ISLAMABAD: Prime Minister Imran Khan’s long-awaited visit to Beijing has not only removed ambiguities about the viability of the Sino-Pakistani economic corridor (CPEC), but has also attracted multi-billion dollar investments in various sectors.
During the visit, the two sides also drew up a plan for CPEC Phase II, which involves huge incentives for Chinese investors to relocate or set up new industrial units in special economic zones (SEZs).
Pakistani officials say Chinese leaders have secured financial support for the country, including overcoming its budget deficit and balance of payments crisis.
Finance Minister Shaukat Tarin called the visit a success and said 20 major Chinese companies have expressed their willingness to invest in SEZs.
Prime Minister held intensive talks with Chinese President Xi Jinping
and Premier Li Keqiang on the geopolitical situation in the region and the roadmap to further strengthen strategic and economic ties between the two countries.
“President Xi was very optimistic about the future of CPEC and assured us of his full support in overcoming the economic crisis,” Tarin said.
Although he admitted that the Chinese authorities had reservations about the delay in paying their independent power producers (IPPs) and security concerns, these have been resolved.
“We have already paid a huge tranche of dues to Chinese IPPs and established a revolving fund for automatic payments to financial institutions for debt and interest payments to ensure that Chinese corporate claims do not increase from of a certain level,” he said.
However, Tarin said China’s IPPs refused to renegotiate the terms and conditions of the deal and they have an ethical right to do so.
The finance minister dispelled the impression that the prime minister had asked China for a $2-4 billion loan. “We never indicated or mentioned that we will be asking for a loan from China, whatever was published in the newspapers or discussed on the news channels was just speculation and nothing else,” he said. he declared.
However, he admitted that Pakistan has requested China’s help to overcome the budget deficit and balance of payments crisis and Chinese leaders have pledged their support. “Two to three billion dollars are very small numbers. China has agreed to help us solve all financial and economic problems,” he added.
The Executive Director of the Sustainable Development Policy Institute, Dr. Abid Qaiyum Suleri, also endorsed the Finance Minister’s views and said the main purpose of the Prime Minister’s visit was mainly to express solidarity with China, which, as the host of the Winter Olympics, faced an unpleasant situation after a few Western countries announced to boycott the games at the official level.
“The Prime Minister’s visit was quite significant as it bridged the trust gap, which arose due to the Dasu incident in which Chinese workers lost their lives and a delay in payments to Chinese IPP,” he said.
Given that compensation for the victims of the Dasu incident has already been paid and the issue of payment of PPIs has been resolved, it is likely that work on the second phase of the CPEC will accelerate in the coming days, Suleri added.
Information and Broadcasting Minister Fawad Chaudhry said a Chinese company wanted to establish a steel smelter in Gwadar, while another wanted to start a mining operation in Balochistan.
China wants to relocate many of its industries, especially textiles to the Philippines, Vietnam and Pakistan, he said. “Due to cheap labor and strategic location, we have an advantage over Vietnam and the Philippines in attracting Chinese investment.”
Chaudhry said development work on SEZs will also be accelerated to help investors establish an industry.
Chinese Premier Li Keqiang said that under CPEC, Pakistan has developed one of the most modern road networks, which it should now use to attract investment.
During the visit, Prime Minister Imran Khan also asked China to import rice and cement for at least 1 billion dollars in order to reduce the bilateral trade imbalance between the two countries, which is strongly oriented towards China.
At a press conference, Special Assistant to the Prime Minister for CPEC Khalid Mansoor said the government has decided to exempt Chinese investors from about 37 approvals for Phase II investment projects.
Mansoor said he would not be able to quantify investment commitments for the second phase of CPEC, but can say it would be in billions of dollars provided the relevant authorities and the nation as a whole work together to materialize the future Chinese investment at a later date. stage.
“We shared with President Xi Jinping and Premier Li Keqiang a competitive advantage notebook for their investment and industry relocation compared to other investment destinations that they would now consider and come back with the proposals for investment,” he added.
The Chinese president was also asked to visit Pakistan, which he acknowledged, and said he would decide later.
Meanwhile, it was decided that the two sides would remain engaged at foreign minister level to review the progress of meetings held during the recent visit, as well as investment proposals put forward by Chinese companies.
“We made a historic decision a few days ago to move investment proposals through the compliance regime, instead of an arrangement that requires 37 federal and provincial approvals,” Mansoor said, adding that he would now be the responsibility of Chinese investors to comply with the compliance regime. the law of the land.
“We have legally empowered them to invest in SEZs without prior authorization.”
In addition, the Prime Minister has made a personal commitment to the Chinese leadership to abide by these arrangements and to immediately resolve any issues that Chinese investors may encounter on his own in addition to institutional arrangements such as the CPEC Authority, the Cabinet Committee on CPEC and Steering Committee on CPEC, he said.
The CPEC framework agreement provided for an investment of $53 billion in phase I under which $25 billion had already materialized in the power sector, as 5,300 MW projects were underway and 3,500 MW projects would be completed in the next six to nine months.
The remaining $28 billion infrastructure projects were in various stages of implementation and financial close, Mansoor added.
Based on the resolution of outstanding issues, the PM also pointed out that insurance coverage for the start of key hydropower projects has been retained by China and wished that the insurance company Sinosure underwrite political risks. and commercial to cover the financing of hydroelectric projects.
Regarding the Karachi-Peshawar Main Railway Line (ML-1), SAPM said it was declared a strategic project at the last CPEC Joint Coordination Committee (JCC) meeting for which the Chinese offered an estimate. financial cost. .
The Pakistani side has completed a feasibility study and offered them to tender due to a price difference on the basis of which “we can update the PC-1”, he said. added.
Under Phase 2, Chinese companies would support the establishment of a steel and metal recycling plant in Gwadar within three years, which would produce metals worth $4.5 billion. dollars for exports, in addition to creating 40,000 jobs.
Chinese companies would also help develop the country’s agriculture on modern lines to improve yield per acre and seed quality, Mansoor said, adding that some companies have shown interest in growing maize and soybeans in Pakistan. .
A Chinese company would invest in the construction of a liquefied natural gas (LNG) storage facility in the port of Karachi, while a factory would be set up on the Lahore-Kasur road for value-added products in the textile sector, did he declare.
Another Chinese company, Royal Guru, is interested in investing $50 million in Pakistan’s automotive sector. Chinese companies also want to invest $200 million in manufacturing medical devices, while an investment of $2 billion would be made for laying optical fiber, he added.
Similarly, Chinese companies also want to invest in the science and technology zone and participate in the bidding process for the privatization of Pakistan Steel Mills.
Senior Economist Samiullah Tariq said Prime Minister Imran Khan’s visit was a success. “The widening of twin deficits over the past decade has become a vicious debt trap for the country and it is therefore no surprise that the government is desperate to secure financing even at a very high profit margin. height and harsh conditions,” he said.
Under these circumstances, only friendly countries like China and Saudi Arabia can bail out Pakistan.
The International Monetary Fund (IMF) in its detailed report also mentioned debt servicing as the main challenge for Pakistan.
“The next fiscal year of CY23 debt service requirement will be $35 billion, which in CY24 will increase to around $42 billion. Fulfilling these debts will be a very daunting task for the PTI government,” said said Tariq.
At present, bilateral trade between the two countries is strongly in favor of China. Despite a 70% increase in exports to China, Pakistan’s exports only reached $3.3 billion, while imports amounted to $24 billion.
“China’s debt accumulation has already reached $28 billion, which is alarming in the sense that the country’s foreign policy could be compromised, as we have already paid a heavy price for relying on states United in the recent past,” he added.