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China and Pakistan have made strides — particularly in electricity and infrastructure projects — in the first three-year phase of their cooperation under the multi-billion-dollar China-Pakistan Economic Corridor (CPEC). Both countries have had good and not-so-good experiences and are learning about each other’s strengths and deficiencies as they try to build upon lessons learnt.
At the conclusion of the recently held eighth meeting of the Joint Cooperation Committee (JCC), they agreed to conduct at least five in-depth sector studies for future investment cooperation under the framework as Islamabad pursues more financial support and Beijing seeks increased facilitation, improved security and a smooth repayment mechanism. In addition, “both sides agreed to make joint efforts to improve the overall media environment for CPEC cooperation”.
Pakistan made a formal request to the JCC — the highest decision-making body on the CPEC — for “more grant, investment, joint ventures and concessional loan arrangements to strengthen and fast track” transport infrastructure, industrial cooperation and socio-economic development.
Beijing is annoyed at the Sindh government for slow progress on Karachi Circular Railway, which it considers critical for the city’s prosperity
China’s focus during the meeting that ended on Dec 20 was more on putting in place a mechanism that ensures smooth repayments given Pakistan’s financial constraints. It expects Islamabad to further strengthen the security structure and take targeted measures to reduce the threat of terrorism by speeding up the building and deployment of Special Security Division-South. Beijing is also pushing more vigorously for the removal of irritants in the implementation of existing projects.
Led jointly by Ning Jizhe, vice chairman of the National Development and Reform Commission of China, and Makhdoom Khusro Bakhtiar, minister for planning, development reforms, meeting participants appreciated that the CPEC had achieved important milestones of early-harvest projects (EHP) and was now entering a new development stage.
The in-depth studies will be on Pakistan’s power market, a cascade study for hydropower projects all along the Jhelum River, optimisation of overall energy mix, an oil and gas industry development plan and a five-year action plan for cooperation on the highway between China and Pakistan as part of the joint traffic density study.
“(The) results of a joint study on power market of Pakistan will be fundamental for deciding the next step of energy cooperation.” The working on the study has just begun. Pakistan has committed to putting into operation all transmission lines required for the evacuation of energy well before CPEC projects achieve commercial operations to avoid penalties.
The payment of outstanding tariffs for the operational energy projects is a source of irritation for China. The two sides agreed to have scientific planning and amicable negotiations to address the issues arising from energy cooperation and create a common panel under the joint working group on energy for monthly formal and informal communications and consultations.
Pakistan promised a timely recovery of bills from consumers as part of the ongoing campaign to reduce line losses and improve collection through reforms and new technology. But Pakistan also wanted Chinese technical support with respect to technology. A comprehensive technical study will also be carried out to increase the production capacity of the surface mine in the Thar coalfield.
Pakistan has demanded that a major 1,320-megawatt Rahimyar Khan project under CPEC be scrapped on the ground that its next-stage priority was using domestic sources of energy. Hence, the need for maximum benefits from the Jhelum River flows by optimising the combined operation of all cascade projects there.
On the industrial side, China asked Pakistan that the Board of Investment should act as lead agency for industrial development and ensure land, energy, taxation, customs, law and other services from the relevant departments to deal with land prices, park development models and infrastructure services.
Rashakai in Khyber Pakhtunkhwa, Dhabeji in Thatta and M3 in Faisalabad have been selected as special industrial zones for the first phase of development. They will promote Chinese investments in key industries, like textile, petro-chemical and iron and steel.
In infrastructure, both sides are happy with the progress on two big projects: $8.2 billion Mainline (ML-1) from Karachi to Khyber and $2bn Karachi Circular Railway (KCR) besides Eastbay Expressway Gwadar and security arrangements for them. Pakistan has promised to ensure timely land acquisition and demolition for the project implementation.
The preliminary design of ML-1 will be ready this month. The project will be implemented in line with the framework agreement signed in May 2017. This means China will provide up to 85 per cent of the project cost as a loan as opposed to a “build-operate-transfer” model proposed by the PTI government to shift financial responsibility on to the private sector and keep government loans on the lower side.
Beijing is annoyed about slow progress on KCR by the provincial government despite the project being critical and feasible for the growth and prosperity of the country’s largest city. Mass transit projects for Quetta and Peshawar have been put on the back burner for the time being because of a lack of preparedness. These will be taken up once their PC-1s are approved by the relevant government forums.
Noting full operational capability of the Gwadar Port, the two sides agreed to continuously pay high attention to it. Weekly container liner services are calling the port as coal trans-shipment and clinker export take place. The JCC appreciated progress on the Gwadar Free Zone. It agreed to jointly make more efforts to attract qualified companies to invest in the area.
Pakistan was required to provide agreed tax and tariff mechanisms to create a good investment environment leading to the next phase. The two sides have failed so far to finalise the Gwadar Smart City Master Plan, but promised to hold the groundbreaking ceremony for the New Gwadar International Port before March 2019.
Published in Dawn, The Business and Finance Weekly, January 14th, 2019
Comments (31) Closed
Question should have been "what Pakistan want from CEPC?". The intension of China is clear, only good of China.
Please kindly make the CPEC terms public, if it is mutually beneficial?
China got what ever it wanted a country, land to import oil and gas in a shortest route but making Pakistan pay the price for it.
China hoodwinked Pakistan with economic power through CPEC, and Pakistan thought without a thought China cares for them.
China is just making their country with economic robust at the cost of other countries, who are in debt trap, Malaysia sneaked out, Pakistan still believes China will resurrect every thing.
China never a friend of any one. They just want business.
PTI government is incompetent enough to understand and take advantages of CEPEC investment.
China would take 91% Gwadar port income, 9% for Pakistan.
China's interest in the CPEC is akin to that of a man in his lover. China wanted just a road. Pakistan wanted permanent security in terms of much more infrastructure and two-way commerce.
Another U-Turn by IK "The project will be implemented in line with the framework agreement signed in May 2017."
"Pakistan promised a timely recovery of bills from consumers as part of the ongoing campaign to reduce line losses and improve collection through reforms and new technology. But Pakistan also wanted Chinese technical support with respect to technology" - And now we are going to collect money on behalf of CHN from our people and need technical support from CHN ??
"The payment of outstanding tariffs for the operational energy projects is a source of irritation for China." - who is running this country China ??
"Beijing is annoyed about slow progress on KCR" - so local govts should just sucum to Chinese and IK pressure??
Someone need to check the detils of these projects .....we are driving fast but blind.
China made CPEC double profit, it will get import and export through Gawadar, shorted way, but for the development, Pakistan is paying for it.
Its unfortunate Pakistan is getting more and more entangled in CPEC, and some of the projects have come to halt, and now it cant get out of it.
The success of CPEC depends on China’s economy remaining successful and free of global sanctions to freely move its goods to the rest of the world.
China with the lions share, it is estimated that the movement of Chinese goods over the next decade will be $1 Trillion.Business growth for China, while Pakistan assumes all the risk and is liable for the $46 Billion loan.
Besides CPEC, for Pakistan, China has an established track record of arriving much like a horde of locusts and completely wiping out local indigenous industry of other countries, in Britain, Canada, US, will do the same in Pakistan in other sectors, such as manufacturing, and other industries.
China’s disregard for the environment and utter destruction of ecological systems therefore there will be more pollution, poor air to breathe, more disease etc.
Pakistani leadership, shown immense immaturity, shortsightedness, and lack of good judgement in signing off on CPEC will become Atlas’s burden, a symbol for the world to see but for Pakistan to carry.
Successful ports like Dubai and Singapore, they owned by their own states and developed with long term strategies.But CPEC deals they are negotiated with careless manners and Pakistani leadership has shown immense immaturity, short-sightedness, and lack of good judgement in signing off on CPEC.
Venezuela, a politically and financially high-risk country in which China has invested over $52 billion from 2008 up till 2014, the another biggest Chinese investment in any single country. Venezuela with huge oil reserves, struggling with economy to pay off the debt, with low price of oil barrel, having no food, medicines in the market to its citizens.
Chine is worried about the-payment so all focus on it. Where will they get 15-23% return in USD when they mostly invest in US treasury bills where they get 1-3% interest.
Pakistan wants CPEC to end with our any payments for it. Free of Charge and China wants to take it all every penny that is generated and much more. With differing objectives CPEC is as good as doomed. But no body agrees to ir. It like the ghost city of Humbantota. Nobody likes to see it. Its built and ready without anyone staying in it and everyone is looking at their calculations wondering where they went wrong.
@Trihan , "China got what ever it wanted a country, land to import oil and gas in a shortest route but making Pakistan pay the price for it." So what is bothering you?
@Umakant, "China made CPEC double profit, it will get import and export through Gawadar, shorted way, but for the development, Pakistan is paying for it." See, we are extremely generous with friends. Wanna be friend with us?
$2bn Karachi Circular Railway (KCR)
@Trihan , Maybe short from geography perspective, but really it is not smart to take oil over the Himalayas to China. Also most of the consumers are on the east side of China. It is good from strategic angle as it creates an alternative route at the time of crisis like war etc...
CPEC is the deal of the century for the Chinese:
Pakistan must pay back loans to the Chinese for developing import & export route for the Chinese which will earn them trillions of dollars in the future under the safety of Pakistani nuclear umbrella.
No wonder CPEC is called the flagship of the One Belt One Road initiative.
@Ishikia, Also pollution by the big huge trucks
Good to see Pakistan and Pakistanis discuss about the benefits of CPEC. I see lot of concerns raised by Indian readers and hope Pakistanis understand it now. Let's collectively ask IK and PTI, what does CPEC give for Pakistan. Better realize that India hatred is causing dearly and only China is benefiting alone. IF not for anyone at least reduce burden on future generations.
One simple truth. CPEC is designed and planned by Chinese.................
I think CPEC is very good foundation. There is nothing bad about it. However to take advantage of CPEC , you will have to create free trade policies and eliminate all territorial enemity and military interventions in neighbours. I hope Pakistan realizes that CPEC is not like finding oil under the ground. To make CPEC work, you will have to invent new policies to trade freely with all neighbours
China should release cpec funds