CPEC and Developments

[Oracle]

More tidbits...

SC moved against Chinese people buying land in Pakistan

Costly lessons for leaders eyeing China's Belt and Road billions

Nepal says to scrap hydropower deal with Chinese firm

What Is China Doing To Pakistan? The Same Thing It Did To Sri Lanka

Why CPEC could be the end of China-Pakistan relationship

[Double Edge]

'We cannot afford this': Malaysia pushes back on China's big projects

Snippets:

This bit is important. If Malacca is a choke point then a deep water base with an aircraft carrier could help somewhat. Not too far away from China either to resupply.

Would it solve China's Malacca dilemma though ?

Not completely which is why they're also trying for alternate routes via Burma and ostensibly Pakistan.

[Oracle]

How long for. They are throwing people at the problem to build infrastructure.

China is moving excess Chinese capacity to foreign shores, and alongwith it Chinese population. It's cyclic. Money the Chinese are spending comes back to them with interest. Their people have jobs, and fires in their factories continue to burn.

Still don't get your point.

Rephrase that

You said -

That article is exaggerating this colony business. 5000 Chinese in a gated area of Gwadar does not a colony make. Western oil companies had the same thing in the early years in the Gulf.

What we see with BRI is Chinese money, Chinese labor, Chinese equipments, Chinese cement, Chinese restaurants, Chinese noodles, basically all things - Chinese. Now compare that to an article you posted about Americans in different lands using the locals for their purpose. Even India is doing the same. So, isn't your point moot. 5Lac Chinese in Gwadar is just the start. There are 1000s more in other Pak cities. And this number would swell. Pak has no economy to speak of, which is why they channel their illiterate abduls towards Kashmir for Jihad. Can't the Chinese use those Paks and impart skill development? Maybe then use them on projects in the BRI? But that's not why the Chinese are investing in BRI, and you too know that, don't you?

[Oracle]

This bit is important. If Malacca is a choke point then a deep water base with an aircraft carrier could help somewhat. Not too far away from China either to resupply.

Would it solve China's Malacca dilemma though ?

Not completely which is why they're also trying for alternate routes via Burma and ostensibly Pakistan.

And bankrupt tiny and corrupt countries in the process and then take over them. The thing is those countries should understand that they would be bombed till kingdom come incase of a conflict, and the infrastructure built, turned into a pile of rubble. Relent or repent.

Why CPEC could be the end of China-Pakistan relationship - read it, it says what I have already argued earlier.

[Double Edge]

You said -

What we see with BRI is Chinese money, Chinese labor, Chinese equipments, Chinese cement, Chinese restaurants, Chinese noodles, basically all things - Chinese. Now compare that to an article you posted about Americans in different lands using the locals for their purpose. Even India is doing the same. So, isn't your point moot. 5Lac Chinese in Gwadar is just the start. There are 1000s more in other Pak cities. And this number would swell. Pak has no economy to speak of, which is why they channel their illiterate abduls towards Kashmir for Jihad. Can't the Chinese use those Paks and impart skill development? Maybe then use them on projects in the BRI? But that's not why the Chinese are investing in BRI, and you too know that, don't you?

Ya

[Oracle]

[Oracle]

How China Got Sri Lanka to Cough Up a Port

HAMBANTOTA, Sri Lanka — Every time Sri Lanka’s president, Mahinda Rajapaksa, turned to his Chinese allies for loans and assistance with an ambitious port project, the answer was yes.

Yes, though feasibility studies said the port wouldn’t work. Yes, though other frequent lenders like India had refused. Yes, though Sri Lanka’s debt was ballooning rapidly under Mr. Rajapaksa.

Over years of construction and renegotiation with China Harbor Engineering Company, one of Beijing’s largest state-owned enterprises, the Hambantota Port Development Project distinguished itself mostly by failing, as predicted. With tens of thousands of ships passing by along one of the world’s busiest shipping lanes, the port drew only 34 ships in 2012.

And then the port became China’s.

Mr. Rajapaksa was voted out of office in 2015, but Sri Lanka’s new government struggled to make payments on the debt he had taken on. Under heavy pressure and after months of negotiations with the Chinese, the government handed over the port and 15,000 acres of land around it for 99 years in December.

The transfer gave China control of territory just a few hundred miles off the shores of a rival, India, and a strategic foothold along a critical commercial and military waterway.

The case is one of the most vivid examples of China’s ambitious use of loans and aid to gain influence around the world — and of its willingness to play hardball to collect.

The debt deal also intensified some of the harshest accusations about President Xi Jinping’s signature Belt and Road Initiative: that the global investment and lending program amounts to a debt trap for vulnerable countries around the world, fueling corruption and autocratic behavior in struggling democracies.

Months of interviews with Sri Lankan, Indian, Chinese and Western officials and analysis of documents and agreements stemming from the port project present a stark illustration of how China and the companies under its control ensured their interests in a small country hungry for financing.

• During the 2015 Sri Lankan elections, large payments from the Chinese port construction fund flowed directly to campaign aides and activities for Mr. Rajapaksa, who had agreed to Chinese terms at every turn and was seen as an important ally in China’s efforts to tilt influence away from India in South Asia. The payments were confirmed by documents and cash checks detailed in a government investigation seen by The New York Times.

• Though Chinese officials and analysts have insisted that China’s interest in the Hambantota port is purely commercial, Sri Lankan officials said that from the start, the intelligence and strategic possibilities of the port’s location were part of the negotiations.

• Initially moderate terms for lending on the port project became more onerous as Sri Lankan officials asked to renegotiate the timeline and add more financing. And as Sri Lankan officials became desperate to get the debt off their books in recent years, the Chinese demands centered on handing over equity in the port rather than allowing any easing of terms.

• Though the deal erased roughly $1 billion in debt for the port project, Sri Lanka is now in more debt to China than ever, as other loans have continued and rates remain much higher than from other international lenders.

Mr. Rajapaksa and his aides did not respond to multiple requests for comment, made over several months, for this article. Officials for China Harbor also would not comment.

Estimates by the Sri Lankan Finance Ministry paint a bleak picture: This year, the government is expected to generate $14.8 billion in revenue, but its scheduled debt repayments, to an array of lenders around the world, come to $12.3 billion.

“John Adams said infamously that a way to subjugate a country is through either the sword or debt. China has chosen the latter,” said Brahma Chellaney, an analyst who often advises the Indian government and is affiliated with the Center for Policy Research, a think tank in New Delhi.

Indian officials, in particular, fear that Sri Lanka is struggling so much that the Chinese government may be able to dangle debt relief in exchange for its military’s use of assets like the Hambantota port — though the final lease agreement forbids military activity there without Sri Lanka’s invitation.

“The only way to justify the investment in Hambantota is from a national security standpoint — that they will bring the People’s Liberation Army in,” said Shivshankar Menon, who served as India’s foreign secretary and then its national security adviser as the Hambantota port was being built.

An Engaged Ally
The relationship between China and Sri Lanka had long been amicable, with Sri Lanka an early recognizer of Mao’s Communist government after the Chinese Revolution. But it was during a more recent conflict — Sri Lanka’s brutal 26-year civil war with ethnic Tamil separatists — that China became indispensable.

Mr. Rajapaksa, who was elected in 2005, presided over the last years of the war, when Sri Lanka became increasingly isolated by accusations of human rights abuses. Under him, Sri Lanka relied heavily on China for economic support, military equipment and political cover at the United Nations to block potential sanctions.

The war ended in 2009, and as the country emerged from the chaos, Mr. Rajapaksa and his family consolidated their hold. At the height of Mr. Rajapaksa’s tenure, the president and his three brothers controlled many government ministries and around 80 percent of total government spending. Governments like China negotiated directly with them.

So when the president began calling for a vast new port development project at Hambantota, his sleepy home district, the few roadblocks in its way proved ineffective.

From the start, officials questioned the wisdom of a second major port, in a country a quarter the size of Britain and with a population of 22 million, when the main port in the capital was thriving and had room to expand. Feasibility studies commissioned by the government had starkly concluded that a port at Hambantota was not economically viable.

“They approached us for the port at the beginning, and Indian companies said no,” said Mr. Menon, the former Indian foreign secretary. “It was an economic dud then, and it’s an economic dud now.”

But Mr. Rajapaksa greenlighted the project, then boasted in a news release that he had defied all caution — and that China was on board.

The Sri Lanka Ports Authority began devising what officials believed was a careful, economically sound plan in 2007, according to an official involved in the project. It called for a limited opening for business in 2010, and for revenue to be coming in before any major expansion.

The first major loan it took on the project came from the Chinese government’s Export-Import Bank, or Exim, for $307 million. But to obtain the loan, Sri Lanka was required to accept Beijing’s preferred company, China Harbor, as the port’s builder, according to a United States Embassy cable from the time, leaked to WikiLeaks.

That is a typical demand of China for its projects around the world, rather than allowing an open bidding process. Across the region, Beijing’s government is lending out billions of dollars, being repaid at a premium to hire Chinese companies and thousands of Chinese workers, according to officials across the region.

There were other strings attached to the loan, as well, in a sign that China saw strategic value in the Hambantota port from the beginning.

Nihal Rodrigo, a former Sri Lankan foreign secretary and ambassador to China, said that discussions with Chinese officials at the time made it clear that intelligence sharing was an integral, if not public, part of the deal. In an interview with The Times, Mr. Rodrigo characterized the Chinese line as, “We expect you to let us know who is coming and stopping here.”

In later years, Chinese officials and the China Harbor company went to great lengths to keep relations strong with Mr. Rajapaksa, who for years had faithfully acquiesced to such terms.

In the final months of Sri Lanka’s 2015 election, China’s ambassador broke with diplomatic norms and lobbied voters, even caddies at Colombo’s premier golf course, to support Mr. Rajapaksa over the opposition, which was threatening to tear up economic agreements with the Chinese government.

As the January election inched closer, large payments started to flow toward the president’s circle.

At least $7.6 million was dispensed from China Harbor’s account at Standard Chartered Bank to affiliates of Mr. Rajapaksa’s campaign, according to a document, seen by The Times, from an active internal government investigation. The document details China Harbor’s bank account number — ownership of which was verified — and intelligence gleaned from questioning of the people to whom the checks were made out.

With 10 days to go before polls opened, around $3.7 million was distributed in checks: $678,000 to print campaign T-shirts and other promotional material and $297,000 to buy supporters gifts, including women’s saris. Another $38,000 was paid to a popular Buddhist monk who was supporting Mr. Rajapaksa’s electoral bid, while two checks totaling $1.7 million were delivered by volunteers to Temple Trees, his official residence.

Most of the payments were from a subaccount controlled by China Harbor, named “HPDP Phase 2,” shorthand for Hambantota Port Development Project.

China’s Network
After nearly five years of helter-skelter expansion for China’s Belt and Road Initiative across the globe, Chinese officials are quietly trying to take stock of how many deals have been done and what the country’s financial exposure might be. There is no comprehensive picture of that yet, said one Chinese economic policymaker, who like many other officials would speak about Chinese policy only on the condition of anonymity.

Some Chinese officials have become concerned that the nearly institutional graft surrounding such projects represents a liability for China, and raises the bar needed for profitability. President Xi acknowledged the worry in a speech last year, saying, “We will also strengthen international cooperation on anticorruption in order to build the Belt and Road Initiative with integrity.”

In Bangladesh, for example, officials said in January that China Harbor would be banned from future contracts over accusations that the company attempted to bribe an official at the ministry of roads, stuffing $100,000 into a box of tea, government officials said in interviews. And China Harbor’s parent company, China Communications Construction Company, was banned for eight years in 2009 from bidding on World Bank projects because of corrupt practices in the Philippines.

Since the port seizure in Sri Lanka, Chinese officials have started suggesting that Belt and Road is not an open-ended government commitment to finance development across three continents.

“If we cannot manage the risk well, the Belt and Road projects cannot go far or well,” said Jin Qi, the chairwoman of the Silk Road Fund, a large state-owned investment fund, during the China Development Forum in late March.

In Sri Lanka’s case, port officials and Chinese analysts have also not given up the view that the Hambantota port could become profitable, or at least strengthen China’s trade capacity in the region.

Ray Ren, China Merchant Port’s representative in Sri Lanka and the head of the Hambantota port’s operations, insisted that “the location of Sri Lanka is ideal for international trade.” And he dismissed the negative feasibility studies, saying they were done many years ago when Hambantota was “a small fishing hamlet.”

Hu Shisheng, the director of South Asia studies at the China Institutes of Contemporary International Relations, said that China clearly recognized the strategic value of the Hambantota port. But he added: “Once China wants to exert its geostrategic value, the strategic value of the port will be gone. Big countries cannot fight in Sri Lanka — it would be wiped out.”

Although the Hambantota port first opened in a limited way in 2010, before the Belt and Road Initiative was announced, the Chinese government quickly folded the project into the global program.

Shortly after the handover ceremony in Hambantota, China’s state news agency released a boastful video on Twitter, proclaiming the deal “another milestone along the path of #BeltandRoad.”

A Port to Nowhere
The seaport is not the only grand project built with Chinese loans in Hambantota, a sparsely populated area on Sri Lanka’s southeastern coast that is still largely overrun by jungle.

A cricket stadium with more seats than the population of Hambantota’s district capital marks the skyline, as does a large international airport — which in June lost the only daily commercial flight it had left when FlyDubai airline ended the route. A highway that cuts through the district is traversed by elephants and used by farmers to rake out and dry the rice plucked fresh from their paddies.

Mr. Rajapaksa’s advisers had laid out a methodical approach to how the port might expand after opening, ensuring that some revenue would be coming in before taking on much more debt.

But in 2009, the president had grown impatient. His 65th birthday was approaching the following year, and to mark the occasion he wanted a grand opening at the Hambantota port — including the beginning of an ambitious expansion 10 years ahead of the Port Authority’s original timeline.

Chinese laborers began working day and night to get the port ready, officials said. But when workers dredged the land and then flooded it to create the basin of the port, they had not taken into account a large boulder that partly blocked the entrance, preventing the entry of large ships, like oil tankers, that the port’s business model relied on.

Ports Authority officials, unwilling to cross the president, quickly moved ahead anyway. The Hambantota port opened in an elaborate celebration on Nov. 18, 2010, Mr. Rajapaksa’s birthday. Then it sat waiting for business while the rock blocked it.

China Harbor blasted the boulder a year later, at a cost of $40 million, an exorbitant price that raised concerns among diplomats and government officials. Some openly speculated about whether the company was simply overcharging or the price tag included kickbacks to Mr. Rajapaksa.

By 2012, the port was struggling to attract ships — which preferred to berth nearby at the Colombo port — and construction costs were rising as the port began expanding ahead of schedule. The government decreed later that year that ships carrying car imports bound for Colombo port would instead offload their cargo at Hambantota to kick-start business there. Still, only 34 ships berthed at Hambantota in 2012, compared with 3,667 ships at the Colombo port, according to a Finance Ministry annual report.

“When I came to the government, I called the minister of national planning and asked for the justification of Hambantota Port,” Harsha de Silva, the state minister for national policies and economic affairs, said in an interview. “She said, ‘We were asked to do it, so we did it.’ ”

Determined to keep expanding the port, Mr. Rajapaksa went back to the Chinese government in 2012, asking for $757 million.

The Chinese agreed again. But this time, the terms were much steeper.

The first loan, at $307 million, had originally come at a variable rate that usually settled above 1 or 2 percent after the global financial crash in 2008. (For comparison, rates on similar Japanese loans for infrastructure projects run below half a percent.)

But to secure fresh funding, that initial loan was renegotiated to a much higher 6.3 percent fixed rate. Mr. Rajapaksa acquiesced.

The rising debt and project costs, even as the port was struggling, handed Sri Lanka’s political opposition a powerful issue, and it campaigned heavily on suspicions about China. Mr. Rajapaksa lost the election.

The incoming government, led by President Maithripala Sirisena, came to office with a mandate to scrutinize Sri Lanka’s financial deals. It also faced a daunting amount of debt: Under Mr. Rajapaksa, the country’s debt had increased threefold, to $44.8 billion when he left office. And for 2015 alone, a $4.68 billion payment was due at year’s end.

Signing It Away
The new government was eager to reorient Sri Lanka toward India, Japan and the West. But officials soon realized that no other country could fill the financial or economic space that China held in Sri Lanka.

“We inherited a purposefully run-down economy — the revenues were insufficient to pay the interest charges, let alone capital repayment,” said Ravi Karunanayake, who was finance minister during the new government’s first year in office.

“We did keep taking loans,” he added. “A new government can’t just stop loans. It’s a relay; you need to take them until economic discipline is introduced.”

The Central Bank estimated that Sri Lanka owed China about $3 billion last year. But Nishan de Mel, an economist at Verité Research, said some of the debts were off government books and instead registered as part of individual projects. He estimated that debt owed to China could be as much as $5 billion and was growing every year. In May, Sri Lanka took a new $1 billion loan from China Development Bank to help make its coming debt payment.

Government officials began meeting in 2016 with their Chinese counterparts to strike a deal, hoping to get the port off Sri Lanka’s balance sheet and avoid outright default. But the Chinese demanded that a Chinese company take a dominant equity share in the port in return, Sri Lankan officials say — writing down the debt was not an option China would accept.

When Sri Lanka was given a choice, it was over which state-owned company would take control: either China Harbor or China Merchants Port, according to the final agreement, a copy of which was obtained by The Times, although it was never released publicly in full.

China Merchants got the contract, and it immediately pressed for more: Company officials demanded 15,000 acres of land around the port to build an industrial zone, according to two officials with knowledge of the negotiations. The Chinese company argued that the port itself was not worth the $1.1 billion it would pay for its equity — money that would close out Sri Lanka’s debt on the port.

Some government officials bitterly opposed the terms, but there was no leeway, according to officials involved in the negotiations. The new agreement was signed in July 2017, and took effect in December.

The deal left some appearance of Sri Lankan ownership: Among other things, it created a joint company to manage the port’s operations and collect revenue, with 85 percent owned by China Merchants Port and the remaining 15 percent controlled by Sri Lanka’s government.

But lawyers specializing in port acquisitions said Sri Lanka’s small stake meant little, given the leverage that China Merchants Port retained over board personnel and operating decisions.

When the agreement was initially negotiated, it left open whether the port and surrounding land could be used by the Chinese military, which Indian officials asked the Sri Lankan government to explicitly forbid. The final agreement bars foreign countries from using the port for military purposes unless granted permission by the government in Colombo.

That clause is there because Chinese Navy submarines had already come calling to Sri Lanka.

Strategic Concerns
China had a stake in Sri Lanka’s main port as well: China Harbor was building a new terminal there, known at the time as Colombo Port City. Along with that deal came roughly 50 acres of land, solely held by the Chinese company, that Sri Lanka had no sovereignty on.

That was dramatically demonstrated toward the end of Mr. Rajapaksa’s term, in 2014. Chinese submarines docked at the harbor the same day that Prime Minister Shinzo Abe of Japan was visiting Colombo, in what was seen across the region as a menacing signal from Beijing.

When the new Sri Lankan government came to office, it sought assurances that the port would never again welcome Chinese submarines — of particular concern because they are difficult to detect and often used for intelligence gathering. But Sri Lankan officials had little real control.

Now, the handover of Hambantota to the Chinese has kept alive concerns about possible military use — particularly as China has continued to militarize island holdings around the South China Sea despite earlier pledges not to.

Sri Lankan officials are quick to point out that the agreement explicitly rules out China’s military use of the site. But others also note that Sri Lanka’s government, still heavily indebted to China, could be pressured to allow it.

And, as Mr. de Silva, the state minister for national policies and economic affairs, put it, “Governments can change.”

Now, he and others are watching carefully as Mr. Rajapaksa, China’s preferred partner in Sri Lanka, has been trying to stage a political comeback. The former president’s new opposition party swept municipal elections in February. Presidential elections are coming up next year, and general elections in 2020.

Although Mr. Rajapaksa is barred from running again because of term limits, his brother, Gotabaya Rajapaksa, the former defense secretary, appears to be readying to take the mantle.

“It will be Mahinda Rajapaksa’s call. If he says it’s one of the brothers, that person will have a very strong claim,” said Ajith Nivard Cabraal, the central bank governor under Mr. Rajapaksa’s government, who still advises the family. “Even if he’s no longer the president, as the Constitution is structured, Mahinda will be the main power base.”

[Double Edge]

[ATTACH]46653[/ATTACH]

Squeezing China AND US, latter isn't mentioned here

What are the Americans to do ?

IMF contribution from the US is funded by the US taxpayer and if the Paks don't get the IMF bailout then China gets a port ?

So the Paks will get the IMF bailout and that money may be used to pay off Chinese loans

[Oracle]

Squeezing China AND US, latter isn't mentioned here

What are the Americans to do ?

IMF contribution from the US is funded by the US taxpayer and if the Paks don't get the IMF bailout then China gets a port ?

So the Paks will get the IMF bailout and that money may be used to pay off Chinese loans

OR, the Paks may not get an IMF bailout, the Chinese lose their investment and Gwadar, and then Pak crumble and lose its nukes.

Paks cannot forever put a gun to their head and threaten suicide if their begging bowl doesn't receive alms.

[Oracle]

CPEC – an unfair deal for common Pakistanis?
The European Foundation for South Asian Studies (EFSAS)

“This will be my first visit to Pakistan, but I feel as if I am going to visit the home of my own brother”. With these words the Chinese President, Xi Jinping, described his first state visit to Islamabad on the eve of formalizing the historic agreement of the multibillion-dollar project, designated as the China Pakistan Economic Corridor (CPEC), in April 2015. Under this grand strategy, China began to finance numerous energy, transport and infrastructural development projects, advertised as being essential to improving Pakistan’s economic progress, social growth and regional connectivity.

Now, after more than three years since the CPEC has officially commenced, it is high time for an assessment on how Pakistan and China have managed so far to advance this colossal, fifteen-year project, valued currently at $62 billion. This article will analyse whether Beijing indeed treats its ‘all-weather friend’ as a brother or more like a subordinate. It will evaluate the progress of the ongoing projects and compare the profits and losses of the two ‘shareholders’. This article will also discuss the benefits derived, or lack thereof, from this venture, using the perspective of the common people, emphasizing the fact that undoubtedly the CPEC will bring money to Pakistan, yet it is unclear whether it will actually positively impact the standard of life of the local population. Despite being fully aware of the legal issues surrounding the building of this corridor with regard to the disputed territories of Gilgit-Baltistan and Pakistan Administered Jammu & Kashmir, ongoing terrorism in the Federally Administered Tribal Areas (FATA) and an insurgency in Balochistan, this article will specifically focus only on the economic implications of the CPEC in order to explain in financial terms how it will influence the lives of common Pakistani people.

In order to achieve that, the article will thoroughly examine the actual job distribution and control over the CPEC projects, the levels of consensus between the two parties, and the interest rates imposed on Pakistan, by using few of the current energy projects as case studies. The Chinese cultural invasion will be further reviewed and forecasts related to its long-term impact will be generated. The article will conclude with calling for greater transparency and public awareness in regard to the implementation of the projects, invoking the greater involvement of the population into the decision-making process and effective accomplishment of the action plan.

CPEC in numbers
In 2014, China initiated a massive economic development project called One Belt One Road (OBOR). This initiative involves China spending between $4-8 trillion during the next several decades on various projects in nearly 70 countries. The ultimate objective is to recreate the old Silk Road, which connected China with the Middle East, Africa, and Europe through Central and South Asia. When completed, this new Silk Road initiative will link China to Europe and Africa using roads, railways, airports, pipelines, telecommunication networks, fibre-optic connections, seaports and other types of utility grids. According to China, the Belt and Road Initiative (BRI) tackles an infrastructural gap and therefore aims to accelerate the economic growth of various countries around the world, by simultaneously developing major industrial, agriculture, and energy centres in the participating countries, yet all linked to Chinese institutions.

By the time of its estimated completion in 2050, OBOR will stretch from the edge of East Asia all the way to East Africa and Central Europe, and it will impact 62% of the world’s population and 40% of its economic output. Its ultimate strategy is of becoming the guardian of a new platform for social and cultural connectivity, international trade, financial cooperation and political dominion.

One of the most important countries in this initiative is Pakistan, since currently the crown jewel of Beijing’s ‘One Belt, One Road’ is the China Pakistan Economic Corridor. CPEC is a 3,218 km-long route (2000 miles), to be built over the next several years, consisting of highways, railways and pipelines, which span from Gwadar port in Pakistan to Kashgar in the Xinjiang Uygur Autonomous Region of China. The agreement was signed on 20 April 2015; the actual estimated cost of the project is expected to be $75 billion, out of which $45 billion shall be spent to support a vision to make the corridor operational by 2030 and the remaining funds shall be invested on energy generation and infrastructural development. Projects have been categorised under four phases: ‘Early Harvest’ (priority) - to be completed by 2018; short-term projects, or actively promoted projects - to be completed by 2020–2023; medium-term ones by 2025; and long-term projects to be completed by 2030.

With regard to infrastructure, according to the project’s action plan, a 1,100 kilometre long motorway will be constructed between the cities of Karachi and Peshawar, while the Karakoram Highway between Rawalpindi and the Chinese border will be further reconstructed. The Karachi-Lahore-Peshawar main railway line (1,872 km) will also be entirely overhauled. Numerous roads will be established in the province of Khyber Pakhtunkhwa (KPK), which will eventually connect it with Balochistan. A network of pipelines to transport liquefied natural gas and oil will also be laid as part of the project, including a $2.5 billion pipeline between Gwadar and Nawabshah to eventually transport gas from Iran. In addition, Pakistan's railway network will be extended to connect it with China's Southern Xinjiang province. According to the Government of Pakistan’s official website, all of these projects will be financed through Chinese Government Concessional Loan (GCL) and among the sponsoring companies will be China State Construction Engineering Corporation and China Communications Construction Company Ltd, while the rest of the work will be awarded through open bidding of Engineering, Procurement and Construction contracts.

In relation to energy projects, around $30 billion worth of energy infrastructure will be constructed by private consortia and up to 15,000 MW of energy generating capacity will be brought in order to help alleviate Pakistan's chronic energy shortages, which regularly amount to over 4,500 MW. While demand during the peak summer months is around 24,000 MW, power generation is less than 1,600 MW, with some regions suffering from 20–22 hours of power cuts every day. Electricity from these projects will primarily be generated from fossil fuels, though hydroelectric and wind-power projects are also included, as well is the construction of one solar farm. Since most of the energy project contracts were ‘won’ by Chinese companies that have taken over the engineering, procurement and construction of them, the necessary power equipment will be imported from China, for which Pakistan will have to pay duly. According to the Pakistani Bureau of Statistics, “…in the first five months of this fiscal year, the import of power generation machinery stood at US$1.4 billion”.

CPEC also includes a number of initiatives in Pakistan that are not only economic in nature, but also have cultural and civic implications. For instance, the Safe Cities Project is such an initiative, which is related to the security and surveillance of Pakistani cities. The objective is to train police, military personnel, city administration and other related departments to manage the city effectively, especially with regard to the threat of terrorism. Nevertheless, what is important to mention is that the initiative was primarily designed to safeguard Chinese workers from Pakistani terrorists, hence exposing the one-sidedness and dissymmetry of the initiative.

Therefore, on paper, it might be explicitly and profoundly explained how the CPEC is being constructed in order to fulfil the needs and wishes of the Pakistani population, yet the following section will portray how the reality greatly differs from what is being said or written. As time will show, Pakistan is at risk of carrying the CPEC on its shoulders as the burden of Atlas - bearing the heavy weight of this shrewd Chinese masterplan, while Beijing devours the lush fruits of its venture.

Financial Implications
Electric power projects constitute the largest share of the CPEC portfolio in terms of cost, since the country experiences its greatest deficiencies in this sector. However, Pakistan’s desperate pursuit of electricity exhibits the collective irrationality and precipitance of its Pakistani contractors, since its electric power shortfall might diminish in the upcoming years, yet it will be much more expensive compared to regional competitors. For example, the acknowledged tariff of the 1320 MW Port Qasim Coal Power Project ($0.0836/kWh) is higher than similar projects in Bangladesh involving Chinese sponsors, such as the 1224 MW Banshkahli Coal Power Project ($0.08259/kWh) and the 1320 MW Payra Coal Power Project ($0.083089/kWh). CPEC security surcharges added to the electricity bills of Pakistani consumers will make the new electric power even more expensive. Furthermore, there are major disparities considering the financing of those energy projects. First, many of them are funded by loans from China and are not actual investments, which could obstruct Pakistan’s ability to pay back. For example, until January 2017, the proportion of foreign direct investments (FDI) from China was only $750 million and the remaining $2.2 billion was in the form of loans. Additionally, the interest rates charged by the China Development Bank and the China EXIM Bank reveal that with an estimated debt-equity ratio of 80%-20%, and investments guaranteeing a 17% to 20% rate of return on their equity, China could recover its investment in less than 3 years, while ripping off Pakistan for at least the upcoming quarter of a century. Not only that, such hugely expensive electricity could paralyze Pakistan’s already fragile economy.

The current scenario draws quite striking parallels with China’s involvement in Sri Lanka. In December 2017, Sri Lanka had to formally hand over its southern sea port of Hambantota to China on a 99-year lease, after being unable to repay its debt. Hence, the debt trap Sri Lanka has found itself should provide some useful lessons for Pakistan. First, CPEC might come at the expense of national sovereignty and independence if Islamabad does not carefully review the financial agreements it abides to; and second, the imposition of China’s terms and conditions could be hardly interpreted as a ‘win-win’ situation. The Gwadar Port deal vividly illustrates those claims, since the profits will be 91% in favour of China in the following 40 years.

Given the above picture, it is possible to forecast the astronomical burden on Pakistan’s payment capacity in the coming years. The impact this debt-financed project will have on Pakistan has been discussed by various international and supranational bodies. In its recently concluded review of the project, the International Monetary Fund (IMF) has also warned Pakistan of the ‘looming CPEC bill’ that Islamabad will have to defray in the end. The IMF has expressed its concerns about the adverse implications of repayments of loans and profit repatriations to China, which could place the Pakistani economy in a lot of trouble than actually encouraging its development.

In the initial year, the impact of the CPEC-related outflow was estimated at only 0.1% of GDP per annum by Pakistani authorities. Yet, according to the IMF, those repayments will peak after seven years, reaching between $3.5 billion and $4.5 billion in a single year. The IMF assessed that the CPEC-related outflow would reach 1.6% of GDP per annum by 2024. In addition, Pakistan had an external debt of $75.747 billion in the first quarter of 2017, which is expected to grow to $110 billion in the next four years according to Pakistani economists. All of that, coupled with the fact that Pakistan’s repayment capacity remains weak, due to lack of any vast increases in terms of exports and due to the volatility of the Pakistani Rupee against the US dollar, appears as an issue of great concern.

Job Opportunities
In such a heavily congested and poor country like Pakistan, the CPEC will certainly be evaluated in regards to any employment opportunities it could provide. Currently, the population of Pakistan is more than 200 million, with people in their 20-30s as a majority, which means a large working age populace. Therefore, for many of those young people, the CPEC might have appeared as a favourable possibility of finding a job.

Both Pakistani and Chinese officials and media news outlets constantly give employment figures for different projects, yet hardly any of those numbers are substantiated by a formal governmental document. For example, Pakistani newspapers reported that the Suki-Kinari hydropower project in Khyber Pakhtunkhwa is expected to create more than 4,000 jobs, while the Sahiwal power plant, southwest of Lahore in Punjab province ‘hired 3,000 locals’. Port Qasim Coal Power project is reported to have created job opportunities for 5,000 Pakistanis, whereas the Sahiwal Coal Power Plant Project and Zonergy Solar Power Project - 3,000 jobs each. The KKH Phase II Havelian has been said to provide jobs to 2071 locals, while the Orange Line Metro Lahore - 956 people and Fiber Optic project - 580.

Chinese Deputy Head of Mission Zhao Lijian, who was recently named as the focal person on CPEC power projects, said that around 60,000 Pakistanis are working on different Chinese projects in Pakistan. Similarly, Fawad Khalid Khan, a senior engineer working with the China National Electric Engineering Company as a deputy commercial manager in Pakistan, believes that at least 100,000 jobs will be created over the next few years under the power and infrastructure projects of CPEC alone. Additionally, Pakistani mainstream media stated that the construction of the 392km highway from Multan in Punjab to Sukkur in Sindh is expected to create some 9,800 local jobs.

Nevertheless, none of these claims have been put on paper. Even ostensibly detailed reports of the CPEC actually provide no specific data on actual job figures, which is highly alarming considering the ongoing public resentment and suspicion regarding who is the de facto benefactor of the CPEC.

Yet, the informational eclipse does not end here. There is scarcity of information on the types of jobs that will be created, what skills will be required, what their duration will be, which projects will be included and what will be the amount of the salaries. Currently, the rates of unemployment in Pakistan stand at 5,9%, which accounts for more than 3 and half million of the population. Therefore, even if those job prospects are taken at face value, they are still nowhere near to satisfy the overall demand.

Considering the fear expressed by many Chinese citizens in regard to security, earlier highlighted by the Safe Cities Project, one could speculate that a big proportion of these jobs, in fact, will be in the security domain. Currently, the figures cited for Pakistani individuals employed in this sector range from 15,000 to 18,000 personnel, all hired to protect Chinese investments and citizens. The December 2017 disappearance of the Chinese engineer Pingzhi Liu, who was located at the Karot Hydropower Plant, justified the fears of Chinese officials for the necessity of more stringent surveillance and security. Shortly after the incidence, the Chinese Embassy warned all “Chinese-invested organisations and Chinese citizens to increase security awareness, strengthen internal precautions, reduce trips outside as much as possible, and avoid crowded public spaces”.

What also must not be forgotten is that resulting from the China Pakistan Free Trade Agreement (FTA), many jobs have been moved from Pakistan to China, which further poses the question whether Beijing will replace those lost jobs. There are similar fears about the CPEC that it might lead to a loss of jobs because of the influx of cheaper Chinese goods that would drive Pakistani products out of the market. China is now the largest source of Pakistan’s imports, which stands at almost 30%. Many industry leaders have complained that the FTA has left them in a disadvantaged position against their Chinese competitors. Between 2012 and 2017, Pakistan’s trade deficit with China tripled, going from $4 billion to $12.7 billion. Various Pakistani business groups have complained that products in which Pakistan enjoys a competitive advantage are not covered by the Chinese side, which enjoys far wider access to Pakistan’s markets.

Appropriation of Land
Using the Suki Kinari Hydropower Project as a case study, another alarming issue surfaces. The Hydropower Station is being established in the region of Khyber Pakhtunkhwa and has an estimated cost of more than $1,800 million, which will finance the formation of a 3.1 kilometre long reservoir with a capacity of 9 million cubic meters of water, where turbines will generate approximately 870 MW of electricity. For the purposes of the project, the divisional administration has promised to ensure the acquisition of 4,418 kanals of land (1 kanal = 505.857 m²), including 1,200 kanals of reserved forest and 30 kanals of State land. Pakistan’s SK Hydro group and China’s Gezhouba Group developed the dam, and in April 2015, the developers and the Exim Bank of China and Industrial and Commercial Bank of China signed an agreement for 75% of financing costs. Subsequently, the Government of Pakistan agreed to purchase electricity from SK Hydro at a cost of $8.8415 cents per kilowatt-hour for the upcoming 30 years. Yet, despite that the aforementioned stakeholders appear to have achieved a consensus on the price and tariffs, one of the major stakeholders – the Pakistani people – have been unceremoniously neglected. In March 2018, the landowners, whose land was acquired for the implementation of this project, forcibly stopped the construction works on the dam in the Rajwal area of the Kaghan valley. As Mian Ashraf, the Chairman of Tahaffuz-i-Haqooq Balakot committee argued:

"We want market price for our land acquired for the dam. The government signed agreements with us but now it does not honour commitments".

He claimed that Tahaffuz-i-Haqooq Balakot Committee had decided to obstruct the district administration to acquire land anywhere in the entire tehsil, as it was not fixing appropriate prices of their lands. According to the landowners, the government had set a price of Pakistani Rupees (PKR) 800,000 per kanal, yet the actual per square metre value of the property was not more than PKR 8,000, while there are over 505 square metres in each kanal of land. As a result, the owners have been offered a five times lower price than the actual commercial value of the property. Considering that those people were having very few other sources of livelihood due to the rough terrain, the unjust appropriation of their land has come as a direct violation of their human rights.

The same situation is visible in other areas, which are part of the project. For example, in the disputed territory of Gilgit Baltistan (part of Jammu & Kashmir), the local residents are concerned about the land grabbing, demographic shift and environmental pollution, which the CPEC inflicts to the region. Although the Pakistani government claims that the multibillion megaproject will bring economic prosperity to the area, the indigenous people remain sceptic since they further perceive the endeavour as a threat to their unique culture, as the majority of them are Shia Muslims, unlike the majority of Pakistanis, who are Sunni Muslims.

Cultural Invasion
Apart from the Chinese financial invasion, which constitutes securing jobs for its workers at the expense of locals, and flooding the market with cheap goods, which suffocates the domestic business, the adverse dimensions of the cultural exchange between the two countries should also be considered; In July-August 2015, a group of Pakistani teachers were part of a 15-day Chinese language training programme. The fact that these teachers have been trained to teach Chinese to Pakistani students implies that many jobs offered will involve dealing with Chinese staff in Pakistan. Currently, the abundance of Chinese language courses across Pakistan suggests that with the advent of the CPEC there will be sufficiently large numbers of Chinese citizens present in Pakistan, which in the long run might trigger cultural friction.

Such cultural frictions and language controversies have exercised far-reaching effects on the history of Pakistan in the past. Behind the separation of East Pakistan from West Pakistan and the establishment of Bangladesh was exactly the imposition of Urdu as a State language, neglecting the Bengali language, despite the fact that the number of Bengali speakers (56%) was higher than the number of Urdu speakers (7%). Language has been closely connected to power and ideology in Pakistan, since Urdu was considered the language of the elite. Currently Punjabi is the most widely spoken (48%), yet it still does not have an official status in law. Pakistan submitting to the socio-cultural impact of the introduction of the Chinese language, at the expense of its local languages, could appear as evidence how the country slowly is becoming a satellite State of China.

The rising numbers of Pakistani students going to China for higher education is another aspect of contemporary Sino-Pak relations. In fact, Pakistani students are now being sponsored for studies in China not just by the Chinese government but also by Chinese companies. In 2017, around 2,500 Pakistani students were enrolled in different Chinese universities, bringing the total number of Pakistani students in China to 22,000. With such a large number of students from Pakistan studying in Chinese universities, China has now become the largest destination for Pakistani students seeking overseas studies. According to statistics from 2016 released by the Chinese Ministry of Education, more than 200,000 students from 64 countries along the Belt and Road Initiative were studying in China. The number of students studying in China from countries along the Silk Road project has increased greatly under a series of preferential policies and scholarships.

In general, enrolling in a foreign university - building a wider network and facing a greater diversity in terms of experience - enhances one’s knowledge and position on a global scale; yet, for Pakistan it could also mean confronting a ‘brain drain’ where its biggest and brightest talents flood out of the country, and as a result the economy experiences even more severe downfall.

Conclusion
The current analysis portrays the mechanisms of the CPEC according to which it operates and it discusses the various complexities originating from the lack of agreement and information on what the actual costs and benefits are likely to be. It argues that despite the abundance of Chinese, Pakistani and international reports which lay out figures and statistics, seldom the data matches, highlighting the absence of transparency and clarity.

The Chinese master plan conceives a picture where the majority of Pakistani socio-economic sectors are deeply penetrated by Chinese companies and Chinese culture; thus, Islamabad puts itself at risk of facing its finances and societal structure experiencing a colossal wreck. The combination of high upfront tariffs, interest rates and surcharges will complicate Pakistan’s efforts to repay its loans, forcing the State to increase its domestic and export prices, making it difficult to compete with neighbouring and other countries which maintain lower prices.

The borrower is always servant to the lender. The 15-year megaproject illuminates how Pakistan voluntarily is becoming progressively subjugated by China and its terms and conditions. Following Beijing’s history of trade relations with African countries, it is evident that China will be very careful about its investments and thereafter quite rigid in receiving its money back. Islamabad might have signed the CPEC agreement believing it would be advantageous to its country but it actually subscribed to an unfair deal for which common Pakistanis will eventually suffer.

Although China advertises Pakistan as its brother and ‘all-weather friend’, the truth is that their ‘friendship’ has always had an embedded enduring imbalance; Pakistan is in China’s debt and the debt will only deepen.

China has exclusively taken advantage of the fact that Pakistan has managed to isolate itself from the world due to wide allegations of sponsoring terrorism and Beijing might currently act as the Godfather assuring Islamabad that it will serve its interests, yet is fully aware that this patronising attitude will only turn Pakistan into a colony which will always require China for its day-to-day survival. As long as Pakistan operates in the shadow of another East India Company and does not realize the importance of protecting its national interests, which in essence are the people of Pakistan, any attempts for national development will transform into national calamity.

[Oracle]

Don't know where to put this article, so posting it here. Things of interest are in bold.

2+2 dialogue important to enhance engagement with India: US

Describing India as an 'all-weather partner', the United States has said the upcoming 2+2 dialogue with the country is an important opportunity to enhance engagement on a range of diplomatic and security issues and discuss how to operationalise India's status as a major defence partner.

US Secretary of State Micheal Pompeo and Secretary of Defence James Mattis will travel to New Delhi next month for the 2+2 dialogue, the format of which was agreed upon between the two sides during the visit of Prime Minister Narendra Modi to Washington in June 2017.

Earlier, External Affairs Minister Sushma Swaraj and Defence Minister Nirmala Sitharaman were to travel to Washington to take part in the meeting with their US counterparts in July.

But the US had postponed the dialogue citing 'unavoidable reasons'. After June last year, the two countries have tried to schedule the dialogue many times with several dates having been considered.

Earlier this year also, the '2+2 dialogue' had been postponed due to uncertainty over the confirmation of Pompeo as President Donald Trump's new Secretary of State.

"With India, we are looking forward to the inaugural 2+2 dialogue with Secretaries Pompeo and Mattis traveling for these meetings in New Delhi on September 6," Principal Deputy Assistant Secretary Alice Wells told reporters on Monday.

"It is an important opportunity to discuss and enhance our engagement on a range of diplomatic and security priorities and really is an indication of the deepening strategic partnership that we enjoy with India," she said.

Wells was addressing a Foreign Press Centre video conference from Washington on 'US Policy in the Indian Ocean Region' during which she previewed her upcoming travel to the Indian Ocean Conference hosted by the India Foundation in Hanoi on August 27-28.

She said India plays a central role in US national security adding that it is 'enshrined in the President's national security strategy as well as the administration's South Asia and Indo-Pacific strategies'.

She said at the upcoming 2+2 ministerial, the US is looking to discuss 'how do we operationalise India's status as a major defense partner'.

India was designated a major defence partner by the US in 2016.

Defence cooperation between India and the US has grown from 'essentially zero dollars' in 2008 to $18 billion (12.5 lakh crore) today.

The US does more military exercises with India than with any other country in the world 'but how do we take this partnership to a new level so that it is not just going to be defense acquisitions but really a way of framing how we see challenges and how we want to be able to respond together to address these challenges'.

Highlighting that the India-US partnership is rooted in shared democratic values and commitment to rules-based order, Wells said the two nations are going to be able to demonstrate at the 2+2 dialogue the facts of this maturing partnership.

On a question about trade relations with India, Wells said opening up trade with India is a 'key strategic objective' for the Trump administration.

Bilateral trade currently stands at about $126 billion (Rs 87 lakh crore), an increase of more than $10 billion (Rs 6.9 lakh crore) from last year and there have been critical purchases by Indian firms in the commercial aviation, energy as well as the defense sectors She however added that impediments do remain between the two countries on trade.

"Tariff and non-tariff barriers have been a subject of longstanding concern and intellectual property rights as well. So we are continuing a very intensive dialogue with the Indian government on how do we address these irritants and unlock the trade that is of great interest to US firms when they look at the Indian market and its potential," she said.

Wells added that looking outside of India, Washington wants to work together with New Delhi and identify projects whether they be in Sri Lanka or Nepal.

"One of the great new elements of our relationship with India is that we are working in third countries," she said as she cited the example of the assistance and developmental level work with India in Africa on health-related issues and peacekeeping training.

She said India and the US worked together in programmes that involved bringing Afghans to India for cost-effective training.

"India really is an all-weather partner as we look ahead to how to ensure that the Indo-Pacific remains free and open."

During the press briefing, Wells previewed her upcoming travel to the Indian Ocean Conference and how it supports the Trump administration's Indo-Pacific strategy.

The annual conference, hosted by the India Foundation along with its partners from Singapore, Sri Lanka and Bangladesh, will focus on the theme of 'Building Regional Architectures'.

[Oracle]

CPEC repayment plan under preparation

ISLAMABAD: Ahead of the new government, bureaucrats are busy in working out details for a bailout package especially for repayments of instalments of operational projects under the China-Pakistan Economic Corridor in 2018-19.

The blueprint mostly identifies a string of measures to cater to supply-side arrangements of foreign exchange in a period of five years — 2018-2023.

The issue gained importance nationally and internationally after Washington’s recent warning to the International Monetary Fund in discussing the bailout package with Pakistan on the plea that there is “no rationale to bail out Chinese bondholder or China itself”.

Initial working shows that nearly $47 billion worth contracts have been signed for CPEC. Out of this, $22bn projects have achieved financial close by the end of PML-N government.

In the energy sector, financial close was achieved in 14 projects worth $12.25bn. However, financial close was yet to be achieved in 10 projects at $11.34bn.

In the same category, six energy projects valuing at $4.5bn are in operation, producing power and its payments are due from the current fiscal year. The total electricity produced from three wind, two-coal based and one solar project is 3,839.5MW.

But the repayment of these and others projects will spread over a period of 25-30 years, paid twice a year. It is estimated the six-month instalments in CPEC projects would amount to a maximum of $71.5m in the short term.

Sources in the prime minister secretariat told Dawn the repayments can even be negotiated in the Chinese renminbi. The repayments start from the time when the projects come under operation, the source said.

No projects have reached completion in the area of road, rail, mass transit, PSDP/SPEC and Gwadar till date, the sources said.

As per an alternative plan to pay off the already borrowed money, several proposals are being considered and suggested to the new government.

CPEC will not become a ‘corridor’ unless the Gwadar-Kashgar oil pipeline is constructed with a foreign direct investment of around $10bn with almost $1bn of rental every year. The tourist cities outsourced to international developers are programmed to bring in about $20bn, the sources added.

It was also suggested that the new government renegotiate the remaining component of CPEC, which is about $28bn from loans to FDI.

About $5bn is required in the shape of grants from international donors in health and education to which the national and international community is willing to contribute under the new governance paradigm promised by the new government.

The last city to be built from scratch in Pakistan was Islamabad, starting in 1960. The city has now grown to a population of nearly 1.5m in 55 years.

Companies like Walt Disney can develop Gwadar and Kumrat, according to the people in PM house who are building this plan for the incoming government, whereas DHA, Bahria Town and others can develop Kallar Kahar and Chattar Plain on build, own, operate and transfer basis, they say.

In order to build another 4m homes, 20 new satellite cities will have to be created around each economic hub, they argue. Each will be at a distance of 40-60km connected with high speed rail and road network to facilitate the workforce living out of major towns yet remaining connected to their workplace.

Disney is into infrastructure building? OR the Paks want a Disney theme park?

[Oracle]

Pakistan in contact with ADB for technical assistance

KARACHI: Caretaker finance minister Dr Shamshad Akhtar has hinted Pakistan is in contact with the Asian Development Bank (ADB) for possible technical assistance and capacity building.

Dr Akhtar, who has served the Manila-based financial institution in various positions during 1990-2011, said she is also playing an active role in connecting the new government with the ADB.

She said this during a meeting with the Pakistan Stock Exchange’s (PSX) board of directors on Saturday.

“The minister apprised that she is in contact with the finance minister-designate of the newly-elected government, as well as ADB for possible support in the areas of technical assistance and capacity-building,” stated the PSX in a press statement.

At present, Pakistan is in contact with multiple international financial institutions and friendly countries, including the Islamic Development Bank (IDB), China and Saudi Arabia to acquire financial assistance, to stabilise its foreign currency reserves and come out of a balance of payments crisis. They altogether are estimated to lend and support to the tune of $7 billion, while China has already provided $2 billion in fresh loans.

Additionally, Pakistan is also preparing to enter into a discussion with the International Monetary Fund (IMF) for a bailout.

PSX roadmap
The meeting discussed at length the roadmap, approved the other day, for the development of the capital market. The minister suggested upgrading the roadmap for a way forward to “implement the initiatives with specified timelines”, the statement said.

“The roadmap has been devised in order to have a proper plan in place to ensure enhancing the market capitalisation, continued resource mobilisation and to strengthen the role of the PSX. The objective is to enhance investor confidence, to bring in more foreign inflows and mobilise savings for investments, which in turn will impact all sectors of the economy with higher growth,” she commented, according to the statement.

PSX Managing Director Richard Morin also briefed Dr Akhtar on the roadmap and stated that the PSX board approved a strategic plan just a day before, with broad objectives and action plan for the development of the capital market.

He emphasised the shared vision and added that “the roadmap is a starting point” and it requires efforts on a continuous basis. For this, he suggested to have a permanent forum to be established by the government.

Participants of the meeting, who represented the banking industry, asset management companies (AMCs) and brokerage houses, drew attention towards impediments in the development of the capital market and suggested a number of measures to remove them.

They suggested the issuance of a comprehensive policy statement from the ministry of finance. The discussion revolved around reforms in taxation policy to provide level playing field to investors of capital market, restructuring policy board of the Securities and Exchange Commission of Pakistan (SECP), and a viable business model for the brokerage industry. Reforms for requirements of enhancing capital and capacity of brokerage houses and consolidation thereof, availability of derivatives and options products for retail investors, promoting digital environment were also discussed.

[Oracle]

Saudi-backed IsDB ready to help Imran-led govt with $4 billion loan

KARACHI: Pakistan plans to borrow more than $4 billion from the Saudi-backed Islamic Development Bank (IsDB) as part of its attempts to restore dangerously low stocks of foreign currency, reported The Financial Times on Thursday.

Two officials told the daily that the Jeddah-based bank had agreed to make a formal offer to lend Islamabad the money when Imran Khan took over as prime minister. They added that they expected Asad Umar — Mr Khan’s proposed finance minister — to accept the offer.

“The paperwork is all in place,” said one senior adviser in Islamabad. “The IsDB is waiting for the elected government to take charge before giving their approval,” the report quoted the official as saying.

The official added that the loan would not cover Pakistan’s expected financing gap of at least $25bn during this financial year but was “an important contribution”.

Speaking to reporters in Islamabad this week, Mr Umar had warned: “The situation is dire. We’ve got 10bn dollars of central bank reserves, [and] we’ve got somewhere between $8bn and $9bn in short-term liabilities, and therefore your net reserves are close to nothing.”

As per the newspaper report, officials have already drawn up plans to borrow up to $12bn from the International Monetary Fund — though such a bailout is likely to come with strings attached, such as a demand to see the details behind billions of dollars’ worth of Chinese loans.

Mr Umar, it added, was therefore exploring what other options remained open to him, of which the IsDB loan was one. Officials said the loan would be used mainly to pay for oil imports, with higher crude prices having contributed to the country’s problems.

One official at Pakistan’s central bank — who has been involved in negotiations with the IsDB — said the loan had the backing of the Saudi government, “which wants to play a part in rescuing Pakistan from its present crisis”.

Despite the promise of money from the IsDB, economists warn that Mr Khan’s government will still have to enact potentially unpopular spending cuts and tax rises to help repair the government’s balance sheet.

“The budget deficit shot up to about 7 per cent of gross domestic product during the last financial year,” Waqar Masood Khan, a former finance ministry official told FT. “Bringing that down to the target of 4 per cent is not going to be easy,” the report added, quoting the official.

[Oracle]

Pakistan receives $439m in foreign loans in July

ISLAMABAD: International creditors have disbursed $439 million loans to Pakistan last month, an amount that still seems insufficient to meet the country’s growing external sector requirements.

About two-thirds of the total loans have been received from China against four projects, showed statistics compiled by the Ministry of Finance and Economic Affairs. The Chinese project financing is expected to slow down in the coming months due to completion of ongoing schemes.

The $439 million in loans are exclusive of the $2-billion one-off Chinese injection meant to stabilise gross official foreign currency reserves held by the State Bank of Pakistan (SBP). The loans have not been booked on the federal government’s books, according to the officials.

China disbursed $290 million in July. This amount includes $166 million for the Orange Line Metro Project, $95 million for the Sukkur-Multan section of China-Pakistan Economic Corridor’s (CPEC) eastern route, and $22 million for Havelian-Thakot road of CPEC. All these three schemes are near completion.

Yao Jing, the Ambassador of People’s Republic of China, met with Asad Umar, the Finance Minister, on Monday. The ambassador said that he looked forward to working closely with Pakistan with a view to further increase the economic cooperation between the two countries, an official handout of the finance ministry stated.

Pakistan expects continued Chinese financial assistance to deal with the current economic crisis, as reliance on the International Monetary Fund (IMF) may make things complicated for both Islamabad and Beijing, according to officials.

The minister expressed his desire to further enhance bilateral cooperation in various fields. Referring to CPEC, he said that the corridor will play an important role in taking Pakistan’s economy forward as well as cementing bilateral relationship. Umar assured the ambassador of his full support for CPEC, according to the finance ministry.

Pakistan also received $70 million worth of two commercial loans from Noor Bank PJSC and consortium-led by Suisse AG. Both of these loans have been obtained for one year at the floating London Interbank Offered Rates. Noor Bank disbursed $20 million in July out of total committed amount of $130 million.

The Suisse AG also disbursed $50 million out of its total commitment of $750 million. Both of these loans will mature within this fiscal year, increasing the refinancing risks for the country at a time when it is already facing pressure on its external sector.

Pakistan’s gross external financing needs are assessed at a minimum $26 to $28 billion, depending upon the projected current account deficit.

Pakistan booked $2.2 billion current account deficit in July, which was 16% higher than the already higher base. But authorities believe that the trend will reverse in the coming months, as July’s current account deficit widened due to clearance of some pending import dues.

Finance Minister Asad Umar remained busy in assessing the macroeconomic situation and held another meeting with senior officials on Monday.

The minister was reviewing all the available options to deal with the external sector crisis, the officials said.

The loan disbursements by multilateral creditors remained low in July, as the country received only $48 million from multilateral lenders. The Asian Development Bank (ADB) disbursed $23.3 million. The World Bank also released $23.1 million last month.

The Economic Affairs Division (EAD) gave a detailed presentation to Umar and the main lenders of Pakistan. The briefing included financial progress of different foreign funded projects as well as certain aspects of potential projects to be included in the pipeline in future, stated the finance ministry.

Umar underlined the realistic assessment of required foreign assistance was an important function and the EAD should regularly update its assessment of various sectors in order to utilise the valuable resources in the most productive manner.

The finance minister also met with Nawaf Bin Said Al Malki, the Saudi Ambassador to Pakistan, and discussed bilateral economic cooperation.