THERE are growing indications that things are not going as
well with CPEC as we are being told. Since the government did not
release any meaningful details following the recent, seventh round of
the Joint Cooperation Council — the crucial forum where the details of
the various projects that come under the CPEC umbrella are being
negotiated between the Pakistani and Chinese sides — news has managed to
trickle out that many of the projects considered central by Pakistan
have suffered setbacks.
The
first news related to the Diamer-Bhasha dam project that was the most
recent addition to the bouquet of projects being considered under the
plan. That information emerged during a parliamentary committee hearing
in which a former Wapda chairman said that the Chinese were asking for
terms that Pakistan was unwilling to give in order to finance the mega
dam.
The next bit of news came after the meeting itself,
when reports trickled out that the framework agreements for the
Peshawar-Karachi railway project, known as the Main Line 1 project, as
well as the Karachi circular railway, could not be signed during the
meeting.
For
the circular rail, there appeared to be good reasons for the delay, but
for the ML1 project, it was merely stated that cost estimates will take
another two to three months to be finalised.
Now comes a
report that three important road projects, brought into the CPEC
framework in the sixth JCC meeting held last December, have also suffered setbacks.
According
to the report, the Chinese have developed new rules for approving
financing for CPEC projects, and each of the latter will have to be
resubmitted through the new procedures before financing can be arranged.
All of these might prove to be temporary difficulties,
and the projects mentioned (except for the Diamer-Bhasha dam which
appears to have been scrapped), could be back on track within months. Or
this could be the moment when CPEC is changing gears, entering a new
phase of its construction beyond the ‘early harvest’ power projects, and
the enterprise is growing beyond the ability of the government to
effectively manage.
As CPEC grows, its implementation
becomes more complex and unwieldy given the small number of people
involved in drafting the Pakistani position in the talks. The only
antidote to the growing difficulties the government appears to be
running into is greater transparency, which is becoming more urgent with
the passage of time.
CPEC’s precarious balancing act
PAKISTAN has turned down a key Chinese demand to allow the
use of yuan in the Gwadar free trade zone under the China-Pakistan
Economic Corridor (CPEC) framework.
The rejection came at
the senior officials’ meeting held in Islamabad on Nov 20, according to
media reports. But it is not known whether the Chinese authorities
pressed for the acceptance of this demand the following day at the joint
cooperation committee (JCC), the highest-level decision-making
committee of the two countries.
Despite Pakistan’s
rejection of the Chinese proposal on allowing a limited use of yuan in
the Gwadar free trade zone, what perturbs media persons and
parliamentarians alike is why the government does not clarify such key
issues.
Despite Pakistan’s rejection of the Chinese proposal on allowing limited use of yuan, what perturbs most is the question of why the government doesn’t clarify key issues
“The media has already reported that we’ve rejected the
Chinese demand,” said an official of the Ministry of Finance when asked
to confirm the status of the yuan proposal. “Whatever transpired in the
two-day meetings is public. This much is for now.”
“But
we are in the process of finding ways to keep media informed about all
CPEC developments on a regular basis,” said an official of the Ministry
of Planning and Development.
Sources in the State Bank of
Pakistan (SBP) say that a currency-swap arrangement made with China
towards the end of 2011 become operational back in May 2013.
Under
that agreement, the SBP could purchase yuans from the Peoples Bank of
China (PBC), and the PBC could in turn buy the rupee against the yuan
for a certain period. Both central banks could then lend currencies thus
purchased to their banks through auctions, enabling the banks to use
yuan or rupee-denominated funds to settle their client’s trade claims.
This
currency-swap arrangement is now expected to be renewed, bankers say.
Much depends on the size of the swap limit and also on whether the funds
flowing from the swap facility will be used only for settling
Pakistan-China bilateral trade claims or whether they can also be used
for CPEC-related investment in Gwadar.
The CPEC long-term
plan has already been approved, with the deputy chairman of the
Planning Commission, Sartaj Aziz, reconfirming this fact on Nov 29 while
talking to a Chinese delegation. This plan also contained a proposal
for the use of yuan in the Gwadar free trade zone.
While
Mr Aziz’s meeting with the Chinese delegation received full media
coverage, no remarks have been attributed to him about the status of the
proposal.
If Pakistan has rejected the proposal at the
senior officials’ meeting on Nov 20, and if the matter was not raised
again at the joint action committee’s meeting held the very next day, Mr
Aziz should have informed journalists about it. Hence an aura of
mystery shall remain around this issue until one of the governments
address it in unambiguous, plain words.
According to Mr
Aziz, the first phase of the CPEC-related investment is no less than $30
billion, whereas the total investment commitments have exceeded $60bn.
The break-up of $30bn or $60bn investment pledges in terms of financial
arrangement (debt, investment, swaps, etc) have yet to become public
knowledge.
This makes it difficult for independent
economists to analyse the financial obligations that CPEC will create
for Pakistan, already struggling with a ballooning current account
deficit.
Amid this situation, it has become imperative
that everything about the CPEC becomes transparent as secrecy shall only
serve to undermine the project’s success.
This was,
perhaps, the spirit behind all the criticism heard in the Senate last
week. And senators who demanded greater transparency in CPEC-related
matters had some reason to do so. Federal Minister for Ports and
Shipping Mir Hasil Bizenjo shocked the senators by revealing that 91pc
of the revenues generated from Gwadar port would go to China while the
Gwadar Port Authority would get only nine per cent. This arrangement
would remain in place for the next 40 years.
Media has
been stressing this point, lawmakers have been calling for it and now
even business associations are demanding greater transparency.
According
to a report published in this newspaper, in a document titled Agenda
for the Economy released on Nov 29, the Pakistan Business Council notes:
“There needs to be greater transparency on how the CPEC will impact the
competitiveness of existing domestic industries and the safeguards that
will be deployed to prevent it from becoming a channel of cheap
imports.”
Last week, Railways Minister Khawaja Saad
Rafique reportedly stated before the Senate standing committee on
Railways that China was earlier offering soft loans for Railways but is
now hesitant in so doing and “is talking about mixed loans”.
He
was quoted by a local newspaper as having informed the committee that
the railways needed long-term loan with a long grace period at below two
per cent annual interest rate.
“If China is not giving
(loans) at certain (interest rate) level and (under) favourable
conditions, Pakistan Railways will not take over $8bn (loans) under the
CPEC agreement,” he was quoted as saying.
CPEC master plan revealed
- Plan eyes agriculture
- Large surveillance system for cities
- Visa-free entry for Chinese nationals
The floodgates are about to open. Prime Minister Nawaz Sharif arrived in Beijing over the weekend to participate in the One Belt, One Road
summit, and the top item on his agenda is to finalise the Long Term
Plan (LTP) for the China-Pakistan Economic Corridor. [See next tab for
details on how the plan was made].
Dawn has acquired
exclusive access to the original document, and for the first time its
details are being publicly disclosed here. The plan lays out in detail
what Chinese intentions and priorities are in Pakistan for the next
decade and a half, details that have not been discussed in public thus
far.
For instance, thousands of acres of agricultural land
will be leased out to Chinese enterprises to set up “demonstration
projects” in areas ranging from seed varieties to irrigation technology.
A full system of monitoring and surveillance will be built in cities
from Peshawar to Karachi, with 24 hour video recordings on roads and
busy marketplaces for law and order. A national fibreoptic backbone will
be built for the country not only for internet traffic, but also
terrestrial distribution of broadcast TV, which will cooperate with
Chinese media in the “dissemination of Chinese culture”.
The
plan envisages a deep and broad-based penetration of most sectors of
Pakistan’s economy as well as its society by Chinese enterprises and
culture. Its scope has no precedent in Pakistan’s history in terms of
how far it opens up the domestic economy to participation by foreign
enterprises. In some areas the plan seeks to build on a market presence
already established by Chinese enterprises, eg Haier in household
appliances, ChinaMobile and Huawei in telecommunications and China
Metallurgical Group Corporation (MCC) in mining and minerals.
In
other cases, such as textiles and garments, cement and building
materials, fertiliser and agricultural technologies (among others) it
calls for building the infrastructure and a supporting policy
environment to facilitate fresh entry. A key element in this is the
creation of industrial parks, or special economic zones, which “must
meet specified conditions, including availability of water…perfect
infrastructure, sufficient supply of energy and the capacity of self
service power”, according to the plan.
But the main
thrust of the plan actually lies in agriculture, contrary to the image
of CPEC as a massive industrial and transport undertaking, involving
power plants and highways. The plan acquires its greatest specificity,
and lays out the largest number of projects and plans for their
facilitation, in agriculture.
Agriculture
For
agriculture, the plan outlines an engagement that runs from one end of
the supply chain all the way to the other. From provision of seeds and
other inputs, like fertiliser, credit and pesticides, Chinese
enterprises will also operate their own farms, processing facilities for
fruits and vegetables and grain. Logistics companies will operate a
large storage and transportation system for agrarian produce.
It
identifies opportunities for entry by Chinese enterprises in the myriad
dysfunctions that afflict Pakistan’s agriculture sector. For instance,
“due to lack of cold-chain logistics and processing facilities, 50% of
agricultural products go bad during harvesting and transport”, it notes.
A full system of monitoring and surveillance will be built in cities from Peshawar to Karachi, with 24 hour video recordings on roads and busy marketplaces for law and order.
Enterprises entering agriculture will be
offered extraordinary levels of assistance from the Chinese government.
They are encouraged to “[m]ake the most of the free capital and loans”
from various ministries of the Chinese government as well as the China
Development Bank. The plan also offers to maintain a mechanism that will
“help Chinese agricultural enterprises to contact the senior
representatives of the Government of Pakistan and China”.
The
government of China will “actively strive to utilize the national
special funds as the discount interest for the loans of agricultural
foreign investment”. In the longer term the financial risk will be
spread out, through “new types of financing such as consortium loans,
joint private equity and joint debt issuance, raise funds via multiple
channels and decentralise financing risks”.
The plan proposes to harness the work of the Xinjiang
Production and Construction Corps to bring mechanization as well as
scientific technique in livestock breeding, development of hybrid
varieties and precision irrigation to Pakistan. It sees its main
opportunity as helping the Kashgar Prefecture, a territory within the
larger Xinjiang Autonomous Zone, which suffers from a poverty incidence
of 50 per cent, and large distances that make it difficult to connect to
larger markets in order to promote development. The prefecture’s total
output in agriculture, forestry, animal husbandry and fishery amounted
to just over $5 billion in 2012, and its population was less than 4
million in 2010, hardly a market with windfall gains for Pakistan.
However,
for the Chinese, this is the main driving force behind investing in
Pakistan’s agriculture, in addition to the many profitable opportunities
that can open up for their enterprises from operating in the local
market. The plan makes some reference to export of agriculture goods
from the ports, but the bulk of its emphasis is focused on the
opportunities for the Kashgar Prefecture and Xinjiang Production Corps,
coupled with the opportunities for profitable engagement in the domestic
market.
The plan discusses those engagements in
considerable detail. Ten key areas for engagement are identified along
with seventeen specific projects. They include the construction of one
NPK fertilizer plant as a starting point “with an annual output of
800,000 tons”. Enterprises will be inducted to lease farm implements,
like tractors, “efficient plant protection machinery, efficient energy
saving pump equipment, precision fertilization drip irrigation
equipment” and planting and harvesting machinery.
The plan shows great interest in the textiles industry in particular, but the interest is focused largely on yarn and coarse cloth.
Meat processing plants in Sukkur are
planned with annual output of 200,000 tons per year, and two
demonstration plants processing 200,000 tons of milk per year. In crops,
demonstration projects of more than 6,500 acres will be set up for high
yield seeds and irrigation, mostly in Punjab. In transport and storage,
the plan aims to build “a nationwide logistics network, and enlarge the
warehousing and distribution network between major cities of Pakistan”
with a focus on grains, vegetables and fruits. Storage bases will be
built first in Islamabad and Gwadar in the first phase, then Karachi,
Lahore and another in Gwadar in the second phase, and between 2026-2030,
Karachi, Lahore and Peshawar will each see another storage base.
Asadabad,
Islamabad, Lahore and Gwadar will see a vegetable processing plant,
with annual output of 20,000 tons, fruit juice and jam plant of 10,000
tons and grain processing of 1 million tons. A cotton processing plant
is also planned initially, with output of 100,000 tons per year.
“We
will impart advanced planting and breeding techniques to peasant
households or farmers by means of land acquisition by the government,
renting to China-invested enterprises and building planting and breeding
bases” it says about the plan to source superior seeds.
In
each field, Chinese enterprises will play the lead role.
“China-invested enterprises will establish factories to produce
fertilizers, pesticides, vaccines and feedstuffs” it says about the
production of agricultural materials.
“China-invested
enterprises will, in the form of joint ventures, shareholding or
acquisition, cooperate with local enterprises of Pakistan to build a
three-level warehousing system (purchase & storage warehouse,
transit warehouse and port warehouse)” it says about warehousing.
One of the most intriguing chapters in the plan speaks of a long belt of coastal enjoyment industry that includes yacht wharfs, cruise homeports, nightlife, city parks, public squares, theaters, golf courses and spas, hot spring hotels and water sports.
Then it talks about trade. “We will
actively embark on cultivating surrounding countries in order to improve
import and export potential of Pakistani agricultural products and
accelerate the trade of agricultural products. In the early stages, we
will gradually create a favorable industry image and reputation for
Pakistan by relying on domestic demand.”
In places the
plan appears to be addressing investors in China. It says Chinese
enterprises should seek “coordinated cooperation with Pakistani
enterprises” and “maintain orderly competition and mutual coordination.”
It advises them to make an effort “seeking for powerful strategic
partners for bundling interest in Pakistan.”
As security
measures, enterprises will be advised “to respect the religions and
customs of the local people, treat people as equals and live in
harmony”. They will also be advised to “increase local employment and
contribute to local society by means of subcontracting and consortiums.”
In the final sentence of the chapter on agriculture, the plan says the
government of China will “[s]trengthen the safety cooperation with key
countries, regions and international organizations, jointly prevent and
crack down on terrorist acts that endanger the safety of Chinese
overseas enterprises and their staff.”
Industry
For industry, the plan trifurcates the country into three
zones: western and northwestern, central and southern. Each zone is
marked to receive specific industries in designated industrial parks, of
which only a few are actually mentioned. The western and northwestern
zone, covering most of Balochistan and KP province, is marked for
mineral extraction, with potential in chrome ore, “gold reserves hold a
considerable potential, but are still at the exploration stage”, and
diamonds. One big mineral product that the plan discusses is marble.
Already, China is Pakistan’s largest buyer of processed marble, at
almost 80,000 tons per year. The plan looks to set up 12 marble and
granite processing sites in locations ranging from Gilgit and Kohistan
in the north, to Khuzdar in the south.
The central zone
is marked for textiles, household appliances and cement. Four separate
locations are pointed out for future cement clusters: Daudkhel, Khushab,
Esakhel and Mianwali. The case of cement is interesting, because the
plan notes that Pakistan is surplus in cement capacity, then goes on to
say that “in the future, there is a larger space of cooperation for
China to invest in the cement process transformation”.
“There is a plan to build a pilot safe city in Peshawar, which faces a fairly severe security situation in northwestern Pakistan”.
For the southern zone, the plan
recommends that “Pakistan develop petrochemical, iron and steel, harbor
industry, engineering machinery, trade processing and auto and auto
parts (assembly)” due to the proximity of Karachi and its ports. This is
the only part in the report where the auto industry is mentioned in any
substantive way, which is a little surprising because the industry is
one of the fastest growing in the country. The silence could be due to
lack of interest on the part of the Chinese to acquire stakes, or to
diplomatic prudence since the sector is, at the moment, entirely
dominated by Japanese companies (Toyota, Honda and Suzuki).
Gwadar, also in the southern zone, “is positioned as the
direct hinterland connecting Balochistan and Afghanistan.” As a CPEC
entreport, the plan recommends that it be built into “a base of heavy
and chemical industries, such as iron and steel/petrochemical”. It notes
that “some Chinese enterprises have started investment and construction
in Gwadar” taking advantage of its “superior geographical position and
cheap shipping costs to import crude oil from the Middle East, iron ore
and coking coal resources from South Africa and New Zealand” for onward
supply to the local market “as well as South Asia and Middle East after
processing at port.”
The plan shows great interest in the
textiles industry in particular, but the interest is focused largely on
yarn and coarse cloth. The reason, as the plan lays out, is that in
Xinjiang the textile industry has already attained higher levels of
productivity. Therefore, “China can make the most of the Pakistani
market in cheap raw materials to develop the textiles & garments
industry and help soak up surplus labor forces in Kashgar”. The ensuing
strategy is described cryptically as the principle of “introducing
foreign capital and establishing domestic connections as a crossover of
West and East".
Preferential policies will be necessary
to attract enterprises to come to the newly built industrial parks
envisioned under the plan. The areas where such preferences need to be
extended are listed in the plan as “land, tax, logistics and services”
as well as land price, “enterprise income tax, tariff reduction and
exemption and sales tax rate.”
Fibreoptics and surveillance
One of the oldest priorities for the Chinese government
since talks on CPEC began is fibreoptic connectivity between China and
Pakistan. An MoU for such a link was signed in July 2013, at a time when
CPEC appeared to be little more than a road link between Kashgar and
Gwadar. But the plan reveals that the link goes far beyond a simple
fibreoptic set up.
China has various reasons for wanting a
terrestrial fibreoptic link with Pakistan, including its own limited
number of submarine landing stations and international gateway exchanges
which can serve as a bottleneck to future growth of internet traffic.
This is especially true for the western provinces. “Moreover, China’s
telecom services to Africa need to be transferred in Europe, so there is
certain hidden danger of the overall security” says the plan. Pakistan
has four submarine cables to handle its internet traffic, but only one
landing station, which raises security risks as well.
So the plan envisages a terrestrial cable across the
Khunjerab pass to Islamabad, and a submarine landing station in Gwadar,
linked to Sukkur. From there, the backbone will link the two in
Islamabad, as well as all major cities in Pakistan.
The
expanded bandwidth that will open up will enable terrestrial broadcast
of digital HD television, called Digital Television Terrestrial
Multimedia Broadcasting (DTMB). This is envisioned as more than just a
technological contribution. It is a “cultural transmission carrier. The
future cooperation between Chinese and Pakistani media will be
beneficial to disseminating Chinese culture in Pakistan, further
enhancing mutual understanding between the two peoples and the
traditional friendship between the two countries.” The plan says nothing
about how the system will be used to control the content of broadcast
media, nor does it say anything more about “the future cooperation
between Chinese and Pakistani media”.
Judging from their conversations with the government, it appears that the Pakistanis are pushing the Chinese to begin work on the Gwadar International Airport, whereas the Chinese are pushing for early completion of the Eastbay Expressway.
It also seeks to create an electronic
monitoring and control system for the border in Khunjerab, as well as
run a “safe cities” project. The safe city project will deploy explosive
detectors and scanners to “cover major roads, case-prone areas and
crowded places…in urban areas to conduct real-time monitoring and 24
hour video recording.” Signals gathered from the surveillance system
will be transmitted to a command centre, but the plan says nothing about
who will staff the command centre, what sort of signs they will look
for, and who will provide the response.
“There is a plan
to build a pilot safe city in Peshawar, which faces a fairly severe
security situation in northwestern Pakistan” the plan says, following
which the program will be extended to major cities such as Islamabad,
Lahore and Karachi, hinting that the feeds will be shared eventually,
and perhaps even recorded.
Tourism and recreation
One of the most intriguing chapters in the plan is the one
that talks about the development of a “coastal tourism” industry. It
speaks of a long belt of coastal enjoyment industry that includes yacht
wharfs, cruise homeports, nightlife, city parks, public squares,
theaters, golf courses and spas, hot spring hotels and water sports. The
belt will run from Keti Bunder to Jiwani, the last habitation before
the Iranian border. Then, somewhat disappointingly, it adds that “more
work needs to be done” before this vision can be realized.
The
plans are laid out in surprising detail. For instance, Gwadar will
feature international cruise clubs that “provide marine tourists private
rooms that would feel as though they were ‘living in the ocean’”. And
just as the feeling sinks in, it goes on to say that “[f]or the
development of coastal vacation products, Islamic culture, historical
culture, folk culture and marine culture shall all be integrated.”
Apparently more work needs to be done here too.
For Ormara, the plan recommends building “unique
recreational activities” that would also encourage “the natural,
exciting, participatory, sultry, and tempting characteristics” to come
through. For Keti Bunder it recommends wildlife sanctuaries, an aquarium
and a botanical garden. For Sonmiani, on the eastern edge of Karachi,
“projects like a coastal beach, extended greenway, coastal villa, car
camp, SPA, beach playground and a seafood street can be developed.”
It
is an expansive vision that the plan lays out, and towards the end, it
asks for the following: “Make the visa-free tourism possible with China
to provide more convenient policy support for Chinese tourists to
Pakistan.” There is no mention of a reciprocal arrangement for Pakistani
nationals visiting China.
Finance and risk
In any plan, the question of financial resources is always
crucial. The long term plan drawn up by the China Development Bank is at
its sharpest when discussing Pakistan’s financial sector, government
debt market, depth of commercial banking and the overall health of the
financial system. It is at its most unsentimental when drawing up the
risks faced by long term investments in Pakistan’s economy.
The
chief risk the plan identifies is politics and security. “There are
various factors affecting Pakistani politics, such as competing parties,
religion, tribes, terrorists, and Western intervention” the authors
write. “The security situation is the worst in recent years”. The next
big risk, surprisingly, is inflation, which the plan says has averaged
11.6 per cent over the past 6 years. “A high inflation rate means a rise
of project-related costs and a decline in profits.”
Efforts
will be made, says the plan, to furnish “free and low interest loans to
Pakistan” once the costs of the corridor begin to come in. But this is
no free ride, it emphasizes. “Pakistan’s federal and involved local
governments should also bear part of the responsibility for financing
through issuing sovereign guarantee bonds, meanwhile protecting and
improving the proportion and scale of the government funds invested in
corridor construction in the financial budget.”
It asks for financial guarantees “to provide credit
enhancement support for the financing of major infrastructure projects,
enhance the financing capacity, and protect the interests of creditors.”
Relying on the assessments of the IMF, World Bank and the ADB, it notes
that Pakistan’s economy cannot absorb FDI much above $2 billion per
year without giving rise to stresses in its economy. “It is recommended
that China’s maximum annual direct investment in Pakistan should be
around US$1 billion.” Likewise, it concludes that Pakistan’s ceiling for
preferential loans should be $1 billion, and for non preferential loans
no more than $1.5 billion per year.
It advises its own
enterprises to take precautions to protect their own investments.
“International business cooperation with Pakistan should be conducted
mainly with the government as a support, the banks as intermediary
agents and enterprises as the mainstay.” Nor is the growing engagement
some sort of brotherly involvement. “The cooperation with Pakistan in
the monetary and financial areas aims to serve China’s diplomatic
strategy.”
The other big risk the plan refers to is
exchange rate risk, after noting the severe weakness in Pakistan’s
ability to earn foreign exchange. To mitigate this, the plan proposes
tripling the size of the swap mechanism between the RMB and the
Pakistani rupee to 30 billion Yuan, diversifying power purchase payments
beyond the dollar into RMB and rupee basket, tapping the Hong Kong
market for RMB bonds, and diversifying enterprise loans from a wide
array of sources. The growing role of the RMB in Pakistan’s economy is a
clearly stated objective of the measures proposed.
Conclusion
It is not clear how much of the plan will be earnestly
followed up and how much is there simply to evince interest from the
Pakistani side. In the areas of interest contained in the plan, it
appears access to the full supply chain of the agrarian economy is a top
priority for the Chinese. After that the capacity of the textile
spinning sector to serve the raw material needs of Xinjiang, and the
garment and value added sector to absorb Chinese technology is another
priority.
Next is the growing domestic market,
particularly in cement and household appliances, which receive detailed
treatment in the plan. And lastly, through greater financial
integration, the plan seeks to advance the internationalization of the
RMB, as well as diversify the risks faced by Chinese enterprises
entering Pakistan.
In some areas the plan seeks to build on a market presence already established by Chinese enterprises, eg Haier in household appliances, ChinaMobile and Huawei in telecommunications and China Metallurgical Group Corporation (MCC) in mining and minerals.
Gwadar receives passing mention as an
economic prospect, mainly for its capacity to serve as a port of exit
for minerals from Balochistan and Afghanistan, and as an entreport for
wider trade in the greater Indian Ocean zone from South Africa to New
Zealand. There is no mention of China’s external trade being routed
through Gwadar. Judging from their conversations with the government, it
appears that the Pakistanis are pushing the Chinese to begin work on
the Gwadar International Airport, whereas the Chinese are pushing for
early completion of the Eastbay Expressway.
But the entry
of Chinese firms will not be limited to the CPEC framework alone, as
the recent acquisition of the Pakistan Stock Exchange, and the impending
acquisition of K Electric demonstrate. In fact, CPEC is only the
opening of the door. What comes through once that door has been opened
is difficult to forecast.
Addendum: Apropos a story titled “CPEC master plan
revealed” appearing in Dawn on May 15, Minister for Planning,
Development and Reform Ahsan Iqbal has said that CPEC’s Long Term Plan is not a project document, rather it “delineates the aspirations of both sides”.
“It
is a live document and both sides [China and Pakistan] have an
understanding to modify it as per the need besides reviewing it
periodically,” Mr Iqbal claimed on Monday.
Three CPEC projects hit snags as China mulls new financing rules
ISLAMABAD: China has temporarily stopped funding of some
projects particularly those related to the road network under the
China-Pakistan Economic Corridor (CPEC) till further decision regarding
‘new guidelines’ to be issued from Beijing, a senior government official
told Dawn on Monday.
The decision could affect over Rs1
trillion road projects of the National Highway Authority (NHA). It was
not clear how wide the impact of the delay will be, but initial reports
confirm that at least three road projects are going to experience a
delay.
The projects to be affected include the 210-km
Dera Ismail Khan-Zhob Road, at an estimated cost of Rs81 billion. Of
this, Rs66bn will be spent on construction of road and Rs15bn on land
acquisition. Also the Rs19.76bn 110-km Khuzdar-Basima Road has also been
affected.
The Rs8.5bn 136-km remaining portion of Karakarom Highway (KKH) from Raikot to Thakot is also impacted.
Three road projects in jeopardy, not clear how many more impacted
All three projects were originally part of the government’s
own development programme, but in December 2016, the spokesman of the
NHA announced that they are to be included under the CPEC umbrella to
become eligible for concessionary finance from China.
The
official told Dawn that funds for the three road projects were approved
in the 6th JCC meeting held last year, pending necessary procedural
formalities. It was expected that the funding of the three projects
would be finalized during the Joint Working Group (JWG) meeting held on
Nov 20, but Pakistan was informed in the meeting that ‘new guidelines’
will be issued from Beijing under which new modus operandi for release
of the funds will be described.
The decision of Chinese
government was conveyed to Pakistan in the JWG meeting and the existing
procedure for release of funds had been abolished. Under the previous
procedure, the projects were to be approved by six different forums
after which the funds were released.
“In fact the
Chinese authorities informed us that the previous procedure of release
of funds was meant for early harvest projects only and new guidelines
will be issued for future projects of the CPEC,” the official said.
This suggests that the impact of the new procedures could be much wider than just the three roads mentioned by the official.
The official said the Pakistani side was left “stunned” when told of
this development since it was the first time they were hearing it.
He, however, claimed that Chinese side was quite disturbed with
increasing news reports being published in Pakistan regarding corruption
in CPEC projects and that was the reason China has temporarily halted
release of funds for the corridor.
