunity to reiterate the importance of continued globalization and the dangers of protectionism; and if a deal does fail by March 1st, then we can expect China to double down on the BRI and encourage its firms to accelerate their search for new markets.

 

5)      Direct response to criticisms around BRI

2018 was a year in which perceptions of the BRI became increasingly polarized. China will look to use the Forum to directly respond and refute to some of the criticisms made of BRI.

The primary criticism frequently made by Chinese citizens is that China is spending too much money abroad when it could instead be spending it at home. This was particularly visible in the aftermath of the China-Africa Summit held in Beijing in September 2017. China pledged new funds to invest in Africa, much to the annoyance of Chinese netizens. This is a view shared by some government officials too; for example, officials at the Chinese Embassy in Ethiopia recently remarked that Chinese investments were overextended in the country and not properly accounting for the financial risks that came with them. As a result, we can expect the Forum to stress that BRI investments will be undertaken with more thorough risk assessments; financial, environmental and social.

Much of the international criticism on BRI has focused around the debt incurred by countries as they take on loans from China. Mahathir’s election in Malaysia followed by the cancellation of key BRI projects worth over $20 billion have been the most visible manifestation of these concerns. Pakistan, Sri Lanka and Nepal have all postponed projects too, with excessive debt and unfavorable project terms oft-cited reasons. Part of the issue is that BRI projects lack transparency, which has resulted in some foreign countries inferring that deal terms are unfavorable for the recipient of Chinese loans.

In response to this, we expect the Forum to be used as an opportunity to announce new measures to improve the transparency of BRI projects, align them with high quality international standards and open up BRI to third party involvement. This can involve foreign governments, investors and companies. Up to now, foreign participation has been limited as the BRI has been monopolized by Chinese companies. Going forward, in response to international pressure, and to ensure a greater pool of capital going into BRI projects, we expect China to further open the initiative to foreign involvement. We have already seen rumblings of this through Saudi Arabia’s participation in the China-Pakistan Economic Corridor.

 

An opportunity to gauge perceptions of BRI, and a chance to reset them

Several countries are expected to send representatives to the Second Belt and Road Forum for International Cooperation. We will be able to gauge from the seniority of that representation how different countries perceive the BRI. In particular, looking at how the seniority of a particular country’s representatives have changed since the 2017 Summit will speak volumes for how that country’s stance on BRI has evolved over the last two years. Xi and China will be hoping for an upgrade in countries representations; when officials had been sent in 2017, Xi will be hoping for Ministers. When Ministers had been sent in 2017, Xi will be hoping for Presidents and Prime Ministers. The greater the seniority of representation at the Forum, the greater the interest the international community has in BRI.

The Forum also presents an opportunity to reset perceptions where there might be problems; especially around debt, transparency, specificity and third country involvement. Unlike 2017, we do not think that the Forum will be judged on how much additional funding China pledges, but instead on whether China can respond constructively to the concerns raised by both recipients of BRI investments and other developed economies. Only by doing so, will China secure the long-term buy-in it needs to make BRI a success. All eyes on 2019’s main event…

Source: Belt and Road Advisory

Date: 6th January, 2019

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Can solar diplomacy green the Belt and Road?

Source: ChinaDialogue

Date: 29/1/2019

China has pledged to fill the global infrastructure development gap with more than US$4 trillion in “sustainable” projects through its Belt and Road Initiative (BRI). But China is not delivering on its promises of green and low carbon infrastructure so the initiative is facing a crisis of legitimacy.

According to a recent report from the World Resources Institute, about 75% of the US$145 billion in loans from China’s major financing institutions went to fossil fuel energy projects, including US$10 billion for coal plants. The report also outlined how almost all investments in the construction of fossil-fuel power were state-owned enterprises. In contrast, private Chinese companies, which have much smaller investment footprints, have focused on solar and wind.

Looking at mainland Southeast Asia, from which many of the examples below are drawn, I observe that China’s BRI power sector investments in Thailand, Cambodia, Vietnam, Myanmar, and Laos total at least 83 gigawatts. This includes over 8 gigawatts of coal projects and a whopping 65 gigawatts of hydropower dams across 137 projects in Myanmar, Cambodia, and Laos.

It’s well established that coal power is bad for the climate and local air quality. There is also no shortage of studies that show how hydropower overdevelopment in the Mekong, Salween, and Irrawaddy river basins will irreversibly damage their ecology. This is putting the livelihoods and economic base of more than one-hundred million people in Southeast Asia at risk. Yet China continues to build.
Tyler Harlan, a postdoctoral fellow at Cornell University’s Atkinson Center for a Sustainable Future claims that solar and wind are unattractive investments for many Chinese companies in countries such as Laos and Myanmar. He blames the absence of stable policy frameworks, challenges with integrating renewables into the grid, and risks associated with long-term power purchasing.

“Hydropower continues to dominate power planning because of the influence of Chinese hydro state-owned enterprises and because it is perceived as a reliable baseload electricity source that can be exported to accumulate foreign exchange,” he said.

Continued investment in coal and hydro at current levels could destabilise mainland Southeast Asia, and partially or entirely offset China’s efforts to reduce emissions at home by exporting them abroad.

Solar champion

China has developed a robust domestic solar sector that could easily deliver a sustainable transition in Belt and Road countries. It has moved quickly in the past ten years to lead the world in solar power with at least 165 gigawatts across solar farms and distributed generation.

China still derives 60% of its power from coal but solar is increasingly competitive. In December, a 500 megawatt solar farm in western China started selling power at .316 yuan per kilowatt hour (~5 cents), beating the country’s benchmark price for coal power for the first time.

China has already exceeded its 2020 solar target by more than 50%. This massive expansion was helped over the past decade by creative and flexible policy guidance, government subsidies for investment, successful R&D programmes, and a government consensus to significantly curb carbon emissions.

The experiences of government agencies, research institutions, and investors form a valuable toolbox that should be exported to rapidly developing BRI countries where a transition to renewable energy is pressingly required. The WRI report found that 31 Belt and Road countries needed about US$235 billion in investments to meet their emissions reduction commitments under the Paris Agreement.

Packaging solar diplomacy

Chinese solar diplomacy could help countries with a lot more than project financing. Solar is commercially competitive in Thailand and Vietnam but energy sector officials and utility operators there often complain that intermittent power is difficult to manage on national grids. Like China, these countries have encouraged investment only to find deployment quickly outpace planning targets. For instance, in 2015 Thailand achieved 50% of its intended 2036 solar target of six gigawatts just a few years after setting it. Vietnam has 20 gigawatts of solar investments registered in its pipeline, which is about half its existing capacity. However, only a minor portion can be absorbed into its grid system due to capacity and distribution limitations.

This is an area where Chinese expertise could help. China has a lot of experience managing the unwieldy expansion of renewables whether it’s adjusting targets on a gradual and flexible basis, changing subsidy structures or reducing power wastage. This shows an ability to deal with the necessary growing pains of a renewable energy transition.

Further, in 2016, China’s National Energy Agency announced a poverty alleviation initiative that provided financial incentives and technical guidance for installing rooftop solar in China’s poorest areas. It allows participating households to sell power back to the grid. The programme aims to help two million households in sixteen provinces earn an extra 3000 yuan per year (US$420) through government subsidies. It will also manage problems related to solar intermittency and structurally optimise the country’s power sector.

Electrification rates in BRI countries such as Cambodia and Myanmar are likely to still be around 50% by 2020 without significant intervention. These countries would benefit from foreign assistance to alleviate poverty through solar rooftops and mini-grids in rural areas. Such programmes would also create opportunities abroad for domestic solar champions such as Suzhou Photovoltaic Technology Co. Ltd (协鑫) which has constructed more than one gigawatt of small-scale solar power plants through China’s poverty alleviation initiative.

China should take responsibility to mitigate carbon intense outcomes outside of its borders

Jennifer Turner, director of the Wilson Center’s China Environment Forum argues that the Chinese government should be more vocal about its rural solar schemes. “These projects not only electrify small communities but also create jobs in installation and maintenance of these small-scale energy projects. These kinds of successes should be interwoven into China’s BRI investments, especially in communities that are displaced by large dams, ports, or roads,” she said.

Chinese developers often build schools, marketplaces, and medical clinics in communities that are resettled due to infrastructure development, but with mixed results. China’s investment in community-level solar could provide a better option if it came with proper technical capacity training for operations and maintenance.

In Laos and Cambodia, resettlement related to infrastructure projects and displacement from economic land concessions are the top driver of internal migration. Providing resettled people with ample access to power will increase access to educational resources for community youth and underpin conditions for rural economic development. It could also help close gaps between rural and urban livelihoods in Belt and Road countries.

Responsibility versus interference

For many developing countries, building a competitive market environment where renewable energy generation reaches price parity with coal requires creative political leadership, physical infrastructure, effective management, and investments in national level transmission and distribution systems.

To date, BRI projects are mostly investments in physical assets such as power generation, highways, railways, and ports. This is what host countries ask for and what China finds easiest to finance given excess domestic capacity. Given China’s aversion to interference in the affairs of other countries, state-owned enterprises or government agencies might be reluctant to get too involved in transformative planning processes for another country’s power sector or the sharing of best practices related to policy incentives for a transition to solar and wind.

But according to the recent Intergovernmental Panel on Climate Change report, a technological transition, the scale and speed of which is comparable to the US domestic mobilisation for World War II, is required to prevent a 1.5C rise in global temperature. Countries in mainland Southeast Asia are among the most vulnerable to climate risk. Locking these countries into a carbon intensive future will exacerbate future vulnerability. Given such urgency, China should take responsibility to mitigate carbon intense outcomes outside of its borders and build resiliency within the most vulnerable regions of the world.

A win-win solution

A programme of Chinese solar diplomacy in the context of the BRI would demonstrate to the world China’s intentions to become an ecological civilisation. So far, China has prioritised BRI countries with plans for significant coal expansion and those where free-flowing rivers provide critical natural resources. Chinese solar diplomacy could accelerate the expansion of solar capacity and create conditions for forward looking power systems which could integrate wind, biomass, and other forms of intermittent energy.

An effective solar diplomacy, if implemented, would greatly improve China’s position as a climate leader at a time when global carbon emissions are ticking upwards again, and potentially spur other actors to create a virtuous race toward a 1.5C future. Big lenders such as the Asian Development Bank and the World Bank would likely be keen to partner with China on such efforts, building on previous pledges to find ways to co-finance projects with China’s Asian Infrastructure Investment Bank and other development agencies. Such a move would raise global confidence in the BRI as a force for sustainable development and help make good on China’s pledge to be a responsible global power.

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China’s Belt and Road Initiative will add US$117 billion to global trade this year, a new study shows

Source: South China Morning Post

Date: 23/1/2019

Merchandise trade between China and the countries targeted by its “Belt and Road Initiative” is predicted to grow by US$117 billion this year, according to new analysis.

For China, this will mean US$56 billion in additional exports, while it will import an extra US$61 billion worth of goods from the 80 countries named in the Chinese government’s official manifesto, research from trade credit insurer Euler Hermes shows.

The report estimates that this will add 0.3 per cent to global trade and 0.1 per cent to global growth, at a time when fears are mounting about a slowdown across the world economy, but most notably in China.

The belt and road strategy is Chinese President Xi Jinping’s flagship investment programme that was launched in 2013, and aimed at building infrastructure in countries accounting for 68 per cent of the world’s population and 36 per cent of its gross domestic product (GDP).

Not all of the countries targeted have welcomed Beijing’s overtures; some have rejected investment, notably India and latterly Malaysia.

Others have yet to agree to any China-funded projects, such as South Korea, but have expressed interest in receiving investment through the belt and road plan.

However, Euler Hermes said that these nations will see higher trade volumes as a result of the initiative, even if they have yet to receive any direct investment from China.

Mahamoud Islam, senior economist at Euler Hermes in Hong Kong, said that this is because of the effect of better connectivity and infrastructure along the belt and road network, as well as better trade relations between China and target markets.

Given that a huge part of the belt and road plan is domestic, international companies could expect to benefit from infrastructural improvements in China too, Islam said.

“Other countries benefit from demand from China. You can argue about politics and the supply chain being controlled by China. But at the end of the day, this is bringing demand to markets that benefit from that demand.

“It improves competitiveness. That’s not surprising, you’re building railroads, ports and airports, connecting countries,” Islam said, adding that for China, the belt and road strategy was a way to push out excess capacity in industries such as coal and steel, to internationalise its companies and to help liberalise the yuan by lending in Chinese currency.

In 2018, the trade gains were estimated to be higher still, at US$158 billion, with South Korea, countries in Southeast Asia, India and Russia the greatest beneficiaries.

The belt and road plan has been billed as a means of improving trade and was roundly welcomed when it was started in 2013. Initially marketed as a revamp of the old Silk Road trade route connecting Eurasia, Euler Hermes estimates that it saw US$460 billion invested between 2013 and 2018.

The investment has continued this year. From January 2 to January 15, the value of new belt and road projects was US$4.5 billion, according to RWR Advisory Group, a Washington-based research house, with the highest proportion of this going to Sub-Saharan Africa.

The largest funding package, however, was in Pakistan, which received US$2.21 billion for the Mohmand dam project, to be built by a joint venture that includes China Gezhouba Group.

Pakistan’s strategic location has made it one of the primary targets of China’s belt and road spend and has been earmarked to receive more than US$60 billion in debt and equity investment.

At the centre of this is Gwadar, a port on the Arabian Sea, which is being turned into a transshipment hub by China, allowing its remote westerly regions to access the energy markets of the Middle East.

However, Pakistan is also one of the most controversial hubs on the network. Many analysts claim that its debt exposure to China is unsustainable.

Indeed, there has been a notable backlash against the initiative in recent months, with the Malaysian Prime Minister Mahathir Mohamad warning last year of a “new version of colonialism” stemming from China’s outbound lending.

A report last year from the Center for Global Development, an American think tank, implied that countries are concerned about being stuck in a debt trap, unable to repay loans and forced to cede assets such as commodities or infrastructure instead.

“The primary concern is that an US$8 trillion initiative will leave countries with ‘debt overhangs’ that will impede sound public investment and economic growth more generally,” the report read.

These fears were fanned by reports in December that Kenya may have to hand over control of its largest port of Mombasa, paid for by China, if it was unable to repay the debt. The claims were denied by the Kenyan President, Uhuru Kenyatta.

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Four key areas under CPEC prioritised

Source: The Dawn

Date: 19th January 2019

Author: Khaleeq Kiani

ISLAMABAD: Prime Minister Imran Khan on Friday prioritised four key areas under the China-Pakistan Economic Corridor (CPEC) for the next couple of years and ordered the groundbreaking of at least three special economic zones (SEZs) before end-June this year.

He was presiding over a meeting here to review progress on the CPEC.

Minister for Planning, Development and Reforms Makhdoom Khusro Bakhtyar briefed the participants on the outcome of the 8th CPEC Joint Cooperation Committee (JCC) meeting and progress on the projects.

The prime minister gave targets for short- to mid-term phases, focusing on cooperation in industrial, socio-economic, agriculture and Gwadar. “It was decided to make the period as a phase of industrial cooperation, socioeconomic and agriculture sector development. Timelines for the development of prioritised SEZs were finalised to ensure groundbreaking in first half of 2019,” an official statement said.

PM orders groundbreaking of three special economic zones by end of June

The meeting was told that four SEZs — Rashaki in Khyber Pakhtunkhwa, Dhabeji in Sindh and M-3 Faisalabad and one in Islamabad — had been planned for development in the first phase and three of them — Rashakai, Dhabeji and Faisalabad — would be ready for groundbreaking by June this year, starting with Rashakai in two to three months. However, IT SEZ in Islamabad would take more time for various reasons including but not limited to selection of its site and then land acquisition process.

The prime minister directed to make full use of upcoming visits of Chinese investors by explaining to them Pakistan’s tax policies and available facilities and speedy processing of business proposals to market SEZs aligned with its development. He desired that ease of doing business should be improved immediately so as these could be shared with the Chinese business delegations. He “directed that a timeline-based policy on provision of utilities to SEZs be prepared at the earliest”. The prime minister directed the Board of Investment’s chairman to present comprehensive recommendations within four weeks on speedy development of SEZs.

The prime minister was informed that the meeting of the newly created Joint Working Group (JWG) on agriculture would meet on Feb 15 in Beijing. It was reported that the Chinese officials had raised questions over Pakistan’s agriculture and the country’s experts wondered why an agro-based economy did not have consistent crop patterns and output predictabilities.

The prime minister directed the relevant agencies and ministries to finalise a well researched agriculture sector road map before going to the JWG meeting next month. “Don’t go unprepared” to the JWG, an official quoted the prime minister as saying.

Mr Khan directed that Pakistan side should finalise the road map for promoting agriculture sector, inviting Chinese companies to explore investment opportunities in Pakistan and leverage agro value chains.

The meeting decided to promote joint ventures in petrochemicals, iron & steel, food and agriculture. On the recommendations of the Planning Commission, the prime minister approved formation of a CPEC Business Advisory Council consisting of leading Pakistani business executives, heads of financial institutions and representatives of business chambers to create an interface with the private sector.

Mr Khan directed that that development of the corridor should continue with the priority to the development of its western route. He emphasised that infrastructure development needed a policy of pragmatism and due financial diligence and not on political considerations.

In the same spirit, a high-level committee, comprising ministers for planning, railways and finance, was formed to finalise modalities on Pakistan Railways ML-1 — the strategic project of the CPEC.

Informed sources said that some ministries had reservations over the Chinese financial and cost modelling of $8.2 billion ML-1 project — Karachi to Torkham border — and wanted some changes.

In the last month JCC meeting, the two sides had nevertheless agreed that “the project should be implemented in line with the Framework Agreement signed in May 2017”.

The prime minister directed that the development of Gwadar should be planned as a smart port city to make it a transhipment and petrochemical hub. He called upon the participants to further expedite progress on various projects under the CPEC because their early completion would bring huge socio-economic opportunities to people.

PM Khan made it clear that early completion of the CPEC projects was in Pakistan’s interest. He said Pakistan could greatly benefit from Chinese experience of bringing its people out of poverty traps and desired that poverty alleviation programmes should be based on multi-pronged schemes because BISP-like programmes could not go on forever.

The meeting that lasted about two hours reviewed overall progress on the CPEC, particularly in the areas of industrial development, — SEZs, ML-1 project, agriculture development, socio-economic development, infrastructure development and Gwadar development.

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Russia’s Interest In Pakistani Power Projects Could Portend CPEC Investments

Source: EurasiaFuture

Date: 17/1/2019

Author: Andrew Korybko

Reports are circulating in the Pakistani press that the Russian company is interested in several power projects in the country, which could pave the way for Moscow to unofficially invest in CPEC without angering its Indian partners.

Many Pakistanis are excited by the news that Russian company Inter RAO Engineer is interested in several power projects in the country, potentially willing to commit the whopping sum of $2 billion worth of investments if their counterparts are receptive. While nothing has been officially confirmed, these reports are plausible enough given the fast-moving rapprochement between Russia and Pakistan over the past couple of years, which aims to establish a strategic partnership that the author coined with the catchphrase of “Rusi-Pakistani Yaar Yaar”.

It evidently appears as though Russia is diversifying its outreaches with Pakistan from their former Afghan-related anti-terrorist centricity to a more robust partnership that’s now taking on important energy dimensions. It shouldn’t be forgotten that Russia already committed to building the North-South gas pipeline and signed a memorandum of understanding for constructing a $10 billion offshore one between Iran, Pakistan, and possibly even India too one day. In a sense, it can be said that Russia’s “traditional diplomacy” with Pakistan evolved to “military diplomacy” and now “energy diplomacy”.

Attention should be paid to the latest report’s claims about how Inter RAO Engineering is supposedly interested in the proposed Mohmand Dam along the Swat River in the former mountainous Afghan-bordering region of what used to be called the Federally Administered Tribal Areas (FATA) prior to its merger with Khyber-Pakhtunkhwa last year. This is highly symbolic because the words “FATA” and “Swat” remind many Westerners of the country’s War on Terror during the mid-2000s, so it says a lot about the overall sub-region’s newfound stability that Russia would consider investing there.

Importantly, $2 billion worth of potential investments in Pakistan’s power industry would signal that Russia wants to get in on the country’s CPEC-related Chinese-driven construction boom but is doing so without openly attaching itself to the CPEC “brand” out of concern for its Indian partner’s political sensitivities. New Delhi is dead-set against CPEC because of its stance that the series of megaprojects transit through territory that India claims as its own per its maximalist approach to the Kashmir Conflict, and the renaissance of relations between it and Russia would be ruined if Moscow invested in CPEC.

That explains why Russia might reportedly be considering investing in CPEC without formally doing so, following the strategy that the author previously suggested in his piece last summer about “Creative Non-CPEC Marketing Strategies For Pakistan”. So long as Russia abstains from officially endorsing CPEC and attaching its investments to that “brand”, then its relations with India won’t suffer no matter how many billions of dollars it eventually pours into Pakistani projects. With that being the case, the latest reports are an encouraging sign of Russian intent and could portend more unofficial CPEC investments.

DISCLAIMER: The author writes for this publication in a private capacity which is unrepresentative of anyone or any organization except for his own personal views. Nothing written by the author should ever be conflated with the editorial views or official positions of any other media outlet or institution.

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8th JCC meeting: ‘Missing paperwork’ delays CPEC mass transit schemes

Source: Express Tribune

Date: 9th Jan, 2019

ISLAMABAD: 

Pakistan and China could not make any breakthrough on mega mass transit and infrastructure projects during the 8th Joint Cooperation Committee (JCC) meeting due to Islamabad’s inability to timely complete paperwork of these multibillion dollars schemes.

The status quo remained on $8.2 billion mainline (ML-1) project of Pakistan Railways, $2 billion Karachi Circular Railways, mass transit schemes of Quetta and Peshawar and five small road projects, according to signed minutes of the 8th JCC meeting. The JCC is the highest decision making body of the China-Pakistan Economic Corridor (CPEC) that met last month in Beijing after one year.

China’s National Development and Reform Commission Vice Chairman Ninglizhe and Pakistan’s Minister for Planning and Development Khusro Bakhtiar co-chaired the JCC meeting.

China has declared the $2 billion Karachi Circular Railway (KCR) project ‘technically feasible’ and important for ‘growth and prosperity’ for Pakistan’s largest commercial hub. But Pakistani authorities failed to fulfill the procedural requirements.

“The Chinese side noted the importance of the KCR project for growth and prosperity of Karachi, presented that more endeavours shall be taken to facilitate the KCR project as soon as possible since it’s technically feasible,” said minutes of the JCC.

Some government officials told The Express Tribune that in October last year the Centre raised certain queries on Sindh government’s request for provision of sovereign guarantees but no reply has been received from the provincial government.

The Planning Ministry spokesman on CPEC affairs Hassan Daud Butt did not comment as to why no breakthrough was achieved on mass transit and infrastructure projects during the 8th JCC.

There was a hope before the JCC that some progress could be made on the multibillion dollar ML-I project of Pakistan Railway. However, the minutes said: “The JCC was satisfied with the progress of the preliminary design review of the strategic project of the ML-1 and two sides agreed that the result of the preliminary design shall be completed by January 2019”.

Both the sides have been frequently missing the deadlines on completion of the preliminary design of the strategically important project. But the 8th JCC has permanently settled the question of the financing mode of minimum $8.2 billion project.

According to the minutes, the ML-I “project should be implemented in line with the Framework Agreement signed in May 2017.”

The Pakistan Tehreek-e-Insaf (PTI) government wanted to explore possibility of completing the ML-I project on build-operate-transfer (BOT) basis to shift financial risks of the multibillion-dollar railway project to the contractors.

According to the framework agreement for the ML-I, China will provide 85% of the project cost as a concessionary loan. The project has been declared strategically important by both the countries.

The ML-I project has a total length of 1,872 kilometres. The project’s initial cost of $8.2 billion was based on a joint feasibility study, which was not backed by a technical design study.

Mass transit schemes

Pakistani authorities could not prepare the feasibility studies of Quetta mass transit scheme and greater Peshawar mass transit circular rail project despite the fact that both the sides agreed to include these schemes in the CPEC framework about two years ago.

“The Chinese side agreed that Quetta mass transit and greater Peshawar mass transit circular rail project shall be taken into consideration when there conditions are all mature and agreed that after approval of PC-I these projects shall be submitted to the Joint Working Group on Transport Infrastructure as soon as possible.”

But the JCC expressed appreciation for the signing and implementation of Five-Year for Technical Cooperation on Highway between China and Pakistan (2018-2022). Both sides agreed to jointly conduct traffic destiny study under the action plan.

Both the parties agreed to work jointly for all weather opening of the Karakoram Highway. It was agreed that the modalities of development of cross border facility at Kunjerab for all weather opening of the road will be considered further.

Small road projects

There was also no headway on five road projects that are already under CPEC framework. The minutes said the Pakistani side expressed desire that work on the Raikot-Thakot road and Dera-Ismail Khan-Zhob should be done on priority.

The Pakistani side briefed the progress on the provincial projects and hoped that more endevours shall be made by the Chinese side to facilitate Gilgit-Shandoor-Chitral project, Mirpur-Muzaffarabad-Mansehra project and Nokundi-Mashkel-Panjgur road.

The Chinese side noted the importance of Gilgit-Shandoor-Chitral project and Nokhundi-Panjgur project for the growth and prosperity of these regions. It was decided that these projects will be presented in the next Joint Working Group meeting on transport infrastructure after completion of feasibility studies.

Pakistani side expressed the hope that the groundbreaking ceremony of New Gwadar International Airport will be held in first quarter of 2019, The project faces significant delays. China has provided grant for the airport construction.

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NAB signs MoU with China to oversee CPEC projects

Source: Pakistan Today

Date: 6th January 2019

ISLAMABAD: National Accountability Bureau (NAB) Chairman Justice (r) Javed Iqbal on Sunday said that the anti-graft watchdog has signed a memorandum of understanding (MoU) with China to oversee China-Pakistan Economic Corridor (CPEC) projects being completed in Pakistan.

He said that considering corruption as cancer, NAB has chalked out a comprehensive National Anti-Corruption Strategy for logical conclusion of mega corruption white collar crimes cases by adopting the policy of ‘Accountability for All’ as the figures of complaints, inquiries and investigations are almost double as compared to the figures of the period between 2017 to 2018. The comparative figures for the last one year from October 2017 to December 2018 are indicative of hard work being put in by all ranks of NAB officers in an atmosphere of renewed energy and dynamism, where the fight against corruption is being taken as a national duty, he added.

He said that NAB is committed to rooting out corruption in all its forms and manifestations across the board with iron hands. He said that NAB has established a state-of-the-art forensic science lab in Islamabad which has facilities of digital forensics, questioned documents and fingerprint analysis which will be utilised for further improvements in the quality of inquiries and investigations. The NAB chief said that due to the prescribed timeline of 10 months for efficient, effective and expeditious disposal of cases from complaint verification-to-inquiry-to-investigation and finally to a reference in the accountability court, NAB has filed 440 corruption references from October 2017 to September 2018 which is a record achievement.

He said that NAB has introduced a new concept of Combine Investigation Team (CIT) in order to benefit from the experience and collective wisdom of senior supervisory officers, hence a system of CIT comprising of a director, additional director, investigation officer and a senior legal counsel has been put in place. This is not only lending quality to the work but also ensuring that no single individual can influence the official proceedings of NAB. He also said that NAB has signed MOU with China to oversee CPEC projects being completed in Pakistan.

He said that Transparency International (TI), PILDAT, Mishal, Gillani and Gallop survey and World Economic Forum have appreciated NAB’s efforts in the eradication of corruption. NAB, in a very short span of time, has established over 50,000 character-building societies in universities/colleges to create awareness against corruption which has proved very successful and now the young generation is aware of the ill effects of corruption and has joined hands with NAB to eradicate corruption from the country.

On September 25, Pakistan and China inked a MoU to work jointly for ensuring transparency in CPEC. Justice (r) Iqbal had said that NAB is playing a vital role in recovering looted money from culprits, adding that since October 2017, the organisation had recovered billions of rupees.

On July 10, the NAB chief had said that the bureau would continue to play its role for saving CPEC and other important development projects from corruption. Presiding over a meeting of Balochistan NAB, he had said that development of Balochistan was a guarantee of Pakistan’s development and prosperity.

During the meeting, Justice (r) Iqbal was briefed on the performance of Balochistan NAB. The meeting had also discussed various issues regarding action against corruption in the province. Justice (r) Iqbal had said that CPEC had not only great importance for the development and prosperity of Pakistan, but it was also a game-changer project for the entire region. He had said that NAB was playing its due role in eliminating corruption from the country and would continue to do so.

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China building ‘most advanced’ naval warship for Pakistan

Source: Dunya News

Date: 2nd January 2019

China has recently began to construct the first of four “most advanced” naval warships for its “all-weather ally” Pakistan as part of a major arms deal, according to China State Shipbuilding Corp, a large State-owned defense contractor.

The deal aims to ensure “balance of power” in the strategic Indian Ocean. The ship is one of the Chinese Navy’s most advanced guided missile frigate.

In December, it was reported that the ship was under construction at its Hudong-Zhonghua shipyard in Shanghai, and it would be equipped with modern detection and weapon systems with capabilities of anti-ship, anti-submarine and air-defense operations.

According to the Pakistan Navy, the ship’s class is Type 054AP, which implies that it is based on the Type 054A of the People s Liberation Army Navy.

Besides, it was said that four such ships had been ordered under the deal.

The warship will be one of the largest and technologically advanced platforms of Pakistan s Navy, which will strengthen the state’s capability to respond to threats posed by the neighboring India, and maintain peace and stability in the Indian Ocean region.

It will also support the Pakistani Navy s initiative of securing sea lanes for international shipping by patrolling distant waters, it said in a statement on its twitter account.

Type 054A is the best frigate in service with the PLA Navy. The ship has a fully-loaded displacement of about 4,000 metric tons, and is equipped with advanced radars and missiles.

About 30 Type 054As are in service with the PLA Navy, observers said.

PLA’s Naval Military Studies Research Institute’s researcher Cao Weidong has said that, previously, Pakistan had been using western radars on its ships constructed by Chinese shipbuilders as it believed that Western naval technologies were better than Chinese.

“But it seems that all weapons and radars on the new ship will be Chinese products, which reflects our progress in the industry and the Pakistani Navy s confidence in our technology and capability,” he said.

Cao said there were many nations selling frigates in the market, so Pakistan must have made thorough comparisons in terms of combat capability and costs.

“I believe the reason they chose our type is that ours is one of the few that can carry out all of the air-defense, anti-ship and anti-submarine tasks,” he said, expecting the service of the Chinese frigate to substantially boost Pakistan s defense capability.

An insider in China s shipbuilding sector with knowledge of the Type 054AP program told China Daily on condition of anonymity that the ship is the largest and most powerful combat vessel China has ever exported.

“Based on pictures circulating on the internet, the ship will have vertical launch cells that can fire Chinese HQ-16 air-defense missiles and other kinds of missiles. Vertical launch cells will bring flexibility to the user in terms of weapons portfolio, thus giving it a stronger fighting capability,” he said, adding that the Type 054AP is the best frigate Pakistan can access in the international market.

“The service of Type 054APs will double the combat power of the Pakistani Navy s surface fleet,” he said

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Sabotaging CPEC: An Indo-US ploy?

Source: The Nation

Date: 2nd January 2019

Author: Mohsin Raza Malik

Pakistan’s Foreign Office spokesman, during his last week’s press briefing, made it just clear that the China Pakistan Economic Corridor (CPEC) had no military dimensions. “The CPEC is a bilateral economic project, which is not against any country”, he further clarified. He was commenting on a report published in a leading US newspaper alleging that the CPEC was not about economy and trade but had military dimensions as well. No doubt, there are strong military ties between China and Pakistan. The CPEC, however, has nothing to do with these ties. Both ‘all-weather’ friends have been enjoying close diplomatic, strategic and military relations for decades, independent of, and prior to, the CPEC project. China and Pakistan, being two sovereign states, have the right to foster strong economic and military relations in accordance with their national interests. Therefore, any regional or global power is by no means justified in unnecessarily objecting to this bilateral relationship.

Last week, Chinese embassy in Pakistan also refuted another media report which claimed that Pakistan would pay $40 billion to china in 20 years in shape of repayments of debt and dividends on Chinese investment under flagship CPEC. The embassy issued a statement that the Chinese government provided concessional loans of $5.874 billion for Pakistan’s transportation infrastructure projects, with a composite interest rate of around 2 per cent in a repayment period of 20-25 years. The embassy also clarified that all the CPEC energy projects are investments in nature and the companies are responsible for their own profits and losses and repayments of loan. Therefore, both of the latest media reports on the CPEC are wrong and misleading, which appear to be only aimed at making the CPEC project controversial.

As a matter of fact, there has been a systematic and persistent propaganda campaign against the CPEC since this project was formally announced in April 2015. Ever since, this mega project has also been the subject of numerous conspiracies and controversies, both domestically and internationally. In order to dispel similar domestic controversies, Pakistan had to conceive and announced the idea of the “Western Route” of the CPEC in addition to some Special Economic Zones (SEZs) along the CPEC route in different provinces in the country. Noticeably, a section of national media, and various so-called nationalist political parties and pressure groups have also been the ardent critic of this mega economic project.

Terrorism has been a major tool to sabotage the ‘game changing’ CPEC project. We have observed a significant surge in the terror attacks across the country following the formal launch of this project. The province of Balochistan, which occupies a pivotal position in the entire CPEC project owing to deep-sea Gwadar Port, instantly became the hotbed of terrorism, militancy and insurgency. This troubled province has experienced most of the worst terror attacks in Pakistan during the last couple of years. According to official statistics, there have been some 1860 terrorist incidents in Balochistan during the last 7 years, leaving more than 2300 people dead and many more injured. In this respect, Quetta, Mastung, Awaran, Khuzdar and Dera Bugti were the worst affected districts in the province. Gilgit-Baltistan, which hosts another important segment of the CPEC route, has also been under attacks by the terrorists. This region experienced the unfortunate 2013 Nanga Parbat massacre where 10 foreign tourists were shot dead. A large number of schools have also been torched by miscreants in this region. Many Chinese nationals, engineers and workers, who were working to complete various CPEC projects in Pakistan, have also been attacked and killed. The recent terror attack on Chinese Consulate in Karachi is also being viewed as a conspiracy to sabotage CPEC.

The United States and India, the two strategic allies in the post-9/11 era, are particularly known for their strong opposition to the CPEC as well as an anti-CPEC hostile propaganda. Both countries have lunched a proactive diplomatic and media campaign against the CPEC for the last few years. We have noticed Indian PM Modi’s persistent anxiety over the CPEC project. He has openly hinted at supporting the separatist elements in Balochistan and Gilgit-Baltistan. In May 2015, he readily visited China to persuade the Chinese government to abandon this project by maintain that the CPEC route was passing through the disputed territory of Gilgit-Baltistan. During the G-20 summit at Hangzhou in China in September 2016, PM Modi had expressed India’s concerns over the CPEC in his bilateral meeting with Chinese President, holding that the two countries needed to be “sensitive” to each other’s strategic interests. In October 2017, the Trump administration told the Senate Armed Services Committee that CPEC was passing through a disputed territory. Similarly, a senior Trump administration official has recently also remarked that the Belt and Road Initiative (BRI) “is a made in China, made for China” initiative.

Substantially shifting the focus of US foreign policy from the Middle East to the East Asia, the Obama administration ambitiously launched its ‘pivot to Asia’ regional strategy in 2012. Under this US foreign policy initiative, the US will endeavour to increasingly relocate its extensive military and economic resources in the Asia Pacific region, realising the utmost economic, political and military significance of this region in the twenty-first century. This US regional strategy includes actions like engaging with regional multilateral organisations, strengthening bilateral security alliances, forging an active broad-based military presence, deepening relationship with emerging powers, expanding trade and investment, and advancing democracy and human rights in the region.

There is a general perception that the US pivot to Asia strategy is nothing but another important tool of its so-called China containment policy in this region. It only aims at minimising or undermining the rising economic and political influence of China in the world. At present, the US economy is in trouble on account of the current global financial crisis and a number of domestic economic constraints. The long-term viability of the US economic model is also being questioned. Therefore, the US is wary of the rapidly growing Chinese economy, which already has become world’s largest economy in terms of Purchasing Power Parity (PPP). China has also become the global hub for manufacturing, and the largest manufacturing economy as well as the largest export of goods in the world.

Besides the East Asia, the South Asian region has also become the primary hub of US extensive strategic manoeuvring in Asia over a period of time. Therefore, notwithstanding its typical ‘pivot to Asia’ strategy, South Asia is now playing a pivotal role in articulating and realising US strategic goals in the region. Bordering China, Iran, and Central Asian Republics, South Asia is bounded on the south by the Indian Ocean, which provides the major sea route connecting the Middle East, Africa, and Europe to East Asia and Australia. Thus this region is central to the so-called One Belt, One Road plan. The flagship OBOR project of China Pakistan Economic Corridor (CPEC) is also located in this region. Therefore, South Asia is by no means strategically less important to the US than East Asia.

India and Afghanistan have occupied a central position in the US ‘pivot to South Asia’ strategy. On the pretext of fighting its War on Terror, the US has been staying in Afghanistan since 2001. Ever since, it has spent its enormous economic and military resources apparently to stabilise the volatile Hindukush state. However, its broader strategic interests demand its active presence in the region. The US has greatly helped India consolidate its position in Afghanistan. Now India is ambitiously desirous of replacing the US in Afghanistan as its ‘successor in interest’ in the region after the US exits Afghanistan. India, Afghanistan and Iran have also signed a tripartite agreement to develop Iranian Chabahar port and a linked trade corridor. Many believe that the primary objective of this project is to undermine the strategic importance and relevance of Pakistan’s Gwadar port.

At the moment, Pakistan’s strategic, security and economic interests observably converge with that of China in this region. Both countries will certainly benefit from the CPEC. Therefore, both countries are currently determined to actively protect their shared interests. To provide security to Chinese nationals working on the CPEC project in Pakistan, Pakistan Army has already established a Special Security Division (SPD), comprising some 15 thousand security personnel. Indeed, Pakistan and China need to be more active, vigilant and cautious to counter all CPEC-related controversies and conspiracies being hatched in the region and beyond.

 

The writer is a lawyer and columnist based in Lahore.