China help to Pakistan at High Price

Discussion in 'Chinese Defence Forum' started by AsianUnion, Jul 21, 2014.

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  1. AsianUnion
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    AsianUnion SENIOR MEMBER

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    Chinese help for Pakistan comes at a High Price

    Published: 30 Jun 2014 at 14.12 | Viewed: 3,131 | Writer: Ali Khizar
    Bangkok Post

    There has been a structural shift of trading partners in Pakistan — from traditional western countries to those geographically closer and culturally similar.

    Over the past decade the combined share of the United States and the United Kingdom of trade into Pakistan has declined by 15 percentage points to 26%. The Middle East also has a sweet slice of the pie from oil imports, while Pakistan is receiving dollars in the form of remittances sent by its millions of overseas citizens working there.

    While the potential for trade with India is high, it accounts for just 5% of total volume due to longstanding military tension between the wary neighbours, while Pakistan’s exports to Afghanistan are on the fast rise.

    One country that is taking a bigger slice of the pie is China, which is on pace to become Pakistan’s biggest trading partner. Its share of official trade has doubled in the last decade and terms it increased by 5.5 times to $8 billion.

    These numbers don’t include the huge amount of goods smuggled from China. Interestingly, there is a difference of $3.4 billion in the value of goods reportedly exported by China to Pakistan versus the amount recorded at Pakistan customs of imports from China.

    Incorporating these numbers, China’s share of Pakistan’s trade is 17% and soon it will surpass that of the United States, as the latter’s proportion has fallen by a third in the last decade to 20%.

    Sino-Pakistan flows are not limited to trade, as both countries are advancing on the investment front as well. China is also expected to be the biggest foreign direct investor in Pakistan in the coming decade. The signs are already visible, as China Mobile, the world biggest mobile network by subscribers, is undertaking its first international venture is in Pakistan. In the recent 3G/4G auction in the the country, China Mobile was the only player out of the four competing companies to obtain both 3G and 4G licences.

    The Chinese are also relatively resilient to terrorist activities in Pakistan, despite occasional incidents involving abductions of Chinese engineers. One reason that economic relations remain close is that the two countries share a strong anti-India political ideology; the adage “the enemy of my enemy is my friend” comes to mind. China has pledged to invest $32 billion in energy, transport and infrastructure projects in Pakistan in the next five to seven years. The Exim Bank of China has agreed to fund these projects in both the public and private sectors. These are big numbers, , as over the last 15 years Chinese cumulative FDI in Pakistan was less than copy billion – a mere 3% of total foreign investment of $30 billion in the same period.

    A new commitment of $32 billion is gigantic in Pakistan’s context, but it is not much considering China’s share of global FDI last year alone was 5% or $81 billion spread over 156 countries.

    Almost 14% of Chinese FDI is in mining and petroleum while only one percent is in electricity. Transport construction ventures are also favoured by Beijing. In recent times, China has also been targeting sophisticated technology and customers in more advanced markets.

    Some of the important potential projects are the construction of an Pak-China Economic Corridor (PCEC), which provides trade avenues to several countries, energy projects in solar power and coal, motorways and improvements to Pakistan’s railway system. There is a proposed investment of $20 billion in the energy sector. Examples of similar past cooperation with the Chinese are in the Heavy Mechanical Complex, Chashma nuclear plant and the Karakoram Highway.

    For large investments that involve preferential, medium-term soft loans, China is expecting that all power projects including the Bhasha Dam, Gaddani and Lakhra coal ventures, the Tarbela Extension and transmission lines be handed over to its investors, under the law, without an international bidding process.

    China’s assistance to Pakistan to acquire cheap energy, in particular, indicates that it is perhaps teaching Pakistan the secret of its extraordinary economic success in recent history. The move from predominantly thermal to cheaper coal, nuclear and renewable energy along with cheap and abundant labour will definitely improve the competitiveness of Pakistani exports. Currently, nuclear and coal-based power have a combined share of only 3% in Pakistan.

    As they say, there is no such thing as a free lunch – Pakistan has to be cautious in selecting these projects and should not fall into a state of complacency. These investments will be in the form of loans and they have to be repaid. Out of $32 billion, $20 billion would be deployed in power projects whereas the rest would be used in building roads, bridges and similar infrastructure.

    As for the economic impact of the Chinese-backed investments on imports and exports in the next 20 years, 70% of the $20-billion investment in power plants will go abroad (most probably to China) for machinery imports and their installation. As for the infrastructure projects, there will probably not be any immediate economic return; instead future generations of Pakistanis will end up servicing the debt.

    Pakistan has to deal with this problem by increasing export diversity and enhancing domestic industrial capacity to absorb the strains on its balance of payments as it piles up debt. One should not keep all its eggs in the same basket; hence, the country should rely on other foreign partners apart from China.

    To give one example, Singapore, Malaysia and Thailand account for 14% of Pakistan’s imports but not much investment has been forthcoming from these countries.

    Additionally, Pakistan needs to further strengthen its economic relations with the Middle East to encompass direct investment apart from being limited to remittances and oil imports.

    Most importantly, improving ties with India is imperative for unlocking regional potential. There are lessons to be learned from China-Japan or China-India affiliations that countries can be political.rivals yet still expand their economic and trade ties.
    Last edited: Jul 21, 2014
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  2. AsianUnion
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  3. Echo_419
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    Pakistan should pay special focus to export Agri products
    Since China has a growing population & their agriculture land is shrinking each year
    Pakistan has good chance to balance the trade deficit by exporting more agriculture products to China
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  4. mughal arslan shah mirza
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    Thanks for the article:-)
    The fact that China is investing at this critical juncture in Pakistan is actually a very positive thing.:china::pakistan:

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  5. AsianUnion
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    Going public: Govt unveils list of 36 projects to parliamentary panel
    By Shahbaz Rana
    Published: July 22, 2014

    ISLAMABAD: Amid the opposition’s call for transparency in the finalisation of mega projects with China, the government on Monday unveiled a list of 36 projects worth $39.6 billion that it wants Beijing to finance in return of giving it access to Gwadar port.

    It was for the first time that the federal government shared the details of the much-hyped China-Pakistan Economic Corridor (CPEC) with a parliamentary panel. The details were submitted to the National Assembly Standing Committee on Planning and Development.

    The cost that the government has revealed is approximately $6 billion higher than what it initially announced. Out of 37 projects, as many as 22 schemes are about the power sector having a total estimated cost of $27.3 billion, according to the government’s working paper.

    There is a tentative agreement with China on these projects but the component of Chinese financing has yet to be finalised, said Planning Secretary Hasan Nawaz Tarar while briefing the standing committee. He maintained that the list of the projects was subject to any deletion or addition.

    Tarar said China was focusing on Gwadar port and on their request Pakistan has constituted a fourth Joint Working Group on Gwadar. “Both China and Pakistan have their own interests. China has an interest in Gwadar port while Pakistan’s interest is to economically develop the corridor,” he added.

    The projects are finalised at the level of Joint Cooperation Committee – the body that has ministerial level representation of both countries. Tarar said the third JCC meeting will be held in Beijing next month, in which all these projects will be reviewed.

    He clarified that the finalisation of the list does not mean that all the projects will be implemented as the final decision rests with Chinese authorities who are currently evaluating these projects.

    “The road and infrastructure projects will be implemented under government-to-government arrangements and China will provide concessional funding for these schemes,” he stated.

    Tarar said that all power sector projects will be funded by Chinese financial institutions purely on commercial considerations and most of these will be undertaken by the private sector.

    According to the committee members, in terms of costing, the projects appeared as a wish-list of the government.

    “These are mega projects of significant importance and should have been shared with the parliament a year ago,” said Nafeesa Shah of Pakistan Peoples Party, a member of the standing committee. She said the speed with which the government is moving on CPEC projects was a matter of concern. Shah alleged that the projects were being finalised in a non-transparent manner.

    Projects

    According to the list, the government wants to build six coal-based power projects, each 660 megawatts (MW), in Gaddani at an estimated cost of $5.94 billion. Two more coal-based power plants, each 660MW, are planned to be set up at Port Qasim having an estimated cost of $2 billion. Three projects, each 330MW, are proposed to be set up at Thar Power Coal Plant with an estimated cost of $1 billion.

    China Power International has been proposed to set up two power plants having total generation capacity of 1,200MW with an estimated cost of $1.8 billion. A coal mining project of $860 million at Thar Block-II is part of the list. At Thar Block-I, another coal mining project worth $1.3 billion has been planned.

    The government has also included 1,100MW Kohal power project worth $2.4 billion, 720MW Karot hydropower project worth $1.42 billion, 873MW Suki Kanari hydropower project costing $1.8 billion and three wind power projects of 250 MW worth $375 million in its list.

    The federal government has included nine projects of the Punjab government that promises 6,110MW power generation at an estimated cost of $6.2 billion. The Orange line Metro Train costing $1.6 billion is also included in the list. The cost of 387 kilometre Multan-Sukkur section of Karachi-Lahore Motorway has been estimated at $2.6 billion.

    The cost of Karakoram Highway, Raikot to Islamabad section, has been estimated at $3.5 billion. Similarly, the cost of rehabilitation and upgradation of Karachi-Lahore-Peshawar railway track has been estimated at $3.7 billion.

    The federal government has approved CPEC support project worth Rs409 million for providing secretariat support to implement the corridors projects. To streamline the process, CPEC steering committee has been set up which is headed by Prime Minister Nawaz Sharif. It provides strategic guidance for planning, monitoring and implementation of the projects.

    Tarar said China has shared its outline of the long-term plan with Pakistan. After reviewing the plan and reaching to an agreement with the Chinese side, the same plan will be submitted before the next JCC meeting for approval, he added.

    Published in The Express Tribune, July 22nd, 2014.

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  6. Hypersonicmissiles
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    This has nothing to do with Chinese Defence
  7. UFO77
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    The article said that Pakistan's much cheaper in China!

    Don't put all your eggs in one basket, this sentence is right, but where is your egg? In fact, China lent you chicken, eggs, hatching chicks. But in the end you just back to China a chicken.

    There are many developed economies, but not every country want to low-interest and interest-free lend it to others, let alone don't know when to pay off.
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  8. AZADPAKISTAN2009
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    [​IMG]


    Pakistan Loves our brother Chinese
    [​IMG]


    The strategic relation between Pakistan - China go beyond the economics infact its a partnership that has been there since old times The Road from China to The Indus valley and the tales of Chinese goods going to world from ports in Pakistan

    The brotherly bond that units the two people is example of how two nations can live next to each other and have common goals on world issues and to promote humanity , peace and good values world wide.

    We would love to see more Chinese Organizations coming to Pakistan and More chinese goods arriving to leave to world wide destinations
    Last edited: Jul 25, 2014
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  9. Cheetah786
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    Infrastructure will not pay dividend right away, how old is this retarded writer ? Investment of 31 billion will create 1000s of jobs which Pakistan can use. China is today's economic power, we will be stupid to say no to be partners with them. Same retards didn't say any thing when Americans invested billions in India or Japan , Germany , but some how same is no good for Pakistan.
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  10. xyxmt
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    xyxmt SENIOR MEMBER

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    Pakistan's natural trading partner is India followed by Afghanistan...too bad we had messed up relationships with both.
  11. mughal arslan shah mirza
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    Absolutely agreed. Seems like certain sections of the media are busy creating confusion and more confusion amongst the masses.
    We need to respect this relationship. It's a geo-political gift to Pakistan to be so close to China.

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  12. AZADPAKISTAN2009
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    We have alot to learn from our friend Chineses and brothers and we hope our future generation can live in prosperity and mutal respect for centuries
  13. mughal arslan shah mirza
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    True.
  14. Ahmad Sajjad Paracha
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    China has been our best ally and despite the criticism from west we are holding strong ties of friendship with China.Not ironically,China has always assisted us and wanted Pakistan to be on the way of prosperity.According to my personal view these news are being veiled so our foes could not create obstructions as they are trying to create in the way our operation Zarbeazb.
  15. dlclong
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    :pakistan::china::yahoo:CHN-PAK ZINDABAD
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