Delegation led by London’s first Muslim mayor shows interest in CPEC

LAHORE: 

A British delegation led by London’s first Muslim mayor Sadiq Khan on Wednesday showed interest in investing on projects related to multi-billion dollar China-Pakistan Economic Corridor (CPEC) during its meeting with Punjab Chief Minister Shehbaz Sharif.

The meeting that took place in Punjab’s provincial capital was preceded by a one-on-one interaction between Shehbaz and Sadiq, who earlier arrived in Lahore via Wagah after concluding his visit to India.

Sadiq, who won London’s mayoral elections in May last year after defeating multi-billionaire Tory candidate Zac Goldsmith, is on a goodwill visit to promote his ‘London is Open’ campaign and is also scheduled to visit Islamabad and Karachi.

Speaking on the occasion, Shehbaz said the CPEC had opened new avenues of investment in Pakistan and the British investors should take full benefit of the golden opportunity. “The British investors will be welcomed as this [CPEC] has given them an opportunity to come forward,” he said.

He said a culture of transparency was promoted by Punjab and laid stress on further promoting mutual cooperation with London in public transport, sanitation and traffic sectors.

Talking on the occasion, Sadiq Khan said the cities of London and Lahore enjoy good relations and expressed the desire to enhance cooperation and investment with Lahore in different sectors.

He thanked Shehbaz for his ‘wholehearted welcome’ and vowed that collective work will be done to enhance investments. The CM later hosted a luncheon in honour of the delegation.

British High Commissioner Thomas Drew, London’s Deputy Mayor for Business Rajesh Agrawal along with a large number of British investors and officials were present on the occasion.

The provincial ministers, Turkish Consul General Serder Deniz, US Consul General Elizabeth Kennedy and Pakistani investors were also present on the occasion.

Earlier, Sadiq held a one-on-one meeting with Shehbaz to discuss matters of mutual interest, including promotion of bilateral relations and expansion of cooperation in different sectors. The CM said this visit will further promote the friendly relations between the two countries

On his arrival in Pakistan, he was received by Lahore Lord Mayor Col (retd) Mubashir Javed and senior government officials. Talking to media on the occasion, he said Pakistani-British men and women had made great contributions in making London the greatest city in the world.

“London is open for partnership, business and trade. It is the city that welcomes you in many ways,” he added. For Sadiq, the Metropolitan Corporation Lahore had arranged a special tour of Badshahi Mosque and other historical places. He was also presented a guard of honour at Iqbal’s mausoleum.

He also attended an event in Alhamrah Art Council to promote his campaign. Addressing the participants, Sadiq said Pakistan has a bright future ahead and a lot of scope for growing its economy.

Son of a Pakistani bus driver, Sadiq is the London’s first Muslim mayor to visit both India and Pakistan.

Source: The Express Tribune, 6th Dec 2017.

China invites more countries to take part in CPEC projects

Beijing: China Monday termed the USD 50billion China-Pakistan Economic Corridor (CPEC) as an “open initiative” and invited more countries to join the controversial project on the “principle of equality and voluntarism”.

Commenting on the commissioning of a power plant built by China and Qatar in Karachi, Chinese Foreign Ministry spokesperson, Geng Shuang told a media briefing here Monday that Qatar’s participation showed that the CPEC is open for third country participation.

The first unit of the 1320-MW coal-fired power plant at Port Qasim in Pakistan, under the CPEC project, was inaugurated on November 29.

The Port Qasim plant has been developed jointly by the Power China Resources Limited and Qatar’s Al-Mirqab Capital with a total investment of USD 2.085 billion, according to reports from Pakistan. It is the second major energy project under the CPEC.

“This is the first project participated by the third country. It shows that the CPEC is an open initiative. We are willing to explore the participation of more countries with the principle of equality and voluntarism,” Geng said.

“The Chinese side is happy with the operation of this plant. I think this will play a positive role in providing energy and bring benefits to people of Pakistan,” he said.

India has objected to USD 50 billion CPEC on the ground that it traversed through the Pakistan-occupied Kashmir (POK).

Source: The Asian Age, 4th Dec 2017.

Can CPEC cause Dutch disease?

First the etiology of the Dutch disease. In 1959, the Netherlands discovered huge deposits of natural gas in the North Sea. It resulted in a massive upsurge in oil exports. The new-found wealth led to the expansion of social security. By the 1970s, unemployment rose some five times and the welfare spending became unbearable. In 1977, this phenomenon of a fortune turning into misfortune was labelled by The Economist magazine as Dutch disease. Pakistan hasn’t discovered a big cache of natural resources. How can Pakistan catch the disease? The disease is not specific to natural resources. Any economy that experiences a sudden high inflow of foreign currency for any reason is likely to suffer from it. Including the early harvest phase of $46 billion, the total expected inflow under CPEC is stated to be $62 billion. This is close to the entire external public debt payable by Pakistan. The large size of the inflow in a short span of time makes it possible, though not probable. Here is how.

Sheer size of CPEC portfolio appals IMF

In the case of the Netherlands, the boon of oil exports turned out to be the bane of non-oil exports, which lost competiveness due to a rapid appreciation of the real exchange rate. Together with the non-traded sector, the oil export sector crowded out the traditional exports with adverse long-term effects. The increased oil exports raised incomes, money supply and demand for non-traded goods and services. In the case of CPEC, the inflows are being utilised largely on the import of power generating machinery and construction equipment. These imports do not directly affect the money supply in Pakistan. A small part of the inflows is spent on domestically supplied goods and services, notably construction and retail trade. It does add to money supply as foreign exchange is converted into local currency. Since the exchange rate in Pakistan has, in effect, been kept fixed, the increased money supply and domestic demand tend to increase prices. As the purchasing power of a unit of foreign currency is less than before, its real value appreciates. Even if the exchange rate regime were flexible, the increased supply of foreign exchange would drive up the nominal exchange rate and thus real exchange rate. In both cases, the traditional export sector suffers. The effect is made worse by the movement of capital and labour away from the export sector and towards domestic non-traded sector.

The CPEC inflows are recent. Pakistan has suffered an absolute decline in exports for three years in a row since 2014-15. Failure to break away from concentration on traditional products and destinations lies at the roots, besides the critical constraints of energy and law and order. There is a revival of exports coinciding with the CPEC inflows. This does not mean that the Dutch disease has died down; only that better energy and security situation and expectations about the Special Economic Zones have reinvigorated exports. The outlook for the global commodity prices has also improved. But the exports still have to contend with a rupee that is overvalued to the extent of 20 per cent. This could worsen with the acceleration of financial flows under CPEC.

London mayor-led delegation shows interest in CPEC

Policymakers have to focus on some deeper questions raised in the context of the Dutch disease. If the assumption is that the CPEC inflows are going to be a recurrent feature for a long period, the economy has to adapt to the required structural changes. These changes will entail shifts that can hurt labour as well as businesses used to get by in the traditional mould.

Source: The Express Tribune, 8th Dec 2017.

‘Afghan stability, peace key to sustainable development in region’

ISLAMABAD: Planning Commission Deputy Chairman Sartaj Aziz on Tuesday said that any future progress on regional integration would sustain if peace and stability prevailed in Afghanistan.

“This is not possible without Pakistan’s support to the international community and we will do all that we can to help the Afghan reconciliation process,” he said while addressing the three-day 20th Sustainable Development Conference (SDC) organised here by the Sustainable Development Policy Institute (SDPI).

Sartaj said that Pakistan was an important force behind keeping trans-boundary energy and resource sharing agreements on track. He said that the China-Pakistan Economic Corridor (CPEC) had paved the way for foreign investment in the country and had enabled Pakistan to connect to all countries using the concept of Belt Road Initiative.

Asian Development Bank (ADB) Country Director Xiahong Nang said that efficient infrastructure was an important element for regional cooperation. She said that the trade patterns were changing between emerging and developing countries and ultimately Pakistan had great potential to trade with CAREC countries.

Prime Minister’s Adviser on Finance Dr Miftah Ismail said that SMEs should be a local economic venture, with focus on industrial zones as facilitators with a national development innovations as key to economic development. He said that the industrial zones, therefore, were the backbone of economic development under CPEC.

In his keynote address, former State Bank governor Dr Ishrat Hussian said that in the first 40 years, the economic growth of Pakistan stood at 6 to 6.5% while India’s economy was at 3%. However, from 2000-2015, there was a decline in Pakistan’s growth at 4 to 4.5%. he said that Bangladesh had also surpassed Pakistan, as currently, its economic growth stood at 6 to 6.5%.

Bangladesh’s exports for 2016 were $35 billion whereas Pakistan’s exports were $21 billion. To improve the current condition, Dr Ishrat reiterated that policies needed to be implemented, as efficient, strong, capable institutes made an economy functional. If the efficiency decreases, the cost and the competitive edge will also decrease, he added.

He proposed that the good governance and inclusive institutions could help promote economic integration in Pakistan. UN CEDAW Committee member Bandana Rana said that Pakistan and India had the reservations against Article 16 that deals with the issues pertaining to marriage, divorce and married life.

She said that states have to translate suggestion/recommendation by the CEDAW committee and disseminate it to the large audience. Pranav Adhikari from Nepal linked to gender equality and empowerment with the achievement of the Sustainable Development Goals (SDGs). According to him, SDG’s cannot be achieved unless women goal 5 will be achieved. He was of the view that both men and women were subject to Intimate Partner Violence (IPV).

In his welcome address, SDPI Executive Director Dr Abid Qaiyum Suleri said that today’s South Asia was a democratic region where stagnant economic conditions of the pre-independence era have now transformed into an economic dynamism. “We are free to choose the people we want to be ruled by. We are free to live under a political system of our own choice,” he said.

“We have reduced poverty on a massive scale, and our products and services are competing in the world.” However, he said that the economic scenario was still not able to address structural inequalities, and the economic growth has made the difference between the rich and the poor as obvious as the one between glittering high-rises of Karachi, Mumbai, or Dhaka and the slums just underneath them.

Imran Shaukat from Jobs Group said that CAREC and CPEC were international visions and among all countries, China was the only country promoting globalisation and working on regional cooperation. He stressed the need to help agro-based countries like Pakistan to bring forward the potential for export promotion.

Source: Pakistan Today, 6th Dec 2017.

Will the China Pakistan Economic Corridor match people’s expectations?

ISLAMABAD (DAWN/ASIA NEWS NETWORK) – More news trickling out of the recent meeting between Pakistani and Chinese delegations to thrash out the future shape of China Pakistan Economic Corridor (CPEC) points to an important trend.

We now have four separate projects that the Pakistani side has been advancing during the seven meetings of the Joint Cooperation Council (JCC) whose fate is either sealed or hangs in the balance as the seventh round concluded.

Those four are: Diamer-Bhasha dam, the Main Line 1 (ML1) upgradation of the Peshawar to Karachi railway line, the Karachi Circular Railway, and three road projects.

Let’s take a close look at one of these, the ML1 project.

This was raised in the first JCC meeting held on August 27, 2013, only months after the formation of the new PML-N government.

The proposal talked of a high-speed rail line from Karachi to Peshawar, with a design speed of 250kmh and length of 1,681km.

When the Chinese side expressed concerns about the cost, they were told that the project could be implemented in ‘build, operate, transfer’ basis in public-private partnership mode.

The Pakistani side was keen to attract a private investor from China for the purpose, offering tolls as well as revenue from service areas along the route as incentives.

Exactly one year later, on Aug 27, 2014, in the third JCC meeting held in Beijing, a Chinese consultant was named to conduct a joint feasibility study of the ML1 and Havelian dry port project.

It was recommended that both sides sign a framework agreement for conducting this study and the study itself be complete four months after the agreement is signed.

“The committee appreciates Pakistan’s commitment for providing entire financing support for the joint feasibility study”, the minutes from that meeting state.

That framework agreement was signed during the April 20-21 visit of President Xi Jinping to Pakistan, during which 49 agreements and MoUs were entered into between both governments.

Once the costs are known, we will have a clue as to how much Chinese plans for CPEC are aligned with Pakistani hopes.

By November of that year, the draft feasibility was complete and phased implementation was decided.

Three sections of the line were identified to start work with, that ran from Keamari in Karachi (where the port is located) to Lahore, divided into three sub-sections each requiring different upgradation work. The work was supposed to be finished by Dec 2017, “based on the availability of funding”.

“It was considered important to accurately determine the costs to avoid issues at implementation stage” the minutes from that meeting note.

Then, after an interval of one year, came the sixth JCC meeting in December 2016. The meeting minutes describe ML1 as a “crucial and strategic component of CPEC” and go on to note that it is “imperative that the project is implemented on a fast track”. The Pakistani side confirmed their willingness to sign a commercial contract of the design “at the earliest”.

A senior working group was created “to discuss the modalities and terms of financing” of the project. “Both sides agreed to have extensive communication in the first fortnight of January 2017 so as to achieve quick progress and finally reach a consensus within three months.”

Notice two things emerging from this dialogue. The first is the repeated invocations by the Chinese about the costs, and how due care must be taken to assess these, and how there is a lot to discuss regarding the costs before moving ahead with implementation.

Second, notice that at least one party in this dialogue is in a hurry.

Then came the seventh JCC meeting on Nov 22, 2017, where financing for the project was supposed to be approved.

Everything was in place, the design, joint feasibility, an implementation and coordination mechanism, and a whole 11 months had elapsed since all this was agreed in the last JCC meeting, giving both sides ample time in which to “reach a consensus”.

News coming out of the seventh JCC says that the approval of the project now awaits cost estimates which are to be generated in the next three months. Presumably these cost estimates will be in line with Pakistani expectations, and the project will be able to move ahead by early 2018.

The ML1 is one of the most important components of CPEC, because the rail transport of goods is badly needed in Pakistan.

In the early discussions, there was talk of extending the project beyond Peshawar to Herat in Afghanistan as well.

The joint feasibility includes a dry port at Havelian, which is also the terminus for the upgraded Karakorum Highway coming from the north. Where the two link, an essential joint in the logistic infrastructure will be created.

But the costs are key to this, as the Chinese have been pointing out from the very beginning. Once the costs are known, and assuming the government shares them with the rest of us, we will have a clue as to how much Chinese plans for CPEC are aligned with Pakistani hopes.

At the moment, the sub-sections identified for priority implementation run from Lahore to the Karachi port.

If the level of interest evinced by the Chinese side ends at this, we will have an indication that the level of their interest extends only to the agro-industrial heartland of Pakistan.

But if the final project is indeed extended out to Peshawar, we will know that northern Punjab and KP are also to be linked to the emerging centres of dynamism under CPEC.

If the line is extended even further out to Herat, we have a truly impressive ambition at play that seeks to connect the region together.

In a sense, the ML1 project and how it shapes up is a crucial metric for measuring CPEC progress.

Since it will be the logistic spine of the corridor, how far the Chinese are willing to build it, and how much resource they are willing to invest in it, will be important to watch.

Source: The Straits Times, 7th Dec 2017.

7th JCC meeting details revealed by Chinese diplomat

Karachi: The beans have been spilt, as a full list of several projects and agreements finalized during 7th Joint Cooperation Council (JCC) held late November have been released.

Chinese diplomat Lijian Zhao in a series of tweets said six documents were signed including Long-Term Plan (LTP) for CPEC to run from 2017-2030, minutes of 7th JCC were given go-ahead by Pakistan and China.

Also, minutes from Joint Working Groups (JWG) on energy, industrial parks and Gwadar also got approved from both Pakistan and China. And among the implementation minutes for New Gwadar International Airport were also finalized.

Following JCC will undertake work on financial arrangement and commercial contract for ML-I Pakistan Railways project, which will see setting up of a high-speed rail link between Peshawar and Karachi. ML-I is the single highest project in CPEC.

Zhao’s tweet read “new infrastructure projects will accelerate talks on signing commercial contracts & financing agreements.”

Also, he further tweeted “NDRC on 7th JCC of CPEC: CPEC entered 2nd phase as 9 industrial parks were included into CPEC. Feasibility study reports of these special economic zones (SEZs) were handed over to Chinese side. 3 SEZs including Rashakai, Dhabeji & M-3 in Faisalabad seemed most feasible.”

Zhao disclosed “NDRC on 7th JCC of CPEC: East Bay Expressway has held ground breaking ceremony. Gwadar power plant & Gwadar Expo will be inaugurated very soon. 6 major projects will be completed in Gwadar Free Zone by early 2018. A medical team and weather station are in place in Gwadar.”

Regarding news of omission of Diamer-Bhasha Dam, Zhao tweeted those views were reflection of one individual only and were inaccurate. He said “DRC on 7th JCC of CPEC: are discussing Basha dam project under CPEC energy expert group. However, it has not been included in list of energy projects.”

And news circulating about Pakistan receiving 9pc revenue from Gwadar port for a period of forty-years was not accurate, said Zhao and” COPHC has invested a lot in Gwadar. The changes in Gwadar port & free zone have shocked many visitors”, the tweet read.

Furthermore; Zhao tweeted NDRC views on 7th JCC of CPEC “China is helping Pakistan to solve energy crisis. 5 power plants including Sahiwal, Bahawalpur solar, UEP wind farm, Sachal wind farm, Dawood wind farm have been completed. Unit 1 of Port Qasim was completed. 5 more power plants under construction.”

Mr. Zhao made no mention of Chinese request for Renminbi being used as legal tender in Gwadar in his series of tweets.

 

Source: Pakistan Today, 8th Dec 2017.

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Pakistan third largest investment beneficiary from B&R Initiative: EIU

 

Ongoing CPEC development projects worth $6 to $7 billion are predominantly being funded by the Chinese and paltry financing of $470 million is being provided by Pakistani banks

LAHORE: China’s Belt and Road Initiative (BRI) seems to be benefiting Pakistan, as it has been ranked amongst the top three countries receiving investment behind Saudi Arabia and Indonesia for years 2013 to 2015.

China has bet over $60 billion in China-Pakistan Economic Corridor which includes infrastructural and various power projects in Pakistan since 2014.

Economist Intelligence Unit (EIU) says Pakistan is in tricky spot to attract China’s private investments. But EIU ranks Pakistan in positive opportunity bracket but also places it in high risk basket. Lower political and regulatory risks can result in better opportunities.

Photo: Economist Intelligent Unit

Recently, Profit reported about an opinion piece published on Bloomberg which raised questions over massive Chinese investment in CPEC and whether could Pakistan be in danger of becoming another Venezuela.

Photo: Economist Intelligent Unit

According to the opinion piece, ongoing CPEC development projects worth $6 to $7 billion are predominantly being funded by the Chinese and paltry financing of $470 million is being provided by Pakistani banks.

Venezuela which received billion-dollar loans from the Chinese, last month defaulted on its debts and has been plagued by political strife, uncertainty and hyper-inflation.

In late November, China Development Bank (CDB) led a syndicate with EIBC for funding a $1.5 billion power plant in Hub, Balochistan and jointly being setup by China Power International Holding Ltd (CPIH) which is listed in Hong Kong.

Also, IMF recently raised questions over Pakistan’s ability to repay loans obtained under CPEC from China and projected payments will spike up after seven years to touch $3.5 billion to $4.5 billion a year. IMF estimates CPEC-linked outflows at 1.6 per-cent of GDP a year by 2024.

Although, investments via OBOR maybe a bane for Pakistan, due to CPEC, the country has experienced a significant construction boom thanks to major infrastructure and power projects but major slice of investment pie has been reserved for the Chinese, with minuscule participation from local banks and industries.

Source: Pakistan Today, 8th Dec 2017.

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CPEC and the case for community capacity building

Dr. Ally R Memon

The genesis of the China Pakistan Economic Corridor (CPEC), now becoming increasingly operational, is increasingly boasting of building further business ties along the silk road. CPEC is set to change the strategic and geo-political dimensions of the region with global logistical power being acquired by China while Pakistan gains massive economic and diplomatic benefits as a result.  As you read of the ongoing developments surrounding CPEC and get consumed into the prophecy of it being a regional ‘game changer’, there still remains what are gaps in understanding and perceiving how this CPEC initiative will translate into actual development for the masses. It would seem so far from any scholarly or journalistic digging that there remains a lack of transparency surrounding it and any criticism otherwise would come across as patriotically insensitive. You cannot help but ponder on one fundamental dimension, which is how CPEC will begin to positively impact the livelihood of people in communities and uplift their well-being? If politicians and ministries talk about impact or the bottom-line, then they ought to be forecasting, planning and demonstrating how CPEC projects will begin to have an effect on the region’s per capita income or for instance, how gross domestic product will measure up for Pakistan’s largest yet poorest province (Baluchistan) or furthermore, what local community development activities will entail?  If we attempt to observe the government’s strategy for community capacity building alongside CPEC’s logistical and infrastructural progress that is constantly reported, then one is hard strapped to find any outlets of information that can tell us something on this front.  The CPEC secretariat in Islamabad which coordinates all CPEC efforts on behalf of the government with their respective Chinese counterparts, state as of mid-2016 that any community engagement or community development activity to arise from CPEC projects is the responsibility of (and lies with) the companies themselves (predominantly Chinese) which undertake CPEC infrastructure projects.  This is a rather worrying thought since China’s policy remit and political motive may simply be limited to efficient road and shipping routes for international trade rather than community development in Pakistan given that they are under pressure to maintain their economic growth while the global economy is on a down turn.  If one is to research the somewhat limited and obscure CPEC website of the Ministry of Planning, Development & Reform, then there are no information releases, policy papers, consultative or strategy documents that relate to community capacity building. All you find are introductory applauding statements and tables with project names and allocated budgets listed. If you also observe the ‘Progress Update’ or ‘Press Release’ sections of the official CPEC website, there again you see nothing but a table that makes anecdotal references to logistical/technical updates, dates for project phases and photo coverage of joint meetings.  There is nil reference to, or mention of, community engagement or community development.

Who is going to actually plan for how communities will economically and socially benefit from the income generated through CPEC projects? How will wealth distribution function when the $46 billion CPEC project begins to give returns in the form of corporate revenue and taxation? Surely as citizens and institutions, we would like to know how CPEC can begin to have a territorial impact upon common people and communities that have paved the way for these CPEC projects to occur.  The questions being asked here that have not yet been addressed in any shape or form by political and government institutions that run the CPEC apparatus. When the government and the federal ministry for Planning, Development and reform attempt to tell us in tangible terms what there is to gain from CPEC, their talk remains geopolitical and puts forth speculative macro-level monetary forecasts. It remains unclear how major economic investments in the region resulting from CPEC that will amass to huge economic payoffs will trickle down to the majority in any meaningful way.  Nothing for instance tells us how Gwadar’s eight listed infrastructure projects and it’s listed Public Sector Development Programme (PSDP) projects (such as a planned international airport, a technical-vocational institute and a large scale hospital expansion) will morph out to create jobs for locals; or how small business development will be supported in communities surrounding Gwadar; or how tax revenues will be ploughed back in if Gwadar is to be a free zone?  If we are to take a lesson from history, then little came in the way of community development from the large scale economic corridors that Pakistan inherited from the British such as its railway networks, irrigation networks and the postal service; which in present day terms would amount to more than $56 billion. Such inherited infrastructures have been poorly managed over the decades, shrunk in capacity and have never been able to elevate populations above the poverty line in semi-urban and rural areas.  So why are we to consider CPEC outcomes to be any different? Is it just expected that these mega scale CPEC infrastructure projects embarked upon will somehow randomly have a positive impact on public services in the region? That somehow education, agriculture, tourism and health will be uplifted as a result of industrial zones and road infrastructure built across provinces under the CPEC banner.  Is it that Pakistan’s literacy rate, its public health indicators and employment rates will begin to miraculously improve in the long term as a result of CPEC? Societal progress cannot be treated as a by-product that just emerges out of various energy or infrastructure mega projects. It needs to be carefully engineered: hence the need for reform, formulaic yet innovative town planning and the need for infrastructure and service blueprinting by district management groups.   It now comes down to the muster of bureaucrats, technocrats, district managers and town planners to articulate a vision for their own districts and negotiate with those funding and undertaking these CPEC related PSDP projects. Undoubtedly, some will do it better than others to improve welfare in their communities.

Even though political intent and resources are now there to undertake community development through the Public Sector Development Programme that has been assigned Rs151 billion for the fiscal year by the government under the CPEC umbrella, there must also be leadership and planning that is publically transparent, so that they can at the very least scrutinise, if not participate, in community building processes. It is time for those with a mandate to lead and for those who push pen and paper to plan for community capacity building and demonstrate how CPEC will lead to creating progress and sustainability for local populations. There is now the dire need to proper institutional arrangements to be put in place that can implement CPEC related community development. Or else, all this will resemble and replicate nothing more than what the town of Sui and it’s dug up resource of the 1950’s has come to represent in the present day: ethnic divisions, economic marginalisation and the lost opportunity to transform communities.

Source: Pakistan Observer. 

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CPEC fears and my response

Humble Reply to Shahjahan Chaudhary on his piece regarding CPEC Fears.

Game Changer

1. 91% of the income from Gwadar Port goes to the Chinese and 9% to Pakistan.

Reply: First of all, the contract was signed with the Port of Singapore Authority in 2007. The same contract was transferred to the Chinese. Secondly, can you kindly point out what’s wrong with this model especially when all the liabilities and investments lie at their end? We don’t up with any loans on Pakistan’s balance sheet.

Let me remind you, in past 7 decades, not only our government has failed to develop the port but also ignored the importance of its geostrategic location; and currently, our country doesn’t have the resources to develop it even if they want to for next 3 decades or so. Every Pakistani still gets to use the port and enjoy the benefits from its development. The port is a window to the economic activity it will generate in the country through becoming a safe transit route for China.

2. Chinese companies get preferential treatment and tax exemptions (making it impossible for local companies to compete and opens the Pakistani market for a commercial invasion)

Reply: The statement is completely misleading. Only CPEC projects get tax exemptions, mainly in the power sector, because we are in dire need to mitigate the losses due to the energy crisis in Pakistan. Moreover, tax exemption also drives down the cost of building these strategic projects, which results in lower tariffs and repayments.

(Impossible is a strong word. Construction companies in Pakistan are working at their full capacity, turning down projects due to output issues. Commercial Invasion? I think mentioning special economic zones would be more relevant since the argument of building infrastructure has no correlation with the commercial viability of businesses.)

3. Money for the road network comes from Pakistan (so we’re paying for the roads China will use to export stuff to us and the world)

Ans: Let me break the statement into 2 parts:

1) The Road; 2) The Money

1) The Road: The roads built under CPEC will be the property of National Highway Authority and will generate revenue through the toll tax. Moreover, as a Pakistani, will you want strategic roads in the country to be the property of a foreign country?

2) The Money: These projects are being built on Engineering-Procurement-Construction+Finance (EPC+F) Model. Finance comes from China and our government takes it as a concessionary loan. Same as ADB model. But the difference is that Chinese companies are mandated to complete these grand projects within 24-36 months. There needs to be open bidding for these projects, but then again, it will push the timeline of the CPEC to 30 years instead of 15 years.

4. Of the original $50b, over $30b was loans to build power plants for which we’ll pay a) interest to Chinese banks b) exorbitant profits to Chinese companies who will build and supply to these plants c) guaranteed profits to the Chinese companies that will operate and own these plants d) backed by sovereign guarantee

Ans: This figure is completely incorrect. All the power projects under CPEC are BOOT (Build-Operate-Own-Transfer) basis which means that investment, loans, and liabilities are all the investor problems. Our problem is to pay for the electricity they produce. No loan has been acquired so far by the government of Pakistan for energy projects.

a) We have nothing to do with the interest rates.

b) Getting a payback for what you invested is a very fair request so don’t know what’s wrong with it?

c) Guaranteed profits because we have PKR 800 billion in circular debt? Why would anyone even want to invest? Would you?

d) Same as above.

5. We’re making commitments to buy electricity at over 8 cents from coal-based plants and India is buying solar electricity at 4 cents (solar price is crashing every year). This will make our manufacturing uncompetitive for the next 15 years or longer.

Ans: We have a flaw in this argument. First, we are comparing apples to oranges. The feed-in tariff for coal power plants is around PKR 8/Kwhr in India as well. Although it’s a lengthy discussion,

Why can’t we opt for Solar? That’s because of the energy mix. India produces 59% of electricity from Coal while Pakistan, prior to CPEC, only 2%. Then, another issue: Solar produces well in the afternoon but doesn’t at night. You need to be over-dependent on reliable energy outputs in order to shift to renewable. I won’t get involved in grid problems but that’s one of the issues as well why Pakistan cannot opt for aggressive solar issues. On the price front, the tariff for solar in Pakistan dropped by more than 60% in past 4 years; in fact, it’s the projects are awarded through open bidding.

Apart from that, cost of producing electricity on generators ranges from PKR 70-90/Kwhr.

6. Meanwhile, the government falsely thinks tax revenue growth is economic growth. Excessive taxation is crushing the local industry and businesses and the government claims a “victory” every time it borrows more money

Ans: That’s a governance and leadership problem, not a CPEC one. If you want to bash the government, you will find me as one of the front-runners.

7. The Chinese are rational profit-minded businessmen…they have zero incentive to think about our future prosperity. Would they rather bolster our economy or own us?

Ans: Too descriptive in nature. But let’s say, we have strategic interests aligned to an extent that they are willing to risk phenomenal amount of money in a country which is not very famous in the international arena. Owning us? I don’t think that would be possible. Bolster our economy? Why not, if it is in great benefit of China?

Shahjahan Chaudhary: So why is the CPEC “game changer” being sold to us with such force? As a state, we are feeling threatened by multiple regional and global forces. The Chinese investment is an insurance policy.

Ans: Isn’t an insurance policy a core agenda from the inception of our existence? We are exhausting 70% budget on the military after the debt is serviced. Why would we not want an insurance policy? Combine that with economic uplift and we land on the term “Game-Changer”

I personally think it’s a game-changer. We are bound by our own fears and fail to realize the scale of what’s coming.

Shahjahan Chaudhary: We’re giving them what they want (profits), in return for what we want (security and survival).

Ans: The problem is that we can’t give them profits. They are betting on us that we can. There is a difference.

Shahjahan Chaudhary:

What’s the problem?

That the “game changer” is a mirage. Let’s be honest about CPEC. It won’t bring us prosperity. It’s a debt trap we’re willing to get into because we’re desperate. Once we see it for what it is, we’ll know what to do: tighten our belts, work hard, train our people and export more.

Ans: I would rather rephrase this: The CPEC is a game-changer, an opportunity for everyone. If we sit at home and expect China to knock at our doors, that won’t happen. What will happen is that the opportunities in Pakistan would become more and more difficult to come by as the markets become more competitive in future. So let’s focus on how to engage with the opportunities emerging from CPEC right now and position ourselves to live the CPEC dream.

Personal Note: I am not happy with the government performance as well but that doesn’t make the CPEC evil in nature. Let’s not run away from our problems and blame China for it. Let’s talk about circular debt, youth platforms, private-public linkages, education, technical training, awareness, research, Gwadar facility centres etc.

Yours truly,

Hamza Orakzai

The writer is the former Head of Operation, Pakistan-China Institute; Australian Awards Fellow 2017 at Australia National University; currently serving as the Chief Executive Officer of Obortunity.

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CPEC will transform Pakistan into regional economic hub: Naval Chief

KARACHI: The launching ceremony of 600 Tons Maritime Patrol Vessel being built for Pakistan Maritime Security Agency (PMSA), was held at Karachi Shipyard & Engineering Works (KS&EW) on Tuesday.

Admiral Zafar Mahmood Abbasi , Chief of the Naval Staff graced the occasion as Chief Guest.

The 600 Tons Maritime Patrol Vessel is a state of the art, multi-mission vessel with steel hull and aluminum super structure having length of 68.5 m, breadth of 8.7 m and can achieve a top speed of 27 knots. The ship is fully equipped to enforce maritime security, search and rescue missions in maritime exclusive economic zone of Pakistan and is being built with technical collaboration of China Shipbuilding & Trading Company (CSTC).

Speaking on the occasion, the Chief Guest Admiral Zafar Mahmood Abbasi congratulated Karachi Shipyard & Engineering Works, CSTC (China) and PMSA on achieving this important milestone and said that it is yet another land mark project that speaks volumes of the evergreen friendship between China and Pakistan.

He added that responsibilities of Pakistan Navy and especially PMSA have increased manifolds after start of CPEC and extension in EEZ.

While highlighting the significance of CPEC, the admiral said that CPEC will transform Pakistan into a regional economic hub. If we capitalize on just 10 percent of China’s external trade, it will be about five times the current volume of trade that we are carrying through our port.

He further said that Maritime sector alone has the potential to double or even triple our GDP. He urged different strata of society to render their support in the development of the ship building and maritime sector.

Earlier, MD KS&EW Rear Admiral Syed Hasan Nasir Shah in his welcome address said that this MPV is part of contract between Ministry of Defence Production and CSTC (China) for construction of 6 MPVs for PMSA and these MPVs will act as a force multiplier for PMSA in safeguarding maritime frontiers of Pakistan together with Pakistan Navy.

The launching ceremony was attended by high ranking officials from Government of Pakistan, Pakistan Navy, China Shipbuilding & Trading Company and KS&EW.

Source: The News, 5th Dec 2017.