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Stop Spinning CPEC’s Finances

Source: CRSS Blog

Date: 30th December 2018

Author: Yasir Masood

The China-Pakistan Economic Corridor (CPEC), since its inception, has been engulfed in perpetual slip-ups both on internal and external fronts. These slip-ups are being purported against the CPEC and China-Pakistan bilateral ties. The opposition of CPEC on various sets of juxtapositions, backed by far-fetched analyses, perhaps make some sense to its “critics”. But entrapping it with innovative, biased, or “planned” analyses by our very own critics (or “experts”) is surely no less than a sorry state of affairs.

Time and again, the Chinese Consulate, Ministry of Planning, and CPEC affiliated line ministries, including the CPEC-Centre of Excellence, have been promoting the true picture of CPEC, based on facts and figures for the furtherance of the true narrative amongst the masses in the best interests of both the nations. But it seems that some of our “experts” are bent on risking their country’s future – which significantly relies on CPEC — by disseminating unusual analyses, particularly pertaining to CPEC finances and debts without knowing its true picture.

At this critical juncture, when the CPEC is about to take off, persistent, durable, pragmatic and workable measures are needed by Pakistan to secure it from all dimensions and corners. Spinning and twisting the facts and figures would only play into the hands of those who would never wish to see the CPEC up and running.

Amidst the “Hybrid Warfare”, especially through social media, which is imposed upon CPEC from near and far, yet another piece, in line with the ongoing campaign against the CPEC, appeared in the local press last week. This piece focusing on CPEC’s debt burden — claiming it to be $40 billion — by putting all the financial modalities of CPEC into one basket, was again way off the mark.

The Ministry of Planning Development and Reform, within no time, refuted the fudged and misleadingly calculated $40 billion debt against CPEC. Although, it is imperative to break down the finances of CPEC. In this regard, the Chinese Consulate stepped up and further enlightened the reality of CPEC finances as under:

Details of CPEC Financing:

Thus far, 22 early harvest projects under CPEC have been completed or are under construction, with a total investment of $18.9 billion. These projects aim at resolving two major bottlenecks hindering economic development of Pakistan, namely lack of transportation infrastructure and energy shortage. The financing details of 22 projects are as follows:

“The Chinese Government provided concessional loans of $ 5.874 billion for Pakistan Government’s major transportation infrastructure projects, with a composite interest rate of around 2% in a repayment period of 20-25 years. The Pakistani government provides a sovereign guarantee for the above loans and will start the repayment from 2021.

Moreover, “the Chinese companies and their partners invested $ 12.8 billion in energy projects in Pakistan. Among them, Chinese companies provide $3 billion from their own equity. The rest $ 9.8 billion is raised from commercial banks with an interest rate of about 5%. The repayment period is 12-18 years. All the CPEC energy projects are the investment in nature, which is purely dependent on individual business behaviour of these companies”, the document revealed.

“The companies are responsible for their own profits and losses and repayment of loans. The Pakistani government does not repay these loans under CPEC. The business cooperation between the two sides is in full compliance with internationally accepted business practices”, further clarified the document.

“The Chinese government provides interest-free loans for Expressway East Bay in Gwadar and provides a grant for some livelihood projects as well”, revealed by the document.

In addition, Pakistan’s Government has provided funding for the feasibility study of ML-1 upgradation.

“Therefore, Pakistan will repay only $ 6.017 billion (Category I $ 5.874 billion and Category III $ 0.143 billion) and their interests to China.”

In the second phase of the CPEC, China and Pakistan are discussing how to use Chinese grant to implement new projects such as new Gwadar international airport, Gwadar vocational training center and friendship hospital, etc. Once the financial details are available, they will be shared.

During Prime Minister Imran Khan’s visit to China in November 2018, the two sides reaffirmed their commitment to CPEC and agreed to ensure the normal operation of the completed projects and the smooth completion of the on-going projects. The two sides also agreed to consult with each other on the future path and direction of CPEC, taking consideration of Pakistan’s priority of economic and social development and the demand of Pakistani people.

On December 20th, 2018, China and Pakistan successfully held the 8th Joint Cooperation Committee (JCC) meeting of CPEC in Beijing and decided to set up a socio-economic joint working group under the rubric of CPEC.

It was also agreed that “the Chinese side will provide more support to the people’s livelihood projects such as education, agriculture, poverty alleviation, health care and vocational training.” Furthermore, both sides signed an MOU on industrial cooperation and agreed to jointly promote the construction of Special Economic Zones (SEZs). The CPEC expansion with focused priorities is already charted by the Government of Pakistan along with the due consultation of the Chinese side.

The Chinese Consulate on its part has been regularly revealing and educating about the CPEC as a “game-changer” concept. Similarly, there is a consensus amongst the Pakistani masses including all the Government bodies, Military forces, Political parties and the rest of the segments of the society are fully cognizant of this ongoing “Hybrid Warfare” against the CPEC and firmly supporting it to secure our national interest.

The Author is working as a Deputy Director Media and Publications at Centre of Excellence-CPEC and is also a Lead Editor of CPEC Quarterly Magazine. He frequently writes for the National and International English Dailies and regularly appears on different English and Urdu TV Channels as a CPEC and International Relations Analyst.

Pakistani cities’ security improved in recent years with progress in CPEC.

Source: Business Recorder

Date: 28 December 2018

BEIJING: The security in the cities of Pakistan has certainly improved in recent years with the progress in the ChinaPakistan Economic Corridor (CPEC), a pilot project of Belt and Road Initiative (BRI) launched by China.

Take Peshawar, a city which has been hit by terrorism in northern Pakistan. The security has certainly improved in recent years with the progress in the CPEC, according to an article published by Global Times on Thursday.

Local people know that terrorism would stand in the way of Belt and Road projects, so they consciously resist the designs of anti-social elements, leading to a reduction in incidents of terrorism.

In northern Myanmar, the construction of the China-Myanmar Economic Corridor under the BRI has seen a marked improvement in security as the importance of peace and stability in facilitating the project dawns of the people. The fact is that the BRI is a geo-economic rather than geopolitical construct and has nothing to do with geopolitics in form or content.

China neither has the intention of forming alliances through the BRI nor plans to seek a sphere of influence. China seeks partners, not allies, in implementing the initiative.

The opponents are grossly mistaken in regarding the initiative as a geopolitical concept.

Some in the West call the BRI China’s Marshal Plan. They are two different things that are not comparable. The Marshall Plan was an American initiative providing aid to West European countries with the political motivation of containing the spread of Communism at the start of the Cold War.

In sharp contrast, the BRI is more about investment. Countries of different political systems are welcomed to participate and it doesn’t aim at a military alliance.

The significance of the BRI as a geo-economic concept lies in that it can help solve development problems some backward regions are grappling with and provide them enabling conditions for the same.

Japan and China have agreed to step up cooperation in infrastructure projects in third countries. Some Western countries such as Britain are eyeing closer cooperation with China under the BRI.

The initiative is open and inclusive; the more participants it draws in, the more secure and healthier its development. It will serve as a platform to step up cooperation among major powers.

In short, the BRI is a promising mechanism for economic cooperation, a new tool for managing security and a platform that can be used to explore more major-power cooperation.

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Projects for Thar, channelisation of Indus likely to be added in CPEC

Source: The News

Date: 27 Dec,2018

Two new projects are likely to be approved for their inclusion in the China-Pakistan Economic Corridor (CPEC), which will have an enormous impact on the overall development of the province.

Sindh Chief Minister Syed Murad Ali Shah said this on Sunday while speaking to media persons after attending the convocation of the Shaheed Zulfiqar Ali Bhutto University of Law (Szabul) at its Korangi campus. He was accompanied by Law and Information Adviser Murtaza Wahab.

Replying to a question, the CM said the Joint Coordination Committee (JCC) was the highest forum for the CPEC and he attended its meeting in China last week. He added that the CPEC authorities had included two more sectors, agriculture and socio-economic development, in its projects’ list.

“I presented two projects in the JCC and most probably they would be approved by the relevant Joint Working Group in their meeting to be held in March,” Shah said.

One of the proposed projects is for the channelisation of 180 kilometres of the Indus River from Guddu Barrage to Sukkur Barrage. “It is a mega project and the provincial government is working to complete its required formalities,” the CM said.

According to Shah, changing the course of the Indus River would be enormously helpful for the development of the agriculture sector. It would not only save water but would also control waterlogging and salinity in the districts on both banks of the river, he said, adding that the project would also help save the area from floods and develop large agricultural lands in Katcha areas.

Commenting on the second project, the CM said he had informed the Chinese authorities that the Thar Foundation was working in education, health, socio-forestry and bio-saline agriculture in Thar. “I proposed them [Chinese authorities] to approve the project of Thar Foundation so that it could be implemented in the Thar area where a coal power plant was being established under CPEC,” he said.

Shah said the Chinese authorities concerned appreciated the efforts of the provincial government and referred the project to the Joint Working Group, which would meet in March 2019, for approval.

Convocation

Earlier, addressing the convocation ceremony of Szabul, the CM said his interest in the first-ever law university of Pakistan was from the days of its inception.

According to Shah, it was a matter of great pleasure for him that the Sindh government had succeeded in establishing the first law varsity of the country. The CM congratulated the vice chancellor, faculty and students of the university for achieving the milestone.

Addressing the graduating students, the CM said they were the judges and lawyers of tomorrow. “In fact, the performance of the justice sector is dependent on the quality of your professionalism, skills and knowledge,” Shah remarked and added that there was a strong link between the qualities of human resources available to judiciary and the functionality, integrity and legitimacy of the judicial system.

“I am confident that you will exceed the expectations of all of us and prove to be an asset [for] the country,” he said. The CM assured Vice Chancellor Qazi Khalid that he would provide him all the required funds to complete the under-construction building of Szabul in Korangi.

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Greek businesses give their backing to China’s Belt and Road Initiative

Source: SMN

Writer: 

Date: 17th December 2018

Greek businesses and Chinese scholars voiced confidence in the prospects of Sino-Greek cooperation in the context of the Belt and Road Initiative (BRI) during a forum in Piraeus, Greece’s largest port which in recent years has become a strong symbol of the win-win bilateral cooperation between the two countries.

The BRI was the main theme of the forum organised by the Chamber of Commerce and Industry of Piraeus (PCCI) and the Chinese Embassy in Greece, with its co-organiser Renmin University of China.

Reflecting on the achievements to date in this corner of the globe and along the 21st century’s Silk Road, five years after the launch of Beijing’s initiative, Greek and Chinese delegates explored the challenges lying ahead as the opportunities to further boost bilateral cooperation to benefit both sides, are seized.

Pointing to Sino-Greek cooperation at Piraeus port, Vassilis Korkidis, president of PCCI, said: “Greece can and should make further use of the opportunities opened up both from its key geopolitical position and from the primacy of Greek shipping to the global economic phenomenon.”

Piraeus Port Authority SA is managed by China’s Cosco Shipping Corp has managed the Piraeus Port Authority SA since 2016, and Piraeus Container Terminal SA since 2010, posting remarkable results as Piraeus advances to become top port in the Mediterranean and among the five largest container hubs in Europe.

Chinese Ambassador to Greece Zhang Qiyue stressed the BRI is proposed by China, but it is actually owned by the world, saying “it is also a call on the part of China to other countries to cooperate in any way we can”.

It is a good initiative for globalisation and the world to work together, not in isolation, the Chinese ambassador said, saying China is trying to align her development with the development strategies of other countries.

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CPEC to lift cement demand to record levels

Source: The Nation

Date: 17th December 2018

Lahore – The China-Pakistan Economic Corridor (CPEC) is going to have huge impact on cement production level in the country, as the demand from the infrastructure and housing sector will surge to a record high with work on Gawadar Port, KKH Phase-II (Havelain-Thakot 120km) and the Karachi-Lahore Motorway (Sukkur-Multan 392km).

According to a report, the previous government in the country had also released Rs2.35 billion for the Housing and Works division.  The new government of PTI has assumed the power after general elections 2018 on the promise of constructing 50 lakh housing units, creating a huge demand of cement. The govt has now announced to construct 10,00,000 houses per year.

PM Imran Khan has repeatedly said they would bring economic revolution through housing. He said the private sector should come forward and work, and they would support them.

The increased production capacity along with high demand from housing infrastructure projects portrays a positive picture for the future of Pakistan’s cement sector. However, cement plants in Punjab are being brought under government regulation, with the Punjab Government halting the Plants on the pretext of environmental protection. The report also suggests that such policies if pursued can provide mixed outcomes for the cement sector in the future.

According to the report, another possible discouraging factor for the cement sector in Pakistan is the declining export figure that has dropped as compared to previous years.

According to the report, Pakistan’s cement industry is currently running at 95 percent capacity that has encouraged the domestic cement manufacturers to spend an estimated $2.25 billion on new production capacity.

5 years of Belt and Road initiative: Chinese vision for shared destiny

Source: Daily Times

Date: 14 th December 2018

ISLAMABAD: Pakistani youth needs to get the required knowledge and skills to be able to part of the emerging new vision of economic and political transformation of the growing world.

China and its phenomenon growth and peaceful rise provide ample example that with consistent efforts and hard work, achieving prosperity is not a distant dream but can be a reality. These were the consensus amongst the scholars speaking during the seminar on “Five years of Belt and Road Initiative: Chinese Vision of Shared Destiny” organized by Centre for Belt and Road and CPEC Studies-Institute of Peace and Diplomatic Studies.

Farhat Asif, Founder President, Institute of Peace and Diplomatic Studies, speaking on the occasion the occasion said that Chinese model of shared destiny is rare and has all the essence to bring peace and prosperity in the region.

Dr. Muhammad Munir, Assistant Professor in National defense University said that BRI is open for states to join its project. Pakistan is main stakeholder in BRI which is dependent on the success of CPEC. Chinese concept is that investing on individual will prosper whole region. BRI will also benefit the common people. CPEC has made the trade most cost effective with its characteristic of trickledown effect.

While talking about Belt and Road Initiative Dr. Muhammad Khan, Head of Department in International Relations in International Islamic University said that Belt and Road has provided China access to market, Global economy and reach over Africa, Europe (the investment hub). BRI is Win-Win situation and states are finding benefit from this project. He was of the view that west instead of opposing and propagating should also get the benefit.

Ambassador ® Javed Hassan, Director, Chinese Studies Centre, National University of Science and Technology, while speaking on the Occasion highlighted at length about the wisdom and vision behind the BRI and how the Chinese nation has transformed them through hard worked. He has also discussed both Pakistan’s and Chinese perspective. He said that one may like it or not China has come a long way and this is a great moment of celebration that BRI has come so long way in just 5 years under all pressures and propaganda. China has achieved what took Europe 400 years. He has advised the Pakistani youth that they must learn the new emerging knowledge to foster forward the interest of Pakistan in the global world.

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CPEC to help addressing Pakistan’s long term economic constraints: Moody’s

Source: Business Recorder

Author: Shoaib Ur Rehman

Date: 14 December 2018.

ISLAMABAD: In its annual credit report released on Thursday, Moody’s has said that infrastructure and power projects under China Pakistan Economic Corridor (CPEC) will address Pakistan’s long-term economic constraints an strengthen its growth potential.

“Pakistan’s longer-term economic prospects remain robust, in part because of improvements in power supply, infrastructure and national security that have raised the country’s growth prospects and hence business confidence,” said the report Moody’s-a credit rating agency.

It said institutional reforms planned by the new government, if effectively implemented, would also bolster institutional strength, which has increased in recent years with greater central bank autonomy and monetary policy effectiveness.

“However, the reforms will be challenging for any government to navigate because of the country’s large bureaucracy and complex federal-provincial politics and administrative arrangements,” it added.

Neverthless, Moody’s said in short time, it expects the country’s real GDP growth to slow down to 4.3-4.7 percent in fiscal 2019 and 2020, from 5.8 percent in fiscal 2018, in part due to policy measures taken to address the external imbalance.

It said that the credit profile of Pakistan (B3 negative) reflects the country’s high external vulnerability, weak debt affordability, and very low global competitiveness.

“Significant external pressures driven by wider current-account deficits have reduced foreign-currency reserves, which are unlikely to be replenished in the near term unless capital inflows increase substantially,” the report stated.

“While Pakistan’s public external debt repayments are modest, low reserve adequacy threatens the ability of the government to finance the balance of payments deficit and roll over external debt at affordable costs.”

Moody’s said its assessment of Pakistan’s susceptibility to event risk is driven by external vulnerability risk. Current-account deficits will remain wider relative to 2013-16 levels, with near-term prospects for a marked and sustained reversal unlikely unless goods imports contract sharply, it pointed out.

“Absent significant capital inflows, the coverage of foreign-exchange reserves for goods and services imports will remain below two months, below the minimum adequacy level of three months recommended by the International Monetary Fund,” the report stated.

The government’s narrow revenue base restricts fiscal flexibility and weighs on debt affordability, while its debt burden has increased in recent years, it observed.

“At around 72 percent of GDP as of the end of fiscal 2018, the government’s debt stock is higher than the 58% median for B-rated sovereigns, and Moody’s expects the burden to rise further and peak at around 76pc of GDP in fiscal 2020 — in part because of currency depreciation — before gradually declining as the twin deficits gradually narrow.

The moderate but rising level of external government debt also exposes the country’s finances to sharp currency depreciation.

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Expanding CPEC.

Source: Express Tribune

Writer: Yasir Masood

Date: 12 December , 2018

The recent visit of Prime Minister Imran Khan to Beijing in the first week of November has further heightened the brotherly relations between Pakistan and China. President Xi Jinping appreciated Prime Minister Khan’s firm resolve to introduce economic and social reforms in Pakistan by following the Chinese practices of incremental reforms and their implementation for achieving development, progress and prosperity. Apart from other diversified talks, pledges, promises and commitments to rectifying Pakistan’s current financial crunch, the China-Pakistan Economic Corridor (CPEC) has also been further solidified by mutual consultation for extending it in the just and right direction.

It is beyond doubt that CPEC carries a colossal importance in the upkeep of amicable relations especially through perpetual commercial linkages which encompass over 2,700 km from Gwadar to Kashgar. Overall, the project fruition is surmised to be completed in 15 years through three different phases — 2013-2020, 2020-2025 and 2025-2030. CPEC and its connectivity to Central Asia, the Middle East and Africa are strongly believed to redesign the current economy of the entire region. The corridor is an extension of China’s proposed 21st century ‘Silk Road Initiative’ or ‘Belt and Road Initiative’ (BRI), which is a strategic initiative for the entire region that aims to make Pakistan an economically-vivacious and business-oriented country. Investments under CPEC in infrastructure and energy sectors, through the implementation of early harvest projects, are already reaping an encouraging economic growth of the country that will provide a springboard to the economy of Pakistan. In the first phase of implementation of CPEC (early harvest projects), priority has been given to developing rudiments of CPEC to initiate the economic activities.

The government is now objectively engaged in identifying those areas which directly or indirectly can redirect the socioeconomic predicament of the people of Pakistan in order to realise the true potential of CPEC. Therefore, the apex catalyst of CPEC is to make the initiative a ‘gateway to prosperity’. Accordingly, six major areas are identified by the current government for the expansion of CPEC which are: Trade & Market Access; Industrial Development & Global Value Chains; Socioeconomic Development & Poverty Alleviation; Agriculture Modernisation & Marketing; Gwadar Oil City & Blue Economy and; Regional Connectivity & Third Country Participation. These key areas through mutual cooperation would help steer CPEC towards the right direction in the upcoming five years (2018-2023). Increased level of all these outcomes will converge to higher development, the accelerated growth rate in economies of both the countries coupled with contributions to the development of the region and contiguous states.

The variety of projects in the areas of trade and market access under CPEC will originate a plethora of opportunities in different spheres of life. In this connection, collaborative bond with China will be the rich source of promoting trade, facilitating market access, elevating the standard of living and achieving sustainable inclusive growth in Pakistan during the next five years. In addition, through CPEC, Pakistan will be able to open its doors to the world by expanding its trade and transport links, as well as boosting economic influence across Central Asia, South Asia, the Middle East, Africa and Europe.

Under the fold of Industrial development and global value chains, the government is charting out industrial cooperation and import substitution with China in light engineering sector through the selective relocation of the Chinese industries. This relocation of Chinese export-focused light manufacturing and consumer products labour intensive industry will likely double the export index. Repositioning expansion of the IT sector through joint ventures along with the transfer of technology and capacity building will certainly drive up productivity graph.

For the socioeconomic development and poverty alleviation, Chinese experiences will help a great deal, for instance, it has been able to lift around 700 million out of poverty in about 30 years. Through CPEC more than a million direct jobs and manifold indirect and induced ones will be created to handle unemployment and poverty reduction. In addition, capacity development of skills via technical and vocational hubs across the country along with community-based projects in low job areas will also be established.

Under the realm of agricultural modernisation and marketing, the government has prioritised value addition and co-branding of dairy, livestock and poultry sectors to significantly uplift these sectors. Productivity enhancement of fruits and high-value crops through the transfer of technology in precision agriculture (drip irrigation and sprinklers, etc) will be focused and application of modified and high yield variety seeds for crops diversification to substitute edible oil/pulses imports.

The government is also stepping up Gwadar with Blue Economy by the establishment of Oil City in Gwadar to substitute refined oil imports with crude oil. Development of aquaculture for fisheries and seafood along the coastal area would also be tapped. Coastal tourism will also further the prospects of Balochistan in particular.

Moreover, the focus will also be upon the CPEC infrastructure towards connectivity improvement, analysis of the alternative optimal routes for the region through Gwadar port, and exploring the feasible connections among Central Asia, the Middle East, Africa and Europe to achieve regional harmony and prosperity.

Pakistan requires to advocate more aspects of CPEC as well as align it with all relevant national, provincial and local plans of Pakistan. Therefore, both Pakistan and China must broaden bilateral cooperation, arrange periodic meetings of experts during the next five years in order to brand the benefits of CPEC through the implementation of various projects, strengthening the mutual communication and cooperation between the various federal level ministries, institutions, provincial departments, business communities and stakeholders. The current five-year plan (2018-2023) of CPEC includes objectives that demand pressing needs and actions by both countries to accomplish the goals in true letter and spirit.

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Peace, Afghanistan and CPEC.

Source: Pakistan Observer

Writer: Naveed Aman Khan

Pakistan, Afghanistan and China trilateral economic cooperation on the Belt and Road would benefit all three of the countries. The China-Pakistan Economic Corridor (CPEC) is believed to be a game changer in South Asia. Part of China’s ambitious Belt and Road initiative (BRI), CPEC is over US $ 60 billion infrastructure development project that aims to connect Xinjiang region of China to Gwadar port of Pakistan. With such a large scale infrastructure investment, CPEC has drawn attention of other regional powers. Since October 2016, Afghanistan has expressed strong desire to join and has even done through official channels. Former Afghan Ambassador to Pakistan, Mr.Omar Zakhilwal, showed his country’s interest in joining CPEC and stressed that a development project of this scale would be beneficial to Afghanistan. If rightly executed, China and Pakistan stand to gain enormously by welcoming Afghanistan to CPEC. China has long harbored an interest in Afghanistan’s untapped reserves of natural resources, but the security situation in the country has prevented further investment and procurement. Pakistan will benefit from easier access to Central Asia through Afghanistan, as well as economic relief from the return of Afghan refugees to their country once the security situation is stabilized. As a landlocked, terrorism and militancy prone nation, Afghanistan is in desperate need of infrastructural development and uplifting its economy by access to Chinese investors. Thus, it appears that trilateral cooperation to include Afghanistan into CPEC can be a win for all parties involved. Afghanistan’s security situation has been steadily declining since 2014, when a large number of international forces began to withdraw from the country. The Taliban’s resurgence, which coincided with the withdrawal of forces, has led to several large scale attacks in the country. While the exact numbers are currently unclear, as Afghanistan has yet to officially be invited to be a part of CPEC, joining may present several benefits.

CPEC is to bring industrialization and investment to Pakistan, the carry over effects of which will benefit neighboring Afghanistan. Pakistan has already undertaken building of several roads to improve connectivity between the two countries. The 75 km Torkham-Jalalabad road is one of them while the Peshawar-Torkham road is another. While both these developments have faced considerable completion challenges, they are a step towards increasing connectivity with Pakistan, and in turn, gaining Afghan access to CPEC. Pakistan has constructed two roads leading from Dera Ismail Khan to Angoor Adda and Ghulam Khan, linking with the Paktika and Khost provinces of Afghanistan respectively. These roads will enable Afghan business people and investors to access the enormous consumer market in South Asia, increasing Afghanistan’s exports and reducing the cost of imports.

By becoming a part of CPEC and BRI, Afghanistan will have the opportunity to stabilize its economy by enhancing its trade opportunities. Over 75 percent of Afghanistan’s total exports go to Pakistan and India. Main Afghan export goods are carpets, rugs, dried fruit and medicinal plants, not the copper, iron ore and other valuable resources Afghanistan possesses in abundance. Accessing the wider BRI network will provide two opportunities. firstly, access to markets in China, Central Asia and parts of Europe that Afghanistan doesn’t currently trade extensively with and secondly the chance to diversify Afghan trade products by exporting copper, iron and other resources to countries on the BRI.

For China, Afghanistan presents strategic value due to its geographic location at the crossroads of South Asia and Central Asia. Its vast mineral resources are untapped and present a valuable economic opportunity. These are valued at US $ one trillion. Afghanistan’s security and corruption challenges have in the past deterred many investment opportunities. Potential investment will stabilize Afghanistan’s security situation. This effort will require great cooperation. In 2008, China had signed a thirty-year agreement with Afghanistan government to access Mes Aynak, the world’s second largest untapped copper deposit. The deal, which was worth over $3 billion, was viewed with great interest until it stalled due to security concerns and attacks by the Taliban.

China has played central role in successful peace talks between Afghanistan and the Taliban by encouraging the latter to join the peace negotiations. Ensuring security in Afghanistan not only contributes to stability in the country but it also allows China to be at ease regarding instability from Afghanistan impacting security and stability in its western region, specifically Xinjiang. China has only made minimal contribution to directly support the security effort in Afghanistan, largely deferring to America and NATO. Since 2014, China has increased its security cooperation, providing military aid for counter-terrorism efforts. A greater effort to combat militancy in Afghanistan will open the doors for Chinese investment and access to the country’s untapped resources.

A stable and thriving Afghanistan presents several direct benefits to Pakistan. Firstly, it will allow Pakistan to ease the economic toll of hosting Afghan refugees. For decades, Pakistan has hosted millions of Afghan refugees, who fled major wars and conflicts in their country. Over the years even more Afghans were born within Pakistan, which increased the economic burden on a country that was already struggling. Pakistan had spent over US $200 billion on hosting Afghan refugees. As a result, since 2015, the Pakistani government has forced several hundred thousand refugees to return to Afghanistan, drawing the ire of humanitarian organizations. The economic integration and improvement of Afghanistan’s economy will allow for millions of refugees to slowly return to their homeland and reap the benefits of the new economic opportunities, while easing the burden on Pakistan’s economy. Secondly, a cooperative relationship will open up the doors for easier access to trade with Central Asia for Pakistan. Already, there is some movement in this direction. The Central Asia Regional Economic Cooperation (CAREC) Sher khan-Ninjpayan border route has been identified by Tajikistan, Afghanistan and Pakistan as a potential corridor for trade. With an improving economic situation in Afghanistan, supplemented by enhanced security, the region could serve as a transit hub for countries like Pakistan to reap the benefits of trade. Thirdly, cooperating on economic development while also emphasizing security will be a win-win for both countries and allow for the improvement of cross-border relations. Afghanistan and Pakistan have long blamed each other for security concerns within their borders. Close cooperation between both countries’ security forces will lay the ground work for eliminating militancy along the Afghanistan Pakistan border which has been a militant haven. Such regional cooperation will ensure regional development.

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Chinese investors given another extension for two CPEC projects

SOURCE: DAWN

ISLAMABAD: The government on Tuesday gave another extension to Chinese investors for achieving financial close of two major power sector projects worth $2.2 billion under the China-Pakistan Economic Corridor (CPEC).

The projects given extensions include 4000MW Matiari-Lahore Transmission Line and 300MW Gwadar Coal Power Project.

At a meeting of the Private Power & Infrastructure Board (PPIB) presided over by Power Minister Omar Ayub Khan, the $1.7bn Matiari-Lahore line was given a three-month extension to achieve financial close with a fresh deadline of Feb 28, 2019.

The contractors were earlier given a six-month extension in financial close in March this year which ended on Dec 1. The new deadline was approved on assurance that commercial operation date (COD) of the project would remain unchanged at Mar 31, 2021. The delay was caused in firming up transmission line service agreement, finalisation of loan-related matters with the State Bank of Pakistan and problems in land leases.

“Keeping in view the importance of much needed +660kV High Voltage Direct Current (HVDC) Matiari-Lahore Transmission Line Project which is specifically designed to provide power evacuation for Thar coal-based power projects, the board has agreed to allow extension in letter of support (LoS) for achieving financial close,” said an official statement.

It was explained that it was the first HVDC line in the country and also the first private sector transmission project under CPEC which had achieved substantial progress. “Such extensions would not compromise the completion date of the project which is March 2021,” the statement said.

A special purpose vehicle (SPV) — Pak Matiari-Lahore Transmission Company Ltd (PMLTCPL) owned by three Chinese firms — was given a 25-year licence for the construction of 878-kilometre line by the power regulator in February this year.

The SPV is owned by two Hong Kong-based companies: Zhong Cheng Xin International Ltd holding with a stake of 69.98 per cent and Zhong Zhuo Ye International Ltd 30pc. Both the entities are wholly owned by State Grid International Engineering Ltd, a 100pc subsidiary of China Electric Power Equipment and Technical Company, which in turn is 100pc owned by State Grid Cooperation of China.

The SPV is required under the licence to achieve COD of the line by Mar 1, 2021 and will be empowered under the licence to run it for 25 years. The project is expected to be completed at a cost of $1.7bn and the government is extending a series of tax concessions for it.

Likewise, the 300MW Gwadar coal-based power project was given a nine-month extension to achieve financial close until August 2019. The project has seen repeated delays in the past and saw changing investor portfolio.

Informed sources say the project still had many issues to resolve: contractors faced difficulties in land acquisition which has mostly been settled now but would require cost adjustments in the tariff while some delays were also caused due to environmental issues and internal management.

They added that there were still uncertainties over the project even though Pakistani authorities have been pushing for its completion to ensure uninterrupted power supply to Gwadar port and allied establishments. The board allowed a nine-month extension in its letter of intent until August 2019.

The PPIB said these extensions will enable sponsors to obtain tariff from the power regulator and LoS from PPIB, leading to financial close and help start construction to ensure much needed electricity to Gwadar to promote business for newly developed port, boost socio-economic activities and start the Special Economic Zones and Export Processing Zones in Gwadar.

These activities will create employment opportunities and develop social facilities under Corporate Social Responsibility, the PPIB stated.

Ayub told board members that his ministry has taken the challenge of controlling theft and losses as well as overhauling transmission and distribution systems to remove bottlenecks in the supply of electricity to consumers.

He said sustainability in the system was only possible by bringing transparency in power system, induction of indigenous and renewable energy and introduction of new technology in transmission and distribution systems.