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Misconceptions, ill-intentions about CPEC
By Webmaster -
January 14, 2017
News & Views
Mohammad Jamil
MANY anti-Pakistan lobbies have been at work to sabotage the China-Pakistan Economic Corridor (CPEC), as they know that with the completion of its projects Pakistan will usher into an era of progress and prosperity. There are others who wittingly or unwittingly create unfounded fear and misconceptions about the CPEC. A national English daily in a news item under the caption ‘Government mulls treating CPEC funds as FDI’ stated: “Cash-flowing in under $55 billion package, the money has so far been reflected as loans…Work on the $16 bn worth of the energy projects has begun but FDI during the last two years has been $750 million.” It has to be mentioned that money or equipment and machinery would come according to the phases of the projects they are undergoing. The package is worth $51.5 bn and not $55 bn as stated by the author.
The author also observed that with the import of machinery and equipment from China for CPEC projects, the import bill will increase and will affect the current account. But this is conceptually wrong and contrary to the facts, because when China is funding the import of equipment and machinery for power projects, how it can affect Pakistan’s balance of trade or lead to current account deficit? Anyhow, a major part of Chinese investment in power projects will be considered as Foreign Direct Investment, and a smaller part as concessional loan bearing 2 per cent interest. Beijing has agreed to provide Pakistan with a $5.5bn concessional loan to upgrade and modernise the Karachi-Lahore main railway line called ML-1. Despite Indian conspiracies, the size of the China-Pakistan Economic Corridor (CPEC) has been increased from $46 bn to $51.5 billion, which help upgrade the main railway line from Karachi to Peshawar.
In the same English daily in its Blogs, Ghazanfar Ali Garewal gave sensible and fair assessment of the CPEC and wrote: “The loans are being given to the companies that are involved in CPEC-related projects. For example, if a company wants to undertake a project, it has to take loan from China’s Bank.” Since the loans are not given to the government of Pakistan, the question of paying them back does not arise. He elaborated: “Firstly, all energy projects are investments which are based on Independent Power Producer (IPP) mode. Some projects are directly invested by the Commercial Bank of China and Import-Export Bank of China, whereas others are joint ventures like the Port Qasim power plant, with an investment of $2.08 billion. The equity ratio of this project is 25%, while the rest has to be arranged by the sponsors through debt financing from the Import-Export Bank of China.
Anyhow, CPEC will open new vistas of development as a result of which the national economy will grow fast, lead to creation of new job opportunities, poverty reduction, and development of transportation sector and boost industrial growth. CPEC is a comprehensive package of cooperative initiatives and projects, which covers key areas including connectivity, information network infrastructure, energy cooperation, industries and industrial parks, agricultural development, poverty alleviation, tourism, financial cooperation as well as livelihood improvement including municipal infrastructure, education, public health and people-to people communication. Energy sector has been assigned top priority to help Pakistan overcome energy shortages in order to achieve higher growth rates for speedy development. The corridor projects initially envisaged $34.5 billion investment in energy sector and around $11.5 billion in infrastructure sector. Both countries have finalized plans to add 10,400 MWs of electricity capacity of energy generation projects spread all across country
Some energy projects are expected to be completed by the year 2017/18, and other 6,645 MWs of projects for energy are on the actively promoted list. All energy projects will be on commercial basis in investment mode. After completing all the requisite regulatory and other facilitation requirements the two sides are nearing financial close for 200 MW wind power projects, 5,580 MW of coal based power generation projects, 1,590 MW hydro power project, 500 MW wind and 1,000 MW solar projects and 3.8 MTPA coal mining project. According to news report in August, Pakistan government had decided to make Diamer Bhasha dam part of CPEC, which will produce 4,500MW electricity and will have a water storage capacity of five million acre feet. Last week, KP Chief Minister Pervez Khattak said that Diamer Bhasha is one of the seven projects under CPEC.
However, Gwadar Port Project is the centerpiece of Pak-China Strategic Partnership with its strategic location and potential for becoming the future economic and energy hub. The projects under China-Pakistan Economic Corridor will transform it into one of the world’s leading port cities having top-class commercial and tourist facilities, integrated infrastructure and investment opportunities. This will make Gwadar a catalyst for development of Makran Coast and Balochistan in particular, and Pakistan in general. The first phase of Gwadar port with three multipurpose berths having a total quay length of 602 metres is fully operational. The first phase was completed last year, which included three multipurpose berths of 602m quay length, one service berth of 100m length, 4.35 km navigable channel of 11.6/12.5m depth, roads, plinths and transit shed, operational craft and equipment, including navigational aids and shore based port buildings and allied facilities.
Sources said that the second phase is longer and mainly includes the development of port-related infrastructure projects, which cannot be carried out without the active support and participation of private sector. There is a need to mobilise the private sector by announcement of attractive incentives and improvement of security situation in Balochistan. The Gwadar international airport is being constructed at a cost of $260 million, which is reportedly a full grant from the Chinese government. The airport would be capable of handling the largest of passenger planes, including A380. Having that said, the Gwadar development project has three phases. One phase has been completed and currently development of second phase is at hand, which is to be completed by 2025, whereas the third phase will be completed in 2030. In this backdrop, the CPEC is not a game changer but fate changer for Pakistan.
—The writer is a senior journalist based in Lahore.
Email:mjamil1938@hotmail.com
By Webmaster -
January 14, 2017
News & Views
Mohammad Jamil
MANY anti-Pakistan lobbies have been at work to sabotage the China-Pakistan Economic Corridor (CPEC), as they know that with the completion of its projects Pakistan will usher into an era of progress and prosperity. There are others who wittingly or unwittingly create unfounded fear and misconceptions about the CPEC. A national English daily in a news item under the caption ‘Government mulls treating CPEC funds as FDI’ stated: “Cash-flowing in under $55 billion package, the money has so far been reflected as loans…Work on the $16 bn worth of the energy projects has begun but FDI during the last two years has been $750 million.” It has to be mentioned that money or equipment and machinery would come according to the phases of the projects they are undergoing. The package is worth $51.5 bn and not $55 bn as stated by the author.
The author also observed that with the import of machinery and equipment from China for CPEC projects, the import bill will increase and will affect the current account. But this is conceptually wrong and contrary to the facts, because when China is funding the import of equipment and machinery for power projects, how it can affect Pakistan’s balance of trade or lead to current account deficit? Anyhow, a major part of Chinese investment in power projects will be considered as Foreign Direct Investment, and a smaller part as concessional loan bearing 2 per cent interest. Beijing has agreed to provide Pakistan with a $5.5bn concessional loan to upgrade and modernise the Karachi-Lahore main railway line called ML-1. Despite Indian conspiracies, the size of the China-Pakistan Economic Corridor (CPEC) has been increased from $46 bn to $51.5 billion, which help upgrade the main railway line from Karachi to Peshawar.
In the same English daily in its Blogs, Ghazanfar Ali Garewal gave sensible and fair assessment of the CPEC and wrote: “The loans are being given to the companies that are involved in CPEC-related projects. For example, if a company wants to undertake a project, it has to take loan from China’s Bank.” Since the loans are not given to the government of Pakistan, the question of paying them back does not arise. He elaborated: “Firstly, all energy projects are investments which are based on Independent Power Producer (IPP) mode. Some projects are directly invested by the Commercial Bank of China and Import-Export Bank of China, whereas others are joint ventures like the Port Qasim power plant, with an investment of $2.08 billion. The equity ratio of this project is 25%, while the rest has to be arranged by the sponsors through debt financing from the Import-Export Bank of China.
Anyhow, CPEC will open new vistas of development as a result of which the national economy will grow fast, lead to creation of new job opportunities, poverty reduction, and development of transportation sector and boost industrial growth. CPEC is a comprehensive package of cooperative initiatives and projects, which covers key areas including connectivity, information network infrastructure, energy cooperation, industries and industrial parks, agricultural development, poverty alleviation, tourism, financial cooperation as well as livelihood improvement including municipal infrastructure, education, public health and people-to people communication. Energy sector has been assigned top priority to help Pakistan overcome energy shortages in order to achieve higher growth rates for speedy development. The corridor projects initially envisaged $34.5 billion investment in energy sector and around $11.5 billion in infrastructure sector. Both countries have finalized plans to add 10,400 MWs of electricity capacity of energy generation projects spread all across country
Some energy projects are expected to be completed by the year 2017/18, and other 6,645 MWs of projects for energy are on the actively promoted list. All energy projects will be on commercial basis in investment mode. After completing all the requisite regulatory and other facilitation requirements the two sides are nearing financial close for 200 MW wind power projects, 5,580 MW of coal based power generation projects, 1,590 MW hydro power project, 500 MW wind and 1,000 MW solar projects and 3.8 MTPA coal mining project. According to news report in August, Pakistan government had decided to make Diamer Bhasha dam part of CPEC, which will produce 4,500MW electricity and will have a water storage capacity of five million acre feet. Last week, KP Chief Minister Pervez Khattak said that Diamer Bhasha is one of the seven projects under CPEC.
However, Gwadar Port Project is the centerpiece of Pak-China Strategic Partnership with its strategic location and potential for becoming the future economic and energy hub. The projects under China-Pakistan Economic Corridor will transform it into one of the world’s leading port cities having top-class commercial and tourist facilities, integrated infrastructure and investment opportunities. This will make Gwadar a catalyst for development of Makran Coast and Balochistan in particular, and Pakistan in general. The first phase of Gwadar port with three multipurpose berths having a total quay length of 602 metres is fully operational. The first phase was completed last year, which included three multipurpose berths of 602m quay length, one service berth of 100m length, 4.35 km navigable channel of 11.6/12.5m depth, roads, plinths and transit shed, operational craft and equipment, including navigational aids and shore based port buildings and allied facilities.
Sources said that the second phase is longer and mainly includes the development of port-related infrastructure projects, which cannot be carried out without the active support and participation of private sector. There is a need to mobilise the private sector by announcement of attractive incentives and improvement of security situation in Balochistan. The Gwadar international airport is being constructed at a cost of $260 million, which is reportedly a full grant from the Chinese government. The airport would be capable of handling the largest of passenger planes, including A380. Having that said, the Gwadar development project has three phases. One phase has been completed and currently development of second phase is at hand, which is to be completed by 2025, whereas the third phase will be completed in 2030. In this backdrop, the CPEC is not a game changer but fate changer for Pakistan.
—The writer is a senior journalist based in Lahore.
Email:mjamil1938@hotmail.com
