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CPEC projects cool off in Pak under new govt, financial uncertainities

April 22, 2019

CPEC projects cool off in Pak under new govt, financial uncertainities

Islamabad: Soon after coming into power last year, the first thing that the newly-formed government of Imran Khan did, was to eliminate projects which were a part of China Pakistan Economic Corridor, a multi-billion dollar initiative of a crucial leg of Chinese President Xi Jinping’s ambitious Belt and Road Initiative.

During the Joint Coordination Committee (JCC) meeting of the China Pakistan Economic Corridor(CPEC) held on December 20, 2018 in Beijing, Pakistan’s Minister for Planning and Development, Makhdoom Khusro Bakhtyar formally conveyed to Chinese officials that Pakistan was no more interested in the construction of an imported fuel power plant of 1,320MW capacity which was proposed to be set up in Rahim Yar Khan district of Pakistan’s Punjab province. After the project was scrapped, it was suggested that it be removed from the CPEC list, to provide structure optimization space for the subsequent power market of Pakistan.

A senior official of Pakistan’s Ministry of Planning and Development confirmed the same and said that Pakistan has made arrangements to meet the demand for electricity. Hence, they opted out of this project. “Pakistan’s delegation had informed Chinese officials that sufficient generation capacity had been lined up for the next few years, so, there was no need to go ahead with this project,” said Tanveer Aslam Khan, a senior official from the Ministry of Planning and Development.

It was not the only project associated with CPEC, which was shelved but instead, Pakistan put on hold a large number of small and medium-level projects falling under the jurisdiction of CPEC which has raised several eyebrows both in Islamabad and Beijing casting doubts on the future of multi-billion dollar project of CPEC. However, both Pakistan and China have never uttered a word on development publicly.

Pak’s economy a cause of worry for Pakistan, claim experts and legislators

Pakistan projected the China Pakistan Economic Corridor as a game-changer for the country and the region for a long time. However, it seems that the project has lost its attraction in political discourse soon after the change of government in Pakistan last year.

“Imran Khan-led government’s policies (of putting many projects on hold) has sent shockwaves to Beijing. It has discouraged Chinese companies and individuals from investing in the special economic zones (SEZs) of CPEC,” said Rana Jameel Hassan, a legislator in Pakistan’s Punjab Assembly.

According to officials, CPEC has lost its pace soon after the change of government in Islamabad. Even China is taking time to start work or provide funding for the remaining projects proposed under CPEC. “It is Pakistan’s deteriorating economy which has prompted China to think how Pakistan would repay the loans it has provided for CPEC projects,” Amir Rana, an Islamabad-based security expert told this correspondent.

Pakistan has been facing an acute financial problem since July 2018. In a bid to support the newly formed government in Pakistan, China provided a $2 billion loan. In February 2019, Pakistan’s foreign reserves plunged to $8.12 billion, below the minimum level prompting Islamabad to look to Beijing for help.

China didn’t disappoint Pakistan either. It provided Pakistan $2.5 billion in loans in March this year. In a bid to boost foreign reserves of its all-weather friend, China provided $4.5 billion during the last couple of years.

On April 25, Pakistan Prime Minister Imran Khan attended China’s second Belt and Road Forum (BRF) in Beijing and met Chinese Premier Li Keqiang during which they signed an agreement to build a double railway track from Karachi and Peshawar, Pakistan’s state-run Radio Pakistan reported but the situation is not as rosy as shown, sources revealed that China was unable to convince Pakistan to revive the Diamer-Bhasha project.

Terrorist attacks on Chinese nationals and the deteriorating economy of Pakistan are hampering China Pakistan Corridor, a multi-billion dollar initiative of a crucial leg of Chinese President Xi Jinping’s ambitious Belt and Road Initiative.

Fauji Power Coal Ltd plant under construction. For representation purposes only. (Picture credit: Wikimedia Commons)

Not sure if Pakistan can repay Chinese loans, claims analyst

According to officials of China’s embassy in Islamabad, 22 early harvest projects worth $18.9 billion under the CPEC has been completed.

“The People Republic of China has provided concessional loans of $5.874 billion for Pakistan government’s major transportation infrastructure projects, with a composite interest rate of around 2% in repayment period of 20-25 years,” a statement issued from China’s embassy in Pakistan said while adding that the Pakistani government provides sovereign guarantee for the above loans and would start the repayment from 2021.

On the other hand, the Chinese companies and their partners invested $ 12.8 billion in energy projects in Pakistan.

“Chinese companies had provided $3 billion from their equity. The rest $9.8 billion was raised from commercial banks at an interest rate of  5 per cent. Pakistan has to repay the loan in 12-18 years,” a senior official of Pakistan’s Ministry of Planning and Development said adding that Islamabad will have to repay $6.017 billion in interests to China.

Analysts believe, Pakistan, in current circumstances, will find it difficult to repay loans to Beijing. “Not sure if Pakistan can repay Chinese loans. Guess, Pakistan will have to request Beijing to extend the time period (to repay loans),” said Zafar Bhutta, an Islamabad-based analyst. Chinese have also sensed it, says Zafar. That’s why they are showing the least interest in providing loans for projects.

Insurgency, another concern for China

Baloch insurgents are a source of nuisance for China. A couple of attacks unleashed by Balochistan Liberation Army at Chinese interests in Pakistan has worried Beijing. Soon after the inauguration of China Pakistan Corridor, the Baloch insurgents started attacking projects linked with the Chinese.

The Baloch insurgents fear that the wave of investment will prompt significant demographic changes in Balochistan, turning them into a minority group in their province. Secondly, they believe that China is helping Pakistan military to quell Balochi’s struggle for independent Balochistan. Hence, the Chinese are equally responsible for their miseries as is Pakistan.

Off-the-record conversations with officials of Balochistan government and background interviews revealed that Baloch insurgents wouldn’t quit attacking Chinese interests in Balochistan until they put CPEC on hold. “They wouldn’t quit attacking Chinese interests because they believe that Chinese investment in Balochistan would surely make Balochs in the minority,” a source told this correspondent.

[The author is an Islamabad-based freelance writer and a member of 101Reporters]