China Pakistan Economic Corridor (CPEC): Myths And Facts

Is China using China Pakistan Economic Corridor (CPEC) to colonize Pakistan just as the British East India company colonized India centuries earlier?



Will Pakistan be caught in a massive Chinese debt trap and eventually become China's colony? What are the terms of Chinese financing and investments in CPEC projects in Pakistan?

Are Pakistanis required to pay exorbitant interest rates on infrastructure loans and unreasonably high return on equity on power plant investments?

Is there an IBM-like organized campaign of fear, uncertainty and doubt (FUD) being waged by CPEC's detractors to convince Pakistanis that it's a zero sum game in which China's gain is Pakistan's loss?

Is there no possibility of win-win in CPEC for both China and Pakistan?

Viewpoint From Overseas host Faraz Darvesh discusses these questions with Misbah Azam and Riaz Haq (www.riazhaq.com)

https://youtu.be/NixuaR0_jws




Related Links:

Haq's Musings

Campaign of Fear, Uncertainty and Doubt Against CPEC

CPEC Financing: Is China Ripping Off Pakistan?

CPEC Transforming Least Developed Parts of Pakistan

Pakistan Rising or Falling? Reality vs Perception

Pakistan Generating Positive Vibes at Davos 2018

CPEC to Create Over 2 Million Jobs in Pakistan

Pakistan's $20 Billion Tourism Industry Boom

Home Appliance Ownership in Pakistani Households

Riaz Haq's YouTube Channel

PakAlumni Social Network

Comments

Riaz Haq said…
Pakistan's auto sales surge 23 pct in January 2018

http://www.xinhuanet.com/english/2018-02/12/c_136970661.htm

The Pakistan Automotive Manufacturers Association announced on Monday that Pakistan's locally assembled cars and Light Commercial Vehicles (LCVs) sales volume jumped by 23 percent to 23,562 units in January on the yearly comparison and by 22 percent on the monthly comparison.

The growth was largely attributed to Pak-Suzuki Motor Company's (PSMC) impressive sales numbers of the Wagon-R (an increase of 1,101 units) and Cultus (an increase of 680 units) and a strong response to Honda Atlas Cars' BR-V (an increase of 500 units).

Moreover, recent changes in import procedures have also resulted in a higher offtake for the less than 1,000cc segment, as consumers continue to shift to Pak-Suzuki Motor Company.

According to the Pakistani auto industry's official numbers, volumes for PSMC and Honda Atlas Car (HCAR) increased by 24 percent and 10 percent on yearly comparison while Indus Motor's volumes decreased by 7 percent.

Furthermore, growth was also recorded in LCVs sales, as they increased by 38 percent to 3,638 units in January this year when compared with the sales of 2,629 units in January last year.

Similarly, tractor sales continued to perform well, thereby registering 5,863 units for January, up by 9 percent as against 5,390 units in the same month of last year.

Moreover, motorcycles and three-wheelers also witnessed a fair bit of increase of 20 percent on the yearly comparison and 13 percent on the monthly comparison.

-------

Imports of used cars in Pakistan jump 70pc

https://www.dawn.com/news/1385303

Imports of used cars and minivans surged to 65,723 units in 2017, up almost 70 per cent from 38,676 units a year ago, latest data released by the auto industry shows.

The arrival of sport utility vehicles (SUVs) also increased 59pc to 7,758 units. Imports of pickups and vans registered a 9pc rise to 3,154 units.

The local industry maintains a record of each imported vehicle, whether new or old, through the Import General Manifest (IGM). Every imported car is logged in the customs’ IGM.

Toyota Vitz remained the most popular imported car in 2017. As many as 8,680 units arrived in 2017, up almost 40pc from a year ago. The volume of Daihatsu Mira swelled 73.1pc to 6,091 units.

Riaz Haq said…
Pakistan looks to increase share of CPEC labor market
KHURSHID AHMED | Published — Friday 16 February 2018

http://www.arabnews.pk/node/1247666/pakistan

KARACHI: Pakistan expects the demand for skilled manpower to grow exponentially as the multibillion-dollar China-Pakistan Economic Corridor (CPEC) project expands.
“The total cost of CPEC projects has already gone from $46 billion to $62 billion and it is hoped that the total cost will rise to $100 billion by 2030,” Executive Director of the Planning Commission’s Center of Excellence (COE) for CPEC Dr. Shahid Rashid said in a press briefing on Thursday.
Many Pakistani institutes are now offering a range of courses — including Chinese-language — to enable Pakistani youths to find employment, and China has vowed to help set up a world-class vocational training institute in Islamabad. More institutes are expected to open in Pakistan in the near future to cover the expected rise in job opportunities offered by CPEC.
CPEC starts from Kashgar in Xinjiang, China, and reaches Karachi and Gwadar, on Pakistan’s south coast via the Khunjerab Pass.
Chinese Ambassador to Pakistan Yao Jing reiterated during a meeting with Executive Director of National Vocational and Technical Training Commission Zulfiqar Ahmad Cheema that CPEC will provide job opportunities to thousands of trained Pakistanis.
Jing vowed that China will soon initiate special programs for Pakistani trainers, which will enable them to teach hundreds of Pakistani workers every year how to use modern machinery and equipment.
Majyed Aziz Balagamwala, president of the Employers’ Federation of Pakistan and a member of the Sindh Technical Education and Vocational Training Authority, told Arab News that a training program “initiated with leading institutes” would produce 200,000 skilled workers in the next three years.
“We do not intend to just produce labor, our aim is to provide them with multiple skills so that they can get better jobs and play their role in the country’s economic uplift by contributing to CPEC,” he explained.
Analyst and CPEC expert Maqbool Afridi stressed the need to expand the skills of Pakistani workers.
“Chinese workers are highly technical. We need to change our attitude toward learning,” Afridi said. “If the Chinese can work with high tech knowledge, why can’t we?”
Afridi said CPEC is a world-class project that demands technically skilled manpower not only to run the projects, but also to balance the share of jobs between the two countries.
Despite substantial progress on CPEC, many are unhappy about how little information about the project has been shared with the public.
“We still don’t know much about the CPEC projects,” said Executive Director of National Organization for Working Communities Farhat Parveen. “The government has been secretive, instead of sharing information about the projects and the number of people required so that skilled workers are imparted with the required training.”
Riaz Haq said…
Who’s Afraid of China

http://newslinemagazine.com/magazine/whos-afraid-china/

Ishrat Husain is a former dean and director of IBA and a former governor of the State Bank of Pakistan.

The foremost singular contribution that has already made a significant and visible difference is the addition of 10,000MW to the generation capacity in Pakistan, in a span of four years. It has overcome chronic energy shortages, altered the fuel mix, and substituted plants with 61 per cent efficiency factor in place of those operating at 28 per cent, bringing down the cost to consumers. Electricity outages had cost the economy about 1.5 to 2 percentage points of the Gross Domestic Product (GDP). Export orders were cancelled and the buyers walked out of Pakistan as their traditional suppliers could not fulfil the orders on time, due to energy shortages. The value of exports took a dip, precipitating a balance of payments crisis. As new hydel, renewable, coal-based projects come on board, there will be a corresponding shrinking of imports of furnace oil and diesel.

The associated risk of an additional supply of power is that unless we restructure or privatise the distribution companies, or make the power distribution sector competitive, the circular debt would keep on rising. Distribution losses and non-recovery of dues have put enormous pressure on public finances, and the subsidies on this account may escalate if institutional reforms are not undertaken.

The second area that would benefit Pakistan is the construction of highways and the railway line linking Gwadar with Kashgar and the mass transit systems within big cities. The rehabilitation and upgrading of the main railway line with high speed trains, would relieve businesses of the high cost of domestic transportation of goods to and from Karachi (at present, the bulk of the freight is carried by a trucking fleet). The inner city mass transit systems in Lahore, Peshawar, Karachi and Quetta, would provide safe and affordable public transport to the citizens, who face inconvenience and spend a lot of time and money in commuting to work. The reduced travel time and saving in transportation expenses would increase their productivity and also augment the purchasing power of the lower income and the lower middle-income group.

The western route would open up backward districts in Balochistan and southern Khyber-Pakhtunkhwa (KP) and integrate them with the national markets. The communities living along the route would be able to produce and sell the output from their mining, livestock and poultry, horticulture and fisheries, to a much larger segment of consumers. Their transportation costs would become considerably lower, the proportion of perishables and waste would go down, cool chains and warehousing would become available and processing would become possible in the adjoining industrial zones. Access to a large trucking fleet and containers, with greater frequency and reduced turnaround, time may help in the scaling-up of operations. The fibre optic network would allow the citizens of these deprived districts access to the latest 3G and 4G broadband Internet connections.
Riaz Haq said…
Western route of CPEC to be completed earlier than eastern route: Chinese envoy

https://dunyanews.tv/en/Business/445901-Western-route-CPEC-eastern-route

Acting Ambassador of the People’s Republic of China, Zhao Lijan Friday said that under the China Pakistan Economic Corridor (CPEC), western route of the project would be completed earlier than the eastern route.

Speaking at the National Press Club here about CPEC Project, the Chinese envoy dispelled rumors about the Western Route and said that western route of CPEC would be completed earlier than the eastern route.

He said work on various project under the CPEC was going with full speed and 22 projects would be completed during the current year while 18 projects would be completed next year.

He said around 70,000 Pakistanis had got employment in these projects.

The Chinese envoy said under the CPEC, the government had plan to complete a total of 200 projects till 2030 which would provide jobs to hundreds of thousands of people.

He expressed the hope that the next government in Pakistan would also continue the pace of progress on CPEC projects.

About Gwadar Port, he said, Gwadar International Airport would be completed in October this year. He said fisheries was an important sector of Gwadar and establishing a re-processing plant at the port Pakistan could further increase its exports.

He invited the overseas Pakistanis to come to their country and invest in Gwadar Port, adding that more than 30 Pakistanis companies had been registered at the Port.

He said the investors were being provided facilities of electricity, gas, water and wifai.

In energy projects under the CPEC, he said, $13 billion were being invested, adding that several energy projects had been completed which had overcome load-shedding problem in Pakistan to a great extent.

Under the CPEC, he said industrial parts would be established in Pakistan.

To a question, he said Pakistani were hard workers and capable people and if they could make an atomic bomb then stabilizing their economy was not a big task for them. He said in the 1970s decade Pakistan’s Gross Domestic Product (GDP) was equal to China, adding that today’s success story of China was a result of hard work and dedication of Chinese people.

He said that China desired improvement in Pak-India relations and both Pakistan and India could resolve their issues with peaceful dialogue.
Riaz Haq said…
CPEC projects: China deposits $1 billion: envoy

https://fp.brecorder.com/2018/06/20180630386244/

 NAVEED BUTT
 
 JUN 30TH, 2018
 
 ISLAMABAD

Chinese Deputy Head of Mission Lijian Zhao Friday said that more than 70,000 Pakistanis are working on various development projects under China-Pakistan Economic Corridor (CPEC) while China has deposited $1 billion with the State Bank of Pakistan.

"China has given a soft loan to Pakistan at around 2 percent interest rate for major infrastructure projects of $6 billion under the CPEC," he added. He said major transport projects included M-5 Motorway project (Multan-Sukkur), Orange Line Metro Train and KKH Phase II (Thakot-Havelian Section)."

About energy projects, he said that China is helping Pakistan overcome energy crisis. He said that as many as six power plants including 2×660MW coal-fired power plants at Port Qasim Karachi, three wind power projects in Sindh, solar power project and Sahiwal coal-based power plants have been completed. He said that 10 power plants including coal and hydropower projects are under construction. He said that these power plants have a total generation capacity of 11,000MW of electricity.

He said that five years earlier, there was seven to eight hours electricity load-shedding daily in Islamabad. But now there is zero load-shedding in Islamabad. He said that sometimes load-shedding in the federal capital occurs due to technical reasons and old transmission lines.

He said that 14 projects are under construction, eight have been completed and 21 projects are in pipeline while their groundbreaking has been taken place. He said that there are 43 early harvest projects under the CPEC and most of them would be completed in 2019. He said that a few hydropower projects are long-term which would be completed in 2023.

About Gwadar free zone, he said that more than 30 Pakistani companies have been registered for Gwadar Free Industrial Zone and more companies are in pipeline. He said that China has constructed 'Business Centre' within a record time of five-and-a-half-month in Gwadar. He said that China Overseas Port Holding Company has also installed desalination plants at Gwadar for supplying drinking water to the people in the port city.

Answering a question, he said that Pakistan Peoples Party (PPP) government had handed over Gwadar to Chinese companies. He said that Gwadar Port is very significant for China, Pakistan and rest of the world. He said that China is also responsible for developing Gwadar free port. He said Part-I of free port was appearing on the ground.

He said that as many as nine industrial parks would be established in Pakistan. He said that facilities of electricity, gas, internet and road, etc, would be provided to the industrial zones.

The Chinese envoy said that Gwadar international airport would be built soon and its groundbreaking ceremony would be held after October 2018.

The Chinese deputy head of mission said a hospital is also operating in Gwadar. He said that fisheries would be a great industry in Gwadar. He said 500 students are studying in a Gwadar school built by the Chinese companies.

Answering a question about western route, he said that propaganda is done in this regard. He said that the western route is also in the interests of China and it would be completed.

Furthermore, he said that China has made tremendous economic growth. He said that now China is working to enhance its gross domestic product (GDP) growth, adding in the next 10 years, GDP of China would be doubled.

Zhao also said that China wants good relationship with every country, including the United States.
Riaz Haq said…
Investment project with 14% is impossible. Sinosure's rates are set at maximum 7% for the total period of 15-20 years of the project. However it is paid only once, therefore it is 0.3-0.5% every year. If you add LIBOR+4.5%, it is only about 6%, not 14%.

https://twitter.com/zlj517/status/1044321706033197058

At budget seminar today it was authoritatively disclosed that loans for CPEC projects are at LIBOR+ 4.5%+Insurance guarantee 7.5% ie nearly 14% interest. Can any economy borrow at this rate? Watch out! Absence of transparency undermining CPEC. Clarification needed.

https://twitter.com/FarhatullahB/status/1044256222852108288

http://web.isanet.org/Web/Conferences/HKU2017-s/Archive/a30ae7f2-83ba-4b48-b15c-3ebbe670d948.pdf

Research into the NEPRA archives has indicated that in July of 2015 [CPEC start, April 2015] there began a flood of petitions filed consecutively for inclusion of Sinosure fees into wind power project financing. For NEPRA, this amounts to an unmatched influx of pressure unseen anywhere else in their operating history, and presents compelling evidence both in frequency and qualitative content to move to withdraw support from the null hypothesis.


The NEPRA petition database shows a large uptick in requests that the Government of Pakistan capitulate to Chinese requirements to utilize insurance through Sinosure. For Chinese projects abroad, project insurance flows through one provider. This firm is the China Export and Credit Insurance Corporation/中国出口信用保险公司, or Sinosure. This State Owned Enterprise is China’s main insurer of export financing and provides protection for SOE’s and other large firms against political, commercial and/or credit risks operating or exporting abroad.

Critically, Sinosure coverage is mandatory insurance for Chinese overseas bank loan and equity investment. In other words, it is required for anyone outside China who wants access to this type of capital from Chinese actors.

In stark contrast to previous years of highly diverse NEPRA petition data, Sinosure related documents show a high degree of coordination. They are unwavering in noting that Chinese state-owned insurance for project funding is required for Chinese capital. Five separate petitions from firms note that “[…] Plea: Sinosure Insurance is a contingent requirement of Debt from China. It is approved by NEPRA for other Projects (Coal etc.). It is a mandatory cost for Chinese Debt and should be incorporated as a pass-through cost by NEPRA.”42 This exact language is found in each of the five petitions originating from distinct wind energy firms. Highly similar language to this is also found in a petition from the Government of Sindh, Directorate of Alternative Energy/Energy Department in Karachi, signifying coordinated inter-governmental and private sector pressure.43 Furthermore, Harbin Electric International, a Chinese State Owned Enterprise, filed its own petition to

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