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THE new government appears ready to renegotiate with China the price of a railway megaproject that will upgrade the main railway line in Pakistan linking Peshawar with Karachi.
The indication came from Railways Minister Sheikh Rashid. He says the cost estimates of the scheme ML-1 had been scaled down by almost a quarter from $8.2bn to $6.2bn.
The mega venture will be executed with commercial Chinese loans as part of the CPEC initiative around which Beijing has agreed to invest $62bn in infrastructure in Pakistan.
The minister, however, stopped short of explaining the dramatic decrease in the cost of the venture.
It still remains unclear if the government is restructuring the terms of the deal or making a compromise on its range and size. The government is said to have convinced Beijing to tweak the original CPEC framework to attract third-country investments in schemes, and it is reviewing the costs of ventures like ML-1 that have yet to be undertaken.
Read more: Pakistan, China agree to broaden CPEC base
But it has done little to address the allegations that the way CPEC has been executed gives unfair benefits to Chinese contractors, who obtained almost every project with no competition, and at the expense of Pakistani companies.
The Chinese firms are also accused of charging higher prices for lower-quality equipment brought for power projects.
Loans were given by Chinese banks to their companies in China that bought equipment from the latter country to bring to Pakistan, and not a single dollar of the $26bn-$30bn (borrowed so far by Islamabad for power and transport schemes) has crossed into Pakistan.
Read more: 'CPEC is not a gift': Professor Jia Yu at the CPEC 2018 Summit
On top of that, expensive projects completed so far as part of the CPEC scheme are accused of exponentially increasing the country’s import bill, widening the current account gap, draining foreign currency stocks, and spiking the external debt.
The Nawaz Sharif government which signed the CPEC agreements with Beijing kept the deals a well-guarded secret, and anyone questioning the fairness of the terms was immediately accused of working against the ‘national interest’.
In spite of its promises, the present government is also following in the footsteps of its predecessor as far as the lack of transparency around Chinese loans and investments is concerned.
It would be doing a huge service to the people by making good on its pledges with the voters and putting before them the financial and other details of all CPEC projects, so that we can calculate their impact.
Published in Dawn, October 3rd , 2018
Read more
Pakistan, China agree to broaden CPEC base
Fitch warns of CPEC ‘curtailment’ under IMF programme
How Gwadar’s CPEC development might leave its people behind
In CPEC talks, Chinese drive a hard bargain with Pakistan
Exclusive: CPEC master plan revealed
'CPEC is not a gift': Professor Jia Yu at the CPEC 2018 Summit
On DawnNews
Comments (88) Closed
Oct 03, 2018 07:03am
Something is not kosher with this story. $2B reduced, and not a peep from China?
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Oct 03, 2018 07:41am
Now even the most hopeless optimist in Pakistan can see for themselves what a game changer CPEC has been for Pakistan.
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Oct 03, 2018 07:52am
Wow! I like this business. Not a single penny flows into the country and they are suddenly in debt. China may be making fool of nations, but it is also their talent to identify one.
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Oct 03, 2018 09:16am
Amazing
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Oct 03, 2018 09:18am
CPEC is a goose which would lay golden eggs for China but normal eggs for Pakistan.
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Oct 03, 2018 09:32am
Absolutely incredible. Can't understand how the Chinese managed to pull off this one sided deal?
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Oct 03, 2018 10:08am
Cpec will attract a lot of tourists for road trips .
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Oct 03, 2018 10:11am
The cost of railway project was escalated to fill the coffers for the last government.
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Oct 03, 2018 10:11am
Costs were inflated so that Nawaz Sharif, Ishaq Dar and others could make huge profits. Nawaz thought he could profit Pakista and profit himself. No other explanation is possible. He made the insider deals with the Chinese in Beijing himself.
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Oct 03, 2018 10:17am
@brr - This should be least of our neighbour's worry!
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Oct 03, 2018 10:19am
@Last Word - Thank you for your concern. India will join after U-turn!
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Oct 03, 2018 10:28am
It is true that "The Chinese firms are also accused of charging higher prices for lower-quality equipment brought for power projects." The reason behind was multiple factor including Zero rated duty and no competition which encourages the chines suppliers to put higher prices. This is just a simple mathematics compare the cost of power plants and tariff in any other country and compare the same with Pakistan and you will surely know how much it is higher. Also chines govt. must understand that higher prices they should be clear in all dealing particularly with Pakistan to whom they believe as a brother.
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Oct 03, 2018 10:28am
Some of the eggs are rotten to their cores, what do you expect from new China, it is fools paradise encompassing each and everyone into it, it is a big show and tell, nobody in South East Asia would deal them including Japan or Russia or even Mongolia, ask yourselves Why?
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Oct 03, 2018 10:28am
@Harmony-1© If India was reasonably confident then that joining CPEC and BRI is not a good idea, its stand feels vindicated now. India escaped the fate of falling into the debt trap that Pakistan and a host of other BRI nations is staring at. Good luck.
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Oct 03, 2018 10:39am
Investors on this scale have to be given special treatment. We are not talking about small amounts dealt through open bidding. China and Saudi has cash and the rest are can only talk. Therefore give the cash holders special treatment and let the talkers talk nonesense in self-interest. Pak loses so much each year only due to lack of infrastructure-especially power. Infra will itself return amounts invested. Our neighbour should also focus, among other issues, on the billion near or below poverty line.
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Oct 03, 2018 10:52am
Great to see cutdown in the cost, but we need to know why the cuts... Chinese low quality equipment has failed railway tests in the past.. we must learn our lessons.. whether corruption on both sides, or low quality capital goods, both must be banished. Such huge expenditure ought to be justified...
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Oct 03, 2018 11:02am
@J marfatia :Malaysia was prudent enough to see through the game.
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Oct 03, 2018 11:05am
concerns of Indians seems to be the sight of JoY
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Oct 03, 2018 11:05am
Why can't we make terms public. It is understandable that NS being a businessman has the habit of keeping things close to his heart. That is the reason our business.man can not compete with outsiders. Our businessman are in the habit of doing things all by our self. That is what exactly Naeaz & Sahbaz have been doing and running the country.
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Oct 03, 2018 11:06am
Pakistan is now seeing CPEC as nothing but a bad dream
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Oct 03, 2018 11:17am
It is amazing how much interest Indians are taking in CPEC. If there were formal contacts such interest could have been discussed to the benefit of both countries.
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Oct 03, 2018 11:19am
Neither China or Pakistan believes in the concept of transparency, forget about details of CPEC projects being made public, they will not be presented to Parliament either. While campaigning PM Khan may have made a million promises, does anyone seriously believe he has the power and freedom to deliver on them ? Those who helped Khan become PM have their own vested interests to further and protect, now you can even dodge taxes but are free to buy fancy cars and houses. A government of the elites, by the elites, for the elites.
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Oct 03, 2018 11:19am
@J marfatia - excellent true comments.
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Oct 03, 2018 11:21am
Seems CPEC is just a propaganda type of thing which politicians use to garner votes. PLMN did and PTI doing and none knows what is going on.
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Oct 03, 2018 11:23am
@brr it's too good to be true
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Oct 03, 2018 11:28am
The commission / amount which was to be given to Nawaz - Shahbaz duo from the ML 1 has been slashed which resulted in reduction of cost.
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Oct 03, 2018 11:51am
Government must insist that a fair portion of cpec should be executed by Pakistan based companies. They can enter into technical collaboration with the appropriate China Companies.
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Oct 03, 2018 11:54am
@Harmony-1© : So Indian poverty/ cast issues are Pak concerns and Pak economy is not ours? Come on, we care for you as much you care for us...
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Oct 03, 2018 12:05pm
Economists are removed for silly reasons and then the ministers give statements with no logic apprently. No one knows what the hell is going on... On one side CPEC isn't transparent and on the other side even those privy to the information don't know what they are into !!
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Oct 03, 2018 12:19pm
@Harmony-1© Really, enjoy the Chinese omelette, India is least interested.
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Oct 03, 2018 12:22pm
The public is immersed in the issue of eating it's butter and bread and has nothing to do with the issues of the transparency or secrecy of CPEC project. Who will benefit from what is matter of time but what is most important to understand is the fact that we should not use the name of public to boost our own ends.
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Oct 03, 2018 12:35pm
@Kris Its called kickbacks from PMLN
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Oct 03, 2018 12:36pm
All these contracts were negotiated with kickbacks in mind by PMLN, now proper contracts will be undertaken, it is as simple as that. China can complain but don't forget there are other countries who can do the job too, you do whatever is best for the country not what is best for your own pocket.
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Oct 03, 2018 12:46pm
@Vineeth CPEC if dealt correctly with financially is good for Pakistan. For India? Hell to the no.
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Oct 03, 2018 01:06pm
China is playing debt-trap politics with countries having lesser money. Pakistan must be careful not falling under that trap.
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Oct 03, 2018 01:19pm
@Nomansland "Economists are removed for silly reasons and then the ministers give statements with no logic apprently. No one knows what the hell is going on.."
Not just economist but all knowledgeable individuals are barred from any public interactions so the story can be kept interesting.
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Oct 03, 2018 01:35pm
Honestly, CPEC needs to be cleansed!.
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Oct 03, 2018 02:08pm
This is just the beginning. On further introspection, Pakistan's all weather friend will be exposed how it befooled the people and Pak govt. It was for no reason that PM Modi was right from begginning in rejecting this bait from China. It is after all proving one sided and one party investment in the form of lending money at an exorbitant interest rate and then receiving back much more than the invested money.
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Oct 03, 2018 03:08pm
Pakistan has to look at it interest first. Who is bringing in jobs and industry. Not just roads and expensive electric
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Oct 03, 2018 03:10pm
CPEC is real game changer. the problem is it is changing the game on daily basis.
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Oct 03, 2018 03:31pm
Transparency is must, but then these people will not be able to defend why they are implementing these projects...
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Oct 03, 2018 04:22pm
Transparency is need of the hour. The future of the children of Pakistan is being compromised therefore people need to know the details.
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Oct 03, 2018 04:22pm
Canada and US have been very close to each other historically. But that doesn't mean Canadian Government accepts everything US wants it to do. Lets learn from this and continue strong relationships with China, while protecting Pakistan's interests.
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Oct 03, 2018 04:39pm
Is there any other alternative for the time being make the best of the situation.
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Oct 03, 2018 05:23pm
Looks like most talk is on paper and will remain so with all the back and forth. Funny thing is that even paper projects seem to be in favour of China. All in all no harm done as none of these will be realized, looks like its just a way for the Chinese govt to pass on the money to its internal cronies in the guise of international projects. CPEC for all you know could be the biggest Chinese scam.
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Oct 03, 2018 05:32pm
perhaps the secrecy and confidentiality was a clause inserted by the Chinese? what else would the pti have to gain from keep the corruption of N-league from the public
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Oct 03, 2018 05:56pm
CPEC is a Trojan horse
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Oct 03, 2018 06:06pm
There is something called patience. In this business of big money, secrecy is only for cover up. From whom that have kept it all secret? Those who will end up paying when dealers have long gone? If it was secret, which all agree it was, would not it take time for the incoming new administration to unwrap what has been kept under covers. This instant miraculous favorable results do not happen in reali life but only in fiction. BTW, this is where the media has failed miserably despite its vociferous claims as to press freedom. Why it has not pressed harder to get answers from the last administratioin?
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Oct 03, 2018 06:33pm
@kitkat The game changer name should now be changed to grave danger.
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Oct 03, 2018 06:48pm
The Railway Minister has already given the explanation for $ 2 billion reduction in ML-1 estimated cost an interview with Ghaida Farouqi , a GNN anchor. The reduced amount include the kickbacks and commissions of Sharif Family and former planning Minister Ahsan Iqbal. He also disclosed that last PML-N government did not prepare PC-1 of the project.
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Oct 03, 2018 07:27pm
Seems Pakistan has found itself a new grand mystery of whether CPEC money is loan or investment. No one cuts down on investment. Only debts are cut down.
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Oct 03, 2018 08:32pm
Sheikh Rashid is a show boat. He couldn't keep his mouth shut until his new government finalizes and communicates it's CPEC strategy. He wanted to show off that somehow he saved $2 Billion.
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Oct 03, 2018 08:56pm
@J marfatia "Not a single penny flows into the country and they are suddenly in debt."
Currency did not flow in but goods did. The debt is for the goods and services provided by China.
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Oct 03, 2018 08:59pm
@Ibrahim Mirza Shah "No other explanation is possible."
Actually there is another explanation:
1. The minister mis-spoke that the cost will go down by $2 billion. It would not be the first minister that mis-spoke.
2. Pakistan is reducing the scope of the ML-1 project. Reduced scope leads to reduced price.
Please note your minister of planning was unaware of how the costs were brought down and whether they were when questioned yesterday.
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Oct 03, 2018 09:01pm
Yes PTI tell us the truth about CPEC.
We know it favours Chinese companies and Chinese banks.
What will we gain from it?....debt burden???
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Oct 03, 2018 09:02pm
@Kris Must have given hefty commissions to Sharifs.
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Oct 03, 2018 09:05pm
@Dr B. N Anand When ever the article on cpec publish, we Indians are very eager to jump in the frey ,as we're the master of economics of cpec. Just for comment, is not healthy practice. CPEC is giant & well spread project, maybe some loopholes be there, but it doesn't mean that total project is bogus. It is better to take initiative than do nothing.
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Oct 03, 2018 09:12pm
@Vineeth as they say.. Real progress is made only when one learns to say no to easy money and say yes to hard work and self sufficiency
While India has had its own critics, I feel proud that India has been refusing to take any free aid and doing all trade negotiations very thoughtfully. My intention is not to do an India Pak comparison to show Pakistan down but frankly there are indeed some good lessons Pakistan can draw from India or even Bangladesh. The premise though is that it needs to have true civilian government and right experts making those decisions
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Oct 03, 2018 09:24pm
PM Imran Khan needs to keep an eye on Rashid, and control his comments. Rashid should be restricted in what he says, Minister or not.
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Oct 03, 2018 10:19pm
to my assessment in $ 62 billions loans $25 billions is kickbacks in Pakistan & China.
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Oct 03, 2018 10:38pm
Salam Sir: I guess we should Salute Sheikh Rasheed for bringing the costs down by US$2 Billion! This is the greatest news one can expect from a government of 40 days, and more particularly this Minister of less than 30 days! Hats Off.
Notwithstanding, I assume it would be fair to expect how the sums add up to US$2 billion savings!
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Oct 03, 2018 11:11pm
@Mohit(US) good one!
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Oct 03, 2018 11:24pm
Question that needs to be asked is reduction of amount is under what head on paper, because we do not see any actual flow of money!
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Oct 03, 2018 11:31pm
One gets a lot of comments from Indians on these pages, commenting on how CPEC is not good for Pakistan, and is all for the benefit of China.. Do you really think the Indians have the interest of Pakistan with their comments? They are spewing negative comments because they do not want to see CPEC succeed, as it will benefit Pakistan and help it develop and become stronger.
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Oct 03, 2018 11:49pm
@Omar totally agree. We should not get carried away with such comments. CPEC is good for Pakistan on an overall basis.
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Oct 04, 2018 01:04am
@brr they are probably calling their markers/stooges, soon the estimate will double.
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Oct 04, 2018 01:22am
Lesson: Other countries cannot develop the country for you, they are working for their own interest. People can do that on their own, just Free the people and create an environment free from official control and pilferage. PTI, your job is to stop corruption, stop money laundering, free press, hire on merit, stop red tape, collect taxes from unregistered businesses. Stop begging from China or Saudis, learn to live within your means. Stop offering 16 or 17 % guarantees on top of useless equipment. Chinese engines are still sitting in yards getting rusted. Schemes and slogans not based on real need and analysis will ruin the country.
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Oct 04, 2018 01:57am
Don’t touch CPEC. Spend the agreed amount. We will reap the fruits in 5 years or so
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Oct 04, 2018 02:30am
pakistan needs concessional loans for infrastructure projects because ROR is low on infrastructure projects and take time but are very safe
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Oct 04, 2018 03:34am
No where says China agrees with this new deal.
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Oct 04, 2018 04:03am
Pakistan Leaders will tell because Pakistan People accept and forget instead of ASKING.
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Oct 04, 2018 04:32am
Present government will correct the wrings of the previous governments.
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Oct 04, 2018 05:02am
What is plan B? If what China denied negotiators is thre other plan?
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Oct 04, 2018 06:16am
Chinese goods will move on our infrastructure and we foot the bill to build it for them at our cost and very high interest rate
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Oct 04, 2018 06:19am
Can anyone spell out what does Pakistan get for its 50 $ billion investment?
The way I understand, Chinese goods move on it for the benefit of China and we get a measly percentage for moving their cargo and that small reward we pay back in interest rate for decades....
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Oct 04, 2018 06:34am
@M.Mudassir Siddiqui you probably are right. And if you consider India as ill wisher if Pakistan, shouldn't that joy be a concern for you?
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Oct 04, 2018 06:36am
@Pakistani that if carries multi billion dollars weight
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Oct 04, 2018 07:16am
@Omar The reason for Indian's concern is, whenever something goes bad in pakistan, something bad happens at the indo-pak border...
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Oct 04, 2018 08:41am
Salam Sir: Reflecting deep, I feel that His Excellency Sheikh Rasheed should head Economic Council recently made by our PM, and I also request our finance minister to exchange his position with Sheikh Rasheed who was able to save the nationa US$2 Billion in less than one month. I am sure readers would agree he is the ONLY Minister who has been able to demonstrate this saving. Also, he was able to create 10,000 jobs at NO cost to the exchequer. Well done Sir. You deserve public appreciation loud and clear!
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Oct 04, 2018 09:21am
@Vineeth it has been a game changer for some politicians. They made so much money?
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Oct 04, 2018 10:26am
PM Imram Khan we are with you. The enemies of Pakistan are jealous of CPEC and are coming up with these bizzard conspiracy theories. After CPEC Pakistan economy will go far ahead than Indian economy.
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Oct 04, 2018 10:37am
A wrong impression has been created as if China engineered the change to the original plan of Kashgar - Gwadar Trade Corridor. The present CPEC has in fact done nothing for that Corridor except to delay the start of construction by almost a decade.
The present Chinese funding appears more for a Social Welfare Program around the country.
On top of that none of the projects disclosed so far appear self sustaining leave alone having the ability of servicing and paying back the loans. Surely China cannot be blamed for it.
The present government must let the nation know the whole truth behind the whole affair.
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Oct 04, 2018 07:58pm
“It would be doing a huge service to the people by making good on its pledges with the voters and putting before them the financial and other details of all CPEC projects, so that we can calculate their impact.” Well said Dawn, after all Prof. Jia says CPEC is NOT a gift. Pakistan has to pay these loans. As for Indians who are hollering here – look at your Rafale contract inflated by 300 % per plane.
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Oct 05, 2018 06:01am
It is unfortunate that China is taking undue benefit from the situation Pakistan is in. The sooner Pakistan makes fundamental changes that improves it security environment, rule of law, civic conditions, education and generally its standing in the world, better investors will come knocking on the doors.
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Oct 05, 2018 06:46am
The reduction in the cost of the rail corridor and infrastructure has been achieved by:
1. Replacing the electric locomotives with large group of pakistani laborers, who will pull the trains
2. Thus costly locomotive cost is eliminated
3. Employment is increased. All able-bodied men have a chance of a job.
and 4. No pollution. No diesel or fuel costs or electric load shedding required.
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Oct 05, 2018 09:20am
A message shall reach Pakistan PM and his team. To tell China that only professional of Grade 18 and onward will be selected as 50% by china and 50% Pakistani. The Labor force and team till grad17 shall all be from Pakistan or 25% from China and 75% Pakistani.
One of my friend from Indonesia told me that China is spending the money in your country but they will take back half of the money through their team salaries and material supply from china.
It will be better that Pakistan force China that China will not bring anything from outside if Pakistan have industry for that material.
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Oct 05, 2018 11:55am
@Omar Sometimes the negative comments also helps in analysing the reality. CPEC has always been perceived as game changer by all Pakistanis but Dawn was the first daily in Pakistan who brought out some serious discrepancies in this deal which were unfortunately ignored by the previous govt. The present govt who is now re-looking at the grey areas should be supported by all right-minded Pakistanis. Though enough damage has already been done but it is never too late to rectify flawed clauses to benefit Pakistan in future projects.
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Oct 05, 2018 02:08pm
Not here criticize any country or readers. But I fail to understand how Pakistan experts failed to see this one sided deal when they entered it. Infact, in management schools there are case studies which are given as exercises, where a 25 year old can even identify what is wrong with such deals, but Pakistan failed to see that. The new government should take stock of such things and ensure that growth and development activities should continue without indebting the nation any further.
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