$56 billion China-Pakistan Economic Corridor (CPEC)

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China has Pakistan over a barrel on ‘One Belt One Road’
Tax concessions for Chinese firms, mounting security costs, crippling debt... The China-Pakistan Economic Corridor is beginning to look like a disaster for its host nation
By F.M. Shakil April 28, 2017 2:12 PM (UTC+8)

http://www.atimes.com/article/china-pakistan-barrel-one-belt-one-road/

The US$56 billion China-Pakistan Economic Corridor (CPEC) – a part of China’s ‘One Belt One Road’ vision – has yet to translate into the ‘game changer’ envisioned by its sponsors. Worse than that, the unparalleled tax breaks and mounting security costs involved have already saddled Islamabad’s exchequer with a hole in its finances of over US$2.5 billion.

Pakistan’s lower house was informed last month that the government had issued a statutory regulatory order (SRO) giving a series of tax exemptions to Chinese firms as an incentive for working in what is considered a highly dangerous zone. These concessions – extensive tax breaks from customs duty, income tax, sales tax, federal excise duty and withholding taxes – have been granted to Chinese companies for the whole of the CPEC operation, including road, mass transit, and Gwadar port projects.

“There is absolutely nothing in the CPEC for the local trade and industry; even the labor is coming from China, which will cause a steep escalation in the operational cost of the project,” said Muhammad Ishaq, a leading industrialist and a director of Khyber Pakhtunkhwa Board of Investment & Trade in conversation with Asia Times. He cautioned CPEC will be a big disaster for Pakistan in the long run.

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Pakistan financial woes exposing more cracks in Belt and Road?
Key country in China’s grand plan sees finances and currency in disarray; some are blaming the Belt and Road Initiative
By Asia Times staff March 29, 2018 3:38 AM (UTC+8)

http://www.atimes.com/article/pakistan-financial-woes-exposing-cracks-belt-road/

The China-led Belt and Road Initiative (BRI) is putting strain on Pakistan’s public finances and currency, some are saying, casting a shadow over Xi Jinping’s signature connectivity plan.

Jonathan Rogers writes in The Asset on potential hiccups for the grand infrastructure scheme.

“[Pakistan’s] current account worsened substantially last year on the back of a sharp increase in imports due to trade activity related to the Belt Road initiative.

“This in turn has put pressure on the Pakistan rupee, which was the worst performer in the Asian currency complex last year and which has experienced downside revaluation pressure since December, with two sharp legs down met with a depletion of the central bank’s foreign exchange reserves.

“Pakistan had signed up to Belt Road-related projects to the tune of US$60 billion, including plans to build power plants and a railway linking Western China with the Pakistani Indian Ocean port of Gwadar. But political dial back prompted the Pakistani government to withdraw from a joint venture with China to develop the Diamer-Bhasha dam in Kashmir last November.

“That pullback apparently came as the Pakistan authorities baulked at the use of Chinese companies and labour that was stipulated under the terms of the Belt Road agreement. Above and beyond the politics, the economics would strain Pakistan’s balance of payments given that the bulk of the work would appear on the import side of the country’s trade balance with China.”

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“Full transparency – through competing public tenders – of the adequacy, suitability and quality of the Chinese equipment being used,” The South China Morning Post reported last November, “could soon become a serious problem.”

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Is China's Belt and Road working? A progress report from eight countries

https://asia.nikkei.com/Spotlight/Cover-Story/Is-China-s-Belt-and-Road-working-A-progress-report-from-eight-countries

GWADAR, Pakistan -- The idea of transforming the ancient fishing village of Gwadar into a bustling port city has been around since at least 1954, when Pakistan commissioned the U.S. Geological Survey to examine its coastline. Their conclusion: Gwadar, which sits on the Arabian Sea, would be an ideal location for a deep-water port.   

Gwadar's potential went unrealized for decades, but it is now at the heart of a hugely ambitious plan known as the China-Pakistan Economic Corridor, or CPEC. China has pledged to spend $63 billion to bolster Pakistan's power plants, ports, airports, expressways and other infrastructure under the initiative, which Beijing positions as one of the pillars of its $1 trillion global Belt and Road Initiative championed by Chinese President Xi Jinping. 

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For all this grand ambition, some analysts have doubts. Pakistan's trade deficit with China has been rising, and there are concerns about what happens if it is unable to repay its debt. As with other countries that have benefited recently from Beijing's largesse, some in Pakistan worry that the price of such investment could be a huge debt burden.

The China-Pakistan corridor "will no doubt be a game changer for Pakistan, but we need to be careful," said Ehsan Malik, the CEO of Pakistan Business Council, a business policy advocacy forum. "Ten years' tax concessions, 90-year leases for Chinese companies and cheap imports will impact the competitiveness of existing domestic industries."

Pakistan symbolizes both the promise and the potential peril for countries participating in China's BRI undertaking -- arguably the largest investment drive ever launched by a single country -- and its related projects.

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Key findings include:

Project delays After initial fanfare, projects sometimes experience serious delays. In Indonesia, construction on a $6 billion rail line is behind schedule and costs are escalating. Similar problems have plagued projects in Kazakhstan and Bangladesh.

Ballooning deficits  Besides Pakistan, concerns about owing unmanageable debts to Beijing have been raised in Sri Lanka, the Maldives and Laos.

Sovereignty concerns  In Sri Lanka, China's takeover of a troubled port has raised questions about a loss of sovereignty. And neighboring India openly rejects the BRI, saying China's projects with neighboring Pakistan infringe on its sovereignty. 

Mushtaq Khan, an economist and former chief economic adviser at the State Bank of Pakistan, acknowledges that the country's debt to China is rising. But he says Beijing "cannot afford" to bankrupt Pakistan -- in part because of the country's importance as a counterweight to India, a regional rival of China's.

"China's primary interest in Pakistan is geopolitical rather than strictly economic, and therefore, for China, repayment of the debt burden will be secondary to maintaining a good political and economic relationship with Pakistan," he said.


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The deeper ties with China come amid strains between Pakistan and the U.S. In January, the U.S. State Department announced that it would suspend security assistance to Pakistan over what it called a failure to clamp down on terror groups. 

The country's economy has been battered over the years by terrorism, fuel shortages and tattered governance, but it grew 5.4% in the year through June 2017, the fastest pace in 10 years. The State Bank of Pakistan forecasts growth to approach 6% in the year ending June 2018.

The projects are underway with the belief that the troubled nation can join the vibrant club of emerging Asian economies. The government of Pakistan plans to transform Gwadar into one of the world's largest port cities by 2055, housing steel mills, terminals for liquefied natural gas, oil refineries and other facilities. Under the plan, trade and industrial zones will be concentrated on the city's east side, while the western side of the peninsula will serve as residential and tourism areas.

"Gwadar port will be a hub to link Afghanistan and Central Asia, but it is not just a trade and logistics center," said Dostain Khan Jamaldini, chairman of Gwadar Port Authority. "We will set up an industrial estate with export manufacturing zones, and invite the motorcycle and electronics industries."

"Gwadar port is not given to China only," Jamaldini said, stressing the authority's willingness to welcome U.S., European and Asian companies.

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China-Pak Corridor Will Help Boost Pakistan's Development: Imran Khan
World Indo-Asian News Service
Pakistani Prime Minister Imran Khan made the remarks during his meeting on Sunday with Chinese State Councilor and Foreign Minister Wang Yi.

Updated : September 09, 2019 08:46 IST

https://www.ndtv.com/world-news/cpec-china-pakistan-economic-corridor-will-help-boost-pakistans-development-imran-khan-2097761

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One of China’s Most Ambitious Projects Becomes a Corridor to Nowhere

A planned $62 billion initiative in Pakistan has been beset by delays and a lack of funding — more signs of trouble for President Xi Jinping’s signature policy.

https://www.bloomberg.com/news/features/2020-03-02/a-china-belt-and-road-project-becomes-a-corridor-to-nowhere

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Plans originally called for a seaport, roads, railways, pipelines, dozens of factories and the largest airport in Pakistan. But, almost seven years after the China-Pakistan Economic Corridor was established, there’s little evidence of that vision being realized. The site of the new airport, which was supposed to have been completed with Chinese funding more than three years ago, is a fenced-off area of scrub and dun-colored sand. Specks of mica in the dirt are the only things that glitter. The factories have yet to materialize on a stretch of beach along the bay south of the airport. And traffic at Gwadar’s tiny, three-berth port is sparse. A Pakistan Navy frigate is the only ship docked there during a recent visit, and there’s no sign of the sole scheduled weekly cargo run from Karachi.

Less than one-third of announced CPEC projects have been completed, totaling about $19 billion, according to government statements. Pakistan bears much of the blame. It has repeatedly missed construction targets as it ran out of money; it got a $6 billion bailout from the International Monetary Fund last year, the country’s 13th since the late 1980s.

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https://www.youtube.com/watch?v=AU1OvrbawE8

The China-Pakistan Economic Corridor is one of the most important components of Beijing’s ambitious Belt and Road Initiative. But so far, just one-third of planned development has been completed.

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https://www.youtube.com/watch?v=mzfHhNS_A8Q

CPEC has been regarded as the golden opportunity to revive Pakistanis’ economic situation. Here’s how a former ambassador to China and an expert on China-Pak Relations explains the major problems hindering CPEC’s completion and how the high number of civil bureaucracy has an impact on CPEC’s progress.

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https://www.youtube.com/watch?v=LU58TnhldX0

On December 25, officials from China and Pakistan met in Urumqi, the capital of China’s far western Xinjiang region, for the second meeting of the Joint Working Group on International Cooperation and Coordination (JWG) under the China-Pakistan Economic Corridor (CPEC). Attended by China’s Vice Foreign Minister Luo Zhaohui and Pakistan’s Foreign Secretary Sohail Mahmood, the meeting was aimed at taking stock of the CPEC as it turns five. Both sides hailed the progress of the plan despite the pandemic, declaring that both countries’ “close cooperation and mutual support amid COVID-19 has laid the foundation for economic recovery” and “injected new momentum into the construction of the CPEC”.