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ISLAMABAD: Pakistan has refused part financing from the Asian Development Bank (ADB) for the $8 billion Karachi-Peshawar Railway Line (ML-1) after China said it wanted to fund the project single-handedly.
“China strongly argued that two-sourced financing would create problems and the project would suffer,” Minister for Planning and Development Ahsan Iqbal told a news conference on Thursday.
The minister said he would not comment whether the Ministry of Railways has resisted the Chinese request for fears of monopoly, but said the entire financing would now come from China. The project was originally planned to be partly funded by the Manila-based ADB.
Minister claims Planning Commission saved Rs560bn in four years
He said the ADB would be accommodated in some other projects, such as those under the Central Asian Regional Economic Cooperation programme.
Under the original plan, the ADB had to provide $3.5bn for the 1,700-kilometre-long line considered the backbone of the country’s logistics connecting two major ports with the rest of the country for transporting goods and passengers.
The minister said the Chinese government therefore wanted that the project financing should be kept single-sourced. Pakistan and China are expected to sign a formal agreement in this regard next month.
Mr Iqbal said the Planning Commission was making efforts to maximise allocation of funds for the next year’s development programme as it would be the final year of the current government. Therefore, the government would like to complete maximum number of projects during this period so as to support the growth momentum.
He said it was also important to have larger development portfolio for the next year because it would trigger activity in the construction industry on which a number of other growth-oriented industries were dependent because of its potential to create jobs.
“But we also have to balance ways and means,” he said, adding that the Planning Commission demanded Rs1 trillion for the of next year’s public sector development programme (PSDP), but the finance ministry has put a ceiling of Rs700bn.
He said the finance minister and the prime minister would be requested to increase development allocations. The minister said the annual plan coordination committee would meet on May 17 to finalise next year’s development programme. And for a formal approval, the Planning Commission has proposed a meeting of the National Economic Council on May 21 or 22, depending on prime minister’s availability.
Mr Iqbal said that since the current government came to power in 2013, the commission has saved Rs560bn by cutting project costs, transparency and scrutiny.
This included $1.6bn saving in highway projects under the China-Pakistan Economic Corridor (CPEC) and Rs70bn in Jamshoro Coal Power Project. He said another $1bn saving has been secured from three liquefied natural gas–based power projects through competitive bidding by the executing agencies.
He said the increased development portfolio has exposed the capacity of the various ministries and executing agencies to process a massive workload. Also, these agencies have formulated their project papers on the basis of feasibility studies prepared by international consultants.
Mr Iqbal said the government has decided not to include any major project in the PSDP without completion of technical designs and financial closures. Previous governments included thousands of projects through “token allocations” without protecting major ongoing projects, he added.
He said it was observed that 70pc of cost overruns were resulting because of inadequate financing in the PSDP. For example, the Bolan Medical College was started by former prime minister Zulfikar Ali Bhutto at an estimated cost of Rs7.5 million, but it was finally completed at a cost of Rs130m due to inadequate funding.
This also inflates projects’ cost, delays implementation, and results in hundreds of white elephants like Neelum-Jhelum Hydropower Project, which was started at cost of Rs80bn but ended up costing more than Rs500bn because the project’s design kept changing as the implementation progressed.
He said the government also revived some of the dead projects which had already consumed a lot of funds. Some of these included Quetta-Gwadar Highway (N-85) that was under suspension and was revived by the current government and made a connection under the western route of the CPEC.
Lowari Tunnel, Islamabad International Airport, Katchhi Canal and Chitral Hydropower Project were some other important projects that became a subject of neglect, corruption and mismanagement, but they have been revived and would be completed during the current fiscal year, he said.
Responding to a question, the minister said the current development portfolio involved 752 projects of Rs7.3tr.
Published in Dawn, April 28th, 2017
Comments (104) Closed
Which friendship is better U.S or China?
It's a dream run for Pakistan where-in both ADB & China are competing to give it loans.
Infact Good to see China falling head over heels to give more N more loans to Pakistan.
Pakistan has forex reserves of $18B.
Thru CPEC China has already promised loans worth $62B, now $8B more for Karachi-Peshawar Railway Line .... way to go.
Nice
the railway line is important, not the financing
It's already happening !! What China wants, it gets and there's nothing anyone can do about it !!
I mean, this can't be good right, that China is monopolizing everything in Pakistan?
Pakistan needs to look out for itself and diversify in every possible way.
Why only China invests in Pakistan?
I think China Sole financing is better as ADB had lots of technical issues.
Wow...China is dictating financial policy of Pakistan. I guess, interest rate of ADB loan may be lower than Chinese loan.
it seems Pakistan will be soon in developed countries list in infrastructure development after reading their ambitious plans
There is ONLY one ladder to succeed for Pakistan... The upcoming Super power China... You will see China's huge influence on World, very soon. Fasten your seat belts.
we have no problem with only China financing as long as it cuts down interest on loans significantly.
Absolutly brilliant dicision
Nice...pakistan is on the right path.
Sole financing by China will create business for more Chinese companies and employment opportunities for more Chinese laborers.
Thank you Brother China, we appreciate. Friends in need are friends indeed.
When you take loan from ADB, you could source your purchases under the loan from anywhere and on global competition. When you take a loan from a country, you have to buy all products and services from that country with almost no competition.
It makes sense to take one loan than two. ADB loan would have been gobbled up.
Neelum-Jhelum Hydropower Project, which was started at cost of Rs80bn but ended up costing more than Rs500bn .What a joke with the nation
China means ' Business ' as simple as that it doesn't want to lose the GRIP on Pakistan by allowing ADB
Pakistani will earn and spend...Chinese will take the money home
High interest chinese loans have never helped anyone...
Before borrowing money from a friend make sure what u want most..friend or money..with this loot khasoot u may not be able to repay..I guess there goes our silk route...self reliance is the best reliance ...
Good that it will cut corruption but bad because now Chinese will insist on their own company and people for construction eating away jobs.
China becoming sole financer ? My dear Pakistani friends, please remember that Chinese are first the businessmen, then your iron brothers. I hope you don't allow them to make Pak a client state for their political support. Best wishes Indian
There are pros and cons of both financing model.
China is slowly but surely getting a stranglehold on Pakistan's infrastructure, industry, utilities, finances, transport not to mention politics and independence with far reaching implications.
Private Money lender's are not good people
Two sources of funding would have clearly highlighted the huge difference in financing cost charged by these two.
"Minister claims Planning Commission saved Rs 560 bn in four years".. Really? So where is that money now? in Panama?
Don't put all your eggs in one basket .
u have to repay anyway ,,,whether CHINA or ADB...
Loans from here then loans from there. What is happening. Everyday it's all about loans.
if Pakistan is not able to repay debt in this case china will be taking the whole projects on lease similar to what it did in Sri Lanka. so it makes sense for China to demand single loan provider. Now if the loan was taken from ADB what would ADB do to recover loan they cannot take the project and utilize it. so it is good for ADB also.
China has effectively started dictating and influencing all public project decisions in this country.
Learn Chinese fast - if you want to be able to survive in this country at all.
We don't need Adb loan. Sorry but too late! Pakistan is rising! Get with the program !
@INDIAN thank for concern ! however since when India has became well wisher to us?
@Booza "Which friendship is better U.S or China?"
Time will tell if either of them was friendship!
There is an old saying, "Never put all your eggs in one basket" even when how durable and beautiful one basket looks. Not a mature business strategy.
Not sure if this is good news or bad news.....
ADB has been traditionally a financier of many projects in Pakistan. Their web site gives a complete list. Further they dont influence your country politics and external affairs relation Almost all large projects take finance from multiple source. Cant really understand the logic of china not allowing ADB. They clearly looking for more advantages than that meets the eye.
What was the interest rate at which ADB was offering the role and what is the interest rate at which China is offering? If the rate of chinese is lower, then there's no issue whatsover. However if it is higher or same as that of ADB, then this is an alarming development. Monopoly of one country over our loans/investment could be disastrous for us in the long run. We need to diversify the sources of investment/loans. Otherwise the prediction of China becoming a second East India Company may come true.
Personally I prefer to take loan from a friend rather than those who claim to be my friend but in reality they may have some hidden agendas. Read confessions of an economic hit man and make your own conclusions about loan from International Financial Institutions (IFIs) such as World bank, IMF and Asian Development Bank. Good luck to Pakistan
@Naveed Khan - Good sarcasm...
It is advisable not to put all eggs in 1 basket.
Pakistan has to remain careful and vigilant in its commitments even with China, because too much dependence on it may create problems in the future.
Is china giving loan at the ADB /Libor rate or at higher premium. that is important because infrastructure projects rate of return is not high . which may lead difficulties in repayment of loan .
@Katappa China is a major investor in Pakistan. No other countries have investednear close to China. This investment will benifit Pakistan and will attract other countries to invest after the long running projects of development are completed.
We admire China for her generous support of Pakistan.
@Katappa
Because of China's friendship with Pakistan and her national interest.
Here comes the most anticipated Chinese influence on our policies! you know what I mean
@The_Truth
Enjoy with truth.
It is music to one's ears to hear stories of development works as described by the minister. Pakistan's infrastructure will receive a mighty economic fillip with such projects because it is direct financial investment and not a loan to make up for the budgetary deficiencies. We must also improve our balance of payment situation because just now we have about 18 billion dollars in our reserves enough only for our 9 months of FE needs which puts heavy burden on our sovereignty because we have to beg for dollars from others. A country cannot be called truly independent unless it has reserves worth two years of our needs. We must get rid of our dependence on imported oil and gas by producing electricity from indigenous sources. Otherwise we cannot get rid of terrorism also.
I simply love the way the Chinese are investing in Pakistan. A true leader, it's investments are helping the world. From Sri lanka to Pakistan. Their projects have produced enormous wealth in the respective countries.
It also depends on which party is willing to pay a handsome percentage, to you-know-who, to make things happen in Pakistan??
All falling over to give loans. Pakistan should negotiate a revolving funds with China, which it can use for its projects and development. China is a brother country and our welfare is their welfare.
@zak Absolutely agree. China is a brother country, and their welfare is our welfare.
@Elli :- We will be only country who will support you in crisis, time will tell.
@CITIZEN thanks to previous incompetent govts including Musharrafs regime
Sri Lankans are clever. They allowed the Chinese investment to happen in Sri Lanka but to a certain extent. Therefore, China kept on investing in some projects (and many investments failed) but China hasn't gained any success in monopolising Sri Lanka. Unlike what's happening here.
@Mahmood No one says it and no one prints it but I have been saying the same.... the capital of Pakistan has moved from Rawalpindi to Beijing. The whole world knows and is saying it but no one in Pakistan is even aware of it?
China and turkey are two biggest corrupt to the bone and commission paymasters. The quality of their goods and services is and always be substandard. But they are good for Pakistan corrupts as money goes direct in their foreign accounts. Very reason you hear day and night China China and China.
After CPEC get completely operational , Pakistan will repay loan within the weak or a month. Pakistan shall then provide loan to ADB & China also. CPEC is "game changer" , it will handle all Pakistan loans . China wants loans from Pakistan in near future as its economy is getting slowdown , through CPEC Pakistan will be able to provide loan not only to China but also to the world. Go CPEC go...
My name is Glenn Baker and i live in USA Florida and i am a happy man today, I told my self that any Loan lender that could change my Life and that of my family, i will refer any person that is looking for loan to Them. If you are in need of loan and you are 100% sure to pay back the loan please contact them and please tell them that Glenn Baker referred you to them. scottlarry918@gmail.com
Glenn Baker
@Khany I think there is a difference between loan and investment.In loan case loan provider wants it money back with interest and in investment case money provider wants a share in the profit.Now the question is whether china investing or just providing loans and if only loans then possibility is china has no interest in Pakistan it only giving loans for to make Pakistan in heavy debt so that it can use this as a leverage.Start thinking that way avoid to became a satellite state of china otherwise you are free to believe what you think.
Shoddy railways lines that will need frequent replacements, shoddy engines and wagons that will pack up half the times. China is in medieval age when it comes to Western world on railway technology and in mecahnised construction of railway lines, erections of signalling system and buildings and monitoring system.
Politicians suck!
@TAriq , yes, good governance is a Fundamental requirement of ADB and World Bank's financing while China looks other side when it comes to dictators, good governance accountability and inclusiveness.
Pakistan is not the first country that china pouring money on. China has been doing it in african countries and in srilanka. No common people benefitted from their investments. they usually do this to countries who are politically unstable and or has huge unexploited natural resources.
China is our real friend.
Chinese will not only finance it but will definitely get contract to built it. You see this is how things are monopolized. They will earn interest and then will also earn all the profit out of the contract to built. Those earning will be tax free like all the CPEC projects. Pakistan is being taken for a ride, what Americans could not do in last 6 decades, Chinese have done in one. Mark it it is not the military power that is gonna rule the world in long time but economic power
@Booza
China is friendship; US is bossing.
Minister for Planning and Development Ahsan Iqbal told a news conference, on Thursday April 27, that the government saved more than Rs560 Billions over four years. That amounts to Rs140B per year or 2.7B per week. That sounds very nice. But does it sound believable? Is it cost avoidance or cost savings? Is it real savings or a “political statement?”
Three savings identified included $1.6 Billions (=Rs166B) in CPEC Highways Projects, Rs70B in Jamshoro Coal Power Project and $1 Billions (=Rs104B) from three liquefied natural gas–based power projects. Add the three identified saving. The total would be Rs340 Billions (=166+70+104). Of the Rs560B savings claimed, only Rs340B has been identifies. Why? Where did the remaining savings come from? If I had saved that much for the nation, I would have detailed every savings, to the granularity of Rs1B, such that an independent audit may validate the claim? Would be nice if the Minister can provide these details. Would he?
@Booza Time will tell
It is hilarious, "ADB will be accommodated in some other projects" a lender has many choices, but the borrower has not.
Has anything heard about putting all eggs in one basket syndrome?
@Booza As a well wisher from India I feel that it's China's move to monopolise the situation. It reminds us of the times of East India company. The Geo political equations, though not in short span, May tend to change to suit the interests of big power. We often fall prey to such powers just to hate a neighbor. These are words of little caution. Anyway good luck to Pakistani friends in it's journey towards prosperity.
Just as Pakistan hurt itself by not diversifying during 50s, 60s, 70 vis-a-vis US. Pakistani is again falling for the same trap by not diversifying vis-a-vis China. Except this time...it's much worse.
China is on its way to become a super power.By helping Pakistan, china wants a firm & a stronger friend and Pakistan being a militarily professional country is the best choice. In case of a future conflict with US, china will use this stronger friend to counter the US. If U've an aim to look the most prosperous then ur friends should also look like you if not equal to u...
@Hussain : You are right. Chinese companies have compliance problems. Under the ADB procurement guidelines Chinese companies will have problems competing. E.G for Mariano- Lahore project Chinese company could not have been qualified to supply HVDC equipment under WB or ADB loan. Chinese companies bring outdated technology and tools to do the work. The local engineers and technicians do not get any opportunity of training and technology transfer.
The way it works is that i say i want to fully finance the operation and you pay me with interest back (my profits). Meanwhile because i'm the sole financier you will have to let that billions be spent on my own companies to make stuff for you at obviously handsome profit margins for my companies. Win for me completely!
@anees zed this is only to fool the people of pakistan. want to justify why loan is being taken from china.
@Yakub nice analysis.
I hope Pakistan is smart enough to understand whats going on and whats to come when dealing with China. China knows Pakistan is economically unstable and by letting them finance everything with high interest loans, Pakistan's future generations would have difficulties paying back. This is when China demands complete ownership and starts dictating Pakistan's policies to favor Chinese firms even when they would hurt Pakistan. Otherwise they would sue in international courts. Through CPEC, a tsunami of cheap Chinese goods will destroy Pakistan's local economy. Remember, when something sounds too good to be true, it is! To develop own economy, must have strong foundation and direction, which Pakistan lacks. China is just taking advantage - just like in Sri Lanka.
One advice to Pak: China wants do desprately dump the dollars, afraid of US devaluing it, or US putting sanctions. So leverage that, make sure that in your contracts with China if dollars go down, you are going to pay whichever is advantageous for Pakistan - not in higher dollar value.
@Anis Ali China is in a bubble which is headed way of USin 2008
@Elli China will give billions more in loan... But one day, they have to be paid back with interest.... Simple logic and simple predictor that Pakistan has become a vassal state already.. In a few years, the picture will be very clear...
@Anis Ali Mark my words for the day you regret for believing in this.
@Booza Both.
Why is it that Pakistan has to depend on loans for a project that can be accomplished through local effort. Just adding another side track along an existing track should be straight forward job for the most part. Only in certain sectors with low clearance major work will be required. Pakistan can itself this work in phases without taking billions in loan. Present Pakistani government lacks indigenous initiatives and has always depended on foreign investment in sectors that can be uplifted and completed with indigenous Pakistan development work. We need a leadership that motivates the nation to step up to challenges rather than sit back and look for help to come.
@Mohajir so dear do you realize what is happening. If not then you do not have even basic knowledge of economics.
@Booza : US never expected business or financial gains from us....We received only aids, grants, gifts from US, but we received only expensive loans from China, on their terms...
To tell you the truth
A. ADB loan would have mandated Global Tendering.
B. Global Tendering would have ensured supply by the lowest bidder.
C. Pricing would have been transparent.
D. And that, of course, does not suit the Sweeter than Honey Friends, who would like to sell Only Chinese goods at a Price most favourable to them.
Another egg to the same basket.
This is an excellent development. China is the only one can help Pakistan.
Part of finances from ADB would have been better to avoid monopoly. Unfortunately, Pakistan Railways doesn't have very good operational experience with Chinese make locomotives.
@Booza : You would understand after 30-40 years when you would not have option to come out Chinese grip.
Interest hmmm...
@wellwisher Without financing, how do you propose to make the railway line?
Why has our country refused to participate in the India led South Asian Satellite Project. We need to cooperate with all countries and not just one?. Not a good development to put all eggs in one basket.
It is always better to limit your needs than to fall in loan traps.
Their are othe railway lines needs upgrading, we have single tracks and vey old I have seen grass has grown in between the tracks, Mr railway Ministar is busy playing , Law Minister, Media Minister, Infomation Minister, and spokesman for the Sharif family, and we are discussing who funds?
@Elli India wants good for Pakistan. We were same people. We look same, talk same, eat same, dance same and marry same. Only while praying, u turn towards Mecca and 80% of Indians turn towards either Benaras or Mathura or Tirupati. It's only one life, don't waste it in hatred
When it comes to money just to everyday life, there is no such thing as free lunch,would you give free money to your friend?