Featured China reluctant to approve $6b ML-I loan

[H!TchHiker]

CPEC is moving forward at its own pace; nothing is on hold.

Financial evaluation is part and parcel of any infrastructure project in the world. It does not happen in vacuum.

Yes it may be I am just pointing out what PM Special assistant informed us earlier

 

[Indus Pakistan]

It's the lending Chinese that don't want further investment because Pakistan can't pay previous investments.

That possibly could be a factor but I think as usual when it comes to business the Chinese play hard. Love is love. But money is money. Magnanimity is not part of the Chinese character. The American's are far more giving and easy by comparison.

In practice this means they will help as long as there is some money to be made. If you look at CPEC project of $60 billion less than $0.5 billion is grants. For China $5 billion is like one paise in your packet. They look at the friend struggling and failing yet they could easily give $5 billion as grant but they won't.

Instead they are not happy at the figure Pakistan wants for the project.

China also termed the total project cost of $6.8 billion at the lower side, which Islamabad is now willing to increase further by 15% or $1 billion.

But ultimately all these are just sidenotes. The biggest take away is CPEC has flopped. Call it even failed. The biggest hope that CPEC brought was profound change in Pakistan's culture. From being a swamp of idealogy which continously gets sucked and drowned into religious or politico-religious issues the country would be reset into a new energetic business minded polity.

In this matrix one hope there would be massive inroad of Chinese businessmen landing at Islamabad to set up industries to take advantage of cheaper labour. This has not happened. This has not happened. The Chinese industry has chosen instead to move o Vietnam, Myanmar, Banglaesh etc but assidiously avoid iron brother.

This is the real sad part.

 

[koolio]

I would agree with most PDF members, lately there has been too much propaganda from Sanghi news outlets, I would wait until there is actual confirmation from GOP.

 

[ziaulislam]

China reluctant to approve $6b ML-I loan
Express concern over Pakistan’s growing debt


Shahbaz Rana May 08, 2021

File photo

ISLAMABAD:
Expressing concern over Pakistan’s growing debt, China has shown reluctance to approve $6 billion loan for the Mainline-I (ML-I) railway track -- the single largest project under the China-Pakistan Economic Corridor -- according to the record of a meeting and senior Pakistani officials.
The construction of ML-1 project in three phases had been approved by the Executive Committee of National Economic Council (Ecnec) in its meeting held in August last year. The actual cost of the project was $9bn initially, including equity amount of the government of Pakistan. But later, it was reduced gradually to $6.8bn.
“Beijing conveyed its concerns during a meeting held on March 30 to discuss financing modalities of the project,” the officials added.
Moreover, the officials said China also termed the total project cost of $6.8 billion at the lower side, which Islamabad is now willing to increase further by 15% or $1 billion.
The sources said that in the last meeting, Chinese authorities were wary of Pakistan’s ability to service its debt. The concerns have now also been reflected in the meeting records.

“The Chinese side have sought clarification regarding the possibility of raising further debt by Pakistan during currency of the IMF programme. The Pakistani side clarified that debt situation is being monitored and there is no restriction under the programme to raise debt for viable projects,” Deputy Chairman Planning Commission Dr Jehanzeb Khan told The Express Tribune while responding to a question.
The Chinese sides also showed its reservations over restrictions imposed by Group 20 nations and the International Monetary Fund which, in Beijing’s view, could undermine the ML-1 project, according to discussions that take took place in the last ML-I Financing Committee meeting held on March 30th.
“The Chinese side expressed concerns about Pakistan’s debts, including IMF’s requirements for the Pakistani government to avail loans and about the impact of restrictions under the G-20 Debt Servicing Suspension Initiative (DSSI) on the financing of the ML-I project,” showed a correspondence between Pakistan and China.
Pakistan’s public debt has jumped to 87.2% of the Gross Domestic Product at the end of the last fiscal year and the country is consuming over 60% of tax revenues in debt servicing. It was 72.5% of the GDP when the PML-N tenure ended about three years ago.
Pakistan has also availed the G-20 temporary debt relief worth $3.5 billion from July 2020 through December 2021 which, according to Beijing, was a signal of weakening debt repayment capacity.
“However, Pakistani authorities tried to remove the reservations shown by their Chinese counterpart,” the officials told The Express Tribune.

The Pakistani side stated that the IMF has not imposed any restriction on loans for the ML-I project and that country’s foreign debt was largely under control and the government has the ability to repay the debts, according to the documents.
The Pakistani side held that the implementation of the ML-I project would bring multiple benefits to Pakistan Railways, in addition to improving the financial situation of the company.
The ML-I project includes dualization and upgrading of the 1,872km railway track from Peshawar to Karachi and is a major milestone for the second phase of CPEC and its construction is facing a delay of over three years.
The government has planned to complete the ML-I project in various packages, spanning over almost 10 years and aimed at spreading the loan over a longer period due to concerns expressed by the IMF.
China also highlighted the dilapidated financial condition of Pakistan Railways that do not allow it to take $6 billion new debt on its books.
The negotiations to secure the loan have been going on for the last over one year but so far no conclusion has been reached. The project is facing delays of over three years against the original schedule agreed between the two countries.
In a meeting held on March 30, Pakistan again expected that the loan currency would be a combination of RMB and the US dollar, covering 85% of the project cost, with an interest rate comparable to the infrastructure project under CPEC and promised that the Pakistani government would provide guarantees.
The share of each currency has not been indicated in the revised term sheet. China wants to give the $6 billion loan in RMB, as it competes with global dominance of the US dollar.

“Pakistan has not yet accepted the Chinese stance of getting a mix of commercial and concessionary loans,” said the sources. Both the sides have not converged on the loan payback period. China has proposed 15 to 20-year payback period, including a five-year grace period.
Pakistan has asked for a 25-year repayment period, including a 10-year grace period.
The Chinese ambassador to Pakistan, Nong Rong, on Friday met with Minister for Planning Asad Umar and discussed matters related to bilateral relations and projects under the CPEC and the upcoming Joint Cooperation Committee meeting, according to a Planning Ministry handout.
But the handout was silent on the the 10th JCC meeting date, which Pakistan has been trying to hold since October last year.
The sources said that Asad Umar pointed that a deal on ML-I was important to showcase the JCC as a successful event. The sources added China was reluctant to hold the JCC until it is assured that CPEC is fully back on track.
Both the sides have now agreed that a joint roadmap to push forward the ML-I project implementation that will entail confirming financial terms, launching bidding process and concluding the commercial contract, will be finalised.
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Amazing Chinese strategy. First put Pakistan in debt trap under CPEC and then stop further loans because Pakistan can't pay previous loans

@Horus @waz @beijingwalker @Beast @ziaulislam @Patriot forever @Indus Pakistan @Del @Dual Wielder @Joe Shearer @jamahir @Verve @koolio @Mav3rick @Muhammad Omar

Actually @Norwegian you misunderstood the situation

First chinese didnt wanted to build certsin projects and were forced by sharif family to do so(like lahore metro) see the news clipping from before(God bless us they aboslutely refused to built a bullet train between lahore and fasilabad)
Problem is sharifs never did visbility study for poltical projects as viability studies take 2-3 years of ground survey..
Same was history with lahore isl motorway in 1998 wasnt viable back then(for sure is now since population has trippled and economy x5 times and car volume 10x)

Article listed states china cant lend pakistan because IMF and G20 doesnt want pakistan to add debt ..as we need their money to keep us alfloat..so its not china but west who doesnt want pakistan to add debt. China is fine i guess they dont care/will be happy to trap us in debt.

Goal of debt should be to that growth should outpace it..in pakistan this doesnt happen because of poor viability study and lack of revenue generation from the projects due to lack of direct revenue generation like tolls etc

 

[vi-va]

For cargo of course. Pakistan doesn't export much so cargo is to be used by China and other central Asian states

No offense.
But I think you misunderstood CPEC.

The traffic between China/Central Asian States and Pakistan is very minimal.

Literally very low cargo volume between China and Pakistan across Karakorum Mountains. Very low.

I hope you are patriot, just misled. Otherwise please provide DATA to back your Statement.

@waz, please help to make sure our discussions are based on facts. Statement should be backed by DATA.

Thank you.

 

[Indus Pakistan]

The traffic between China/Central Asian States and Pakistan is very minimal.

Literally very low cargo volume between China and Pakistan across Karakorum Mountains. Very low.

This is what I said in my previous post. China could be slightly more mangnanimous but the real issue is in Pakistan. We just don't have any business or trade. Our culture is not about making and then selling abroad thus creating wealth. Our culture is preaching and finding ways to migrate abroad to get jobs. As long as this does not change the basic problem of Pakistan will continue.

But ultimately all these are just sidenotes. The biggest take away is CPEC has flopped. Call it even failed. The biggest hope that CPEC brought was profound change in Pakistan's culture. From being a swamp of idealogy which continously gets sucked and drowned into religious or politico-religious issues the country would be reset into a new energetic business minded polity.

In this matrix one hope there would be massive inroad of Chinese businessmen landing at Islamabad to set up industries to take advantage of cheaper labour. This has not happened. This has not happened. The Chinese industry has chosen instead to move o Vietnam, Myanmar, Banglaesh etc but assidiously avoid iron brother.

 

[Indus Pakistan]

To demonstrate my point. Compare this with Loas. A poor country with population of just 7 million, smaller than Lahore city. Karachi has twice the population compared to Laos.

Yet China is building a 250 mile railway across very difficult mountains but when completed it will link Vientane the capital of Laos with Chinese border. The cost is expensive compared to the ML-1 in Pakistan at $6 billion. Yet the project is about to be completed in fours year at end of 2021.


As of June 2020, Chinese state media reported that the US$6 billion project was 90% done. Work crews started laying track in Laos in March 2020, five years after breaking ground. With all of the many dozen tunnels and bridges completed, service is set to start in December 2021.[16] In April 2021 the northernmost section in Luang Namtha Province was 97% complete. Track laying of the last started section in Oudomxay Province, would be completed in May, leaving the project well on track for a 2021 opening.[17]

Financing
The cost of the project is estimated at 6 billion US dollars. Lao government borrows 60% (3.6 billion US$) from the Export-Import Bank of China and the remaining 40% (2.4 billion US$) is funded by a joint venture company between the two countries. China holds 70% of the stake of the company. Of the rest of the stake, Lao government disburses 250 million US$ from its national budget and borrows 480 million US$ further from the Export-Import Bank of China. [11] [1


So why are the Chinese so bullish here despite a tiny country? Because they know that the trade potential and business generated will cover the costs as it will fit out with rest of South East Asia.

Boten–Vientiane railway - Wikipedia

en.wikipedia.org

@Viva_Viet @Norwegian

 

[Crimson Blue]

So here is a question to ponder upon.

If China is going to use CPEC to bypass her trade away from the choke points of 'South China Sea ' & 'Strait of Malacca' then why Pakistan has to bear all the financeial burden (loans) of this project. Why doesn't China bears at least half of these loans.

Chineese compnaies running power generation units and setting up factories in economic zones in Pakistan are going to generate profit for China after all. So why Pakistan is solely bearing all the loans to ficilitate profit generation for Chinese companies?

 

[Indus Pakistan]

If China is going to use CPEC to bypass her trade away from the choke points of 'South China Sea ' & 'Strait of Malacca' then why Pakistan has to bear all the financeial burden (loans) of this project. Why doesn't China bears at least half of these loans.

Who told you China intended to "bypass" her trade away from the choke points? Do you know the cost of land transport compared to sea? It was never for that. I have no idea which fool concluded that.

 

[vi-va]

This is what I said in my previous post. China could be slightly more mangnanimous but the real issue is in Pakistan. We just don't have any business or trade. Our culture is not about making and then selling abroad thus creating wealth. Our culture is preaching and finding ways to migrate abroad to get jobs. As long as this does not change the basic problem of Pakistan will continue.

My Friends here:
I think my attitude towards Pakistan is well known. I always support Pakistan, under any condition.

The CPEC initially was created under Nawaz Sharif administration, when Pakistan is under electricity shortage.

The first several projects were directly targeting electricity shortage, many power plants installed.

Road, railway are not major investment, Power stations are.

The traffic volume across Karakorum Mountains between Pakistan and China is very low, very low.

Although it was branded China-Pakistan Economic Corridor, but it's mainly for economy and infrastructure within Pakistan territory.

The trade volume between Pakistan and China are through Karachi SEA PORT, not by land.

So it's Pakistan decision to build railway or not. While Pakistan can make loan from anywhere as long as interest benefit Pakistan.

Recently some more Hydropower plants were built, hopefully this can decrease fuel consumption and import. There are some old power stations in Pakistan which consume OIL and Natural Gas, which is much more expensive than Hydropower plants.

Pakistan does NOT have OIL and Natural Gas, it will cost Pakistan an arm and leg, as well as Foreign Exchange. Hydropower plants will benefit Pakistan a lot, I just don't understand why those were NOT built decades ago.

 

[Leishangthem]

In this matrix one hope there would be massive inroad of Chinese businessmen landing at Islamabad to set up industries to take advantage of cheaper labour. This has not happened. This has not happened. The Chinese industry has chosen instead to move o Vietnam, Myanmar, Banglaesh etc but assidiously avoid iron brother.

This is the real sad part.

Gov policies are one thing ,but capitalists work on its own. Does Pakistan provides the safe,business friendly,less corrupt,highly accountable,transparent and vibrant market that appeals to the capitalist? I'm sure china is investing ,if china invest too much ,foreign media will claim china is taking over Pakistan .
Those south east asian nations might not have developed like their eastern neighbors but they have the necessary elements to attract foreign investment and capitalists from china. Tiny Singapore attracted more global FDI than world's 2nd most populous nation India last year.

 

[Path-Finder]

The problem is, the advisors that surround thee PM. they are pro western. that is something China is not pleased with.

 

[vi-va]

The problem is, the advisors that surround thee PM. they are pro western. that is something China is not pleased with.

I like your signature, well summarized.

 

[Bilal.]

Gov policies are one thing ,but capitalists work in its own. Does Pakistan provides the safe,business friendly,less corrupt,highly accountable,transparent and vibrant market that appeals to the capitalist? I'm sure china is investing ,if china invest too much ,foreign media will claim china is taking over Pakistan .
Those south east asian nations may not have developed like their eastern neighbors but they have the necessary elements to attract foreign investment and capitalists from china. Tiny Singapore attracted more FDI than world's 2nd most populous nation India last year.

Yes. Just one of the many SEZs being setup across the country with ease of business, transparency, tax and duty breaks and superb infrastructure:

 

[Indus Pakistan]

Does Pakistan provides the safe,business friendly,less corrupt,highly accountable,transparent and vibrant market that appeals to the capitalist? I'm sure china is investing ,if china invest too much ,foreign media will claim china is taking over Pakistan .
Those south east asian nations may not have developed like their eastern neighbors but they have the necessary elements to attract foreign investment and capitalists from china. Tiny Singapore attracted more FDI than world's 2nd most populous nation India last year.

Absolutely no. South East Asia has culture that is attractive to capitalists. South Asia is not generally as good but Pakistan comes out the worst. Which is why India and Bangla are doing better. Nobody wants to invest in Pakistan. I mean nobody. Even Pakistani's will send their money abroad. The only sector that recieves investment is real estate. Building houses. Which is why you see housing estates sprout everywhere.

To sum up Pakistani economy. Migrate aboard. Send wages home. Then use those remittances to buy western and Far Eastern consumer products like cars, planes and other toys.