Wednesday, July 19, 2017

CPEC Financing: Is Pakistan Being Ripped Off By China?

Is China ripping off its all-weather friend Pakistan by charging high interest rates on loans and exorbitant guaranteed returns on investments in China Pakistan Economic Corridor (CPEC) projects?  That's a question that is being asked on a frequent basis by Pakistan's friends and foes alike. While friends of China-Pakistan ties are concerned about an undue burden on Pakistanis, the foes see CPEC as an opportunity to create a lot of fear, uncertainty and doubt about it and its benefits for Pakistan's economy and society. Who's right? Who's wrong? Why? Let's dive into it.

CPEC Projects in Pakistan

Claims by CPEC Detractors:

Many Western and Indian opponents claim that the cost of CPEC financing will be so high that Pakistan will not be able to bear it. They assert that China is attempting to catch Pakistan in a debt trap from which the country will not be able to escape, eventually turning it into a Chinese colony. The financing costs for Chinese loans and investments they claim are in high teens.

Misguided Pakistani Analysts' View:

Many well-meaning Pakistanis, including serious economists, seem to echo detractors' claims without any serious examination or comparison with prevailing bench-marks. They do not mention how similar projects in other parts of the world are financed and what sort of interest rates and return-on-equity are guaranteed.

CPEC Finance Rates vs Benchmarks:

About two-thirds of Chinese CPEC funding is for power projects while one-third is for infrastructure projects like roads, rail lines and ports.

The Chinese soft loans for CPEC infrastructure projects carry an interest rate of just 1.6%, far lower than similar loans offered by the World Bank at rates of 3.8% or higher.

Chinese companies investing in Pakistan power sector are getting loans from Chinese banks at commercial interest rates. These loans will be repaid by the Chinese companies from their income from these investments, not by Pakistani taxpayers.

The rate of return guaranteed by Pakistan power regulators to the Chinese power companies is about 17%. Is it too high, as some claim? Let's compare it to the US market considered among the safest investments in the world.

Rate of Return in United States: 

The average return on equity for almost 8,000 US firms is 14.49%. The power utility companies – with an average of 10.13% – are on the lower end of the spectrum because they are viewed as less risky investments.

In the United States, rate of return varies significantly from state to state, as each state regulator has exclusive authority to regulate utility operations as they choose.

In Advance Energy Economy (AEE) Power Portal database, which tracks ROE for over 100 investor-owned utilities across the country, the highest allowed ROE belongs to Alabama Power Co., at 13.75% while the lowest belongs to United Illuminating Co. (CT) at 9.15%.

Within the US states, Alabama being seen as relatively less safe for investment, offers 13.75% return. So why is it such a surprise to see Pakistani regulator offer Chinese investors a higher rate of return of 17%?

Growing Infrastructure Gap:

Development of physical infrastructure, including electricity and gas infrastructure, is essential for economic and social development of a country such as Pakistan. China-Pakistan Economic Corridor financing needs to be seen in the context of the large and growing infrastructure gap in Asia that threatens social and economic progress.

 Rich countries generally raise funds for infrastructure projects by selling bonds while most developing countries rely on loans from international financial institutions such as the World Bank and the Asian Development Bank to finance infrastructure projects.

The infrastructure financing needs of the developing countries far exceed the capacity of the World Bank and the regional development banks such as ADB to fund such projects. A recent report by the Asian Development Bank warned that there is currently $1.7 trillion infrastructure gap that threatens growth in Asia. The 45 countries surveyed in the ADB report, which covers 2016-2030, are forecast to need investment of $26 trillion over 15 years to maintain growth, cut poverty and deal with climate change.

Pakistan Country Report in Shanghai Business Review Feb/March 2016


China is financing CPEC projects at rates that are comparable to similar projects elsewhere. Chinese loans for infrastructure projects such as rails, roads and ports are at rates (2% or less) below those (3.8%) offered by the Asian Development Bank and the the World Bank. The rate of return on power project investments under CPEC is 17%, somewhat higher than the 13.75 offered by much safer US state of Alabama.

Development of physical infrastructure, including electricity and gas infrastructure, is essential for economic and social development of a country such as Pakistan. China-Pakistan Economic Corridor financing needs to be seen in the context of the large and growing infrastructure gap in Asia that threatens social and economic progress.

An unrelenting campaign of fear, uncertainty and doubt (FUD) about China-Pakistan Economic Corridor (CPEC) has been unleashed in the media in recent weeks. This strategy harkens back to the aggressive marketing techniques used by the American computer giant IBM in the 1970s to fight competition. Part of the motivation of those engaged in FUD against CPEC appears to be to check China's rise and Pakistan's rise with its friend and neighbor to the north. As in IBM's case, the greatest fear of the perpetrators of FUD is that CPEC will succeed and lift Pakistan up along with rising China.  Their aim is to preserve and protect the current world order created by the Western Powers led by the United States at the end of the second world war.   Pakistani government should respond to the FUD campaign against CPEC by countering it with facts and data and increasing transparency in how CPEC projects are being financed, contracted and managed. 

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Majumdar said...

Brofessor sb,

Chinese companies investing in Pakistan power sector are getting loans from Chinese banks at commercial interest rates. These loans will be repaid by the Chinese companies from their income from these investments, not by Pakistani taxpayers.

But where are the chaptas going to generate income from- obviously by selling power to Pakistanis, taxpayers and otherwise. Presumably those who dont pay taxes dont pay power dues and the vice versa . So ultimately Pakistani taxpayers will be picking up the tabs.


Anonymous said...

Riaz Haq said...

Majumdar: "So ultimately Pakistani taxpayers will be picking up the tabs."

Taxpayers will only need to subsidize power purchases if the power companies fail to collect dues from consumers. But subsidies will hopefully be a lot less than the entire amount of power bills.

The important thing is the rate of return guaranteed which is 17%, only a couple or three points above what the US states such as Alabama guarantee investors.

Riaz Haq said...

Anon: ""

Industrial corridors such as CPEC are meant to create competitive power and transport infrastructure to facilitate investment and trade.

There are dozens of manufacturing and agri special zones being planned around CPEC.

As Dawn's Khurram Husain puts it: "Of course, there is nothing wrong with this. The agri-sector is in dire need of investments. But the fact that this is being done with some care to ensure no attention is brought to bear upon it is curious."

His main beef is with the government not acknowledging this.

As to the "dire need of investment" in agri, Pakistan's value added to agriculture is high for its region, it has been essentially flat since mid-1990s. It also lags significantly behind developing countries in other parts of the world. For example, per capita worker productivity in North Africa and the Middle East is more than twice that of Pakistan while in Latin America it is more than three times higher.

Lee Ping HK said...

China cannot help bribe and corruption in Pakistan economy. Pakistan is not very efficient like Chinese business. That is why the benefit to Pakistan will not be as good.

Nigel said...

Pakistan is blessed with its location that China finds attractive. Biggest benefit in GDP growth comes from "neighbourhood trade". Pakistan has nearly closed links with its neighbours. Even if firms decide to set up shop in Pakistan trade with bigger India is shut off. Many Euro firms use NAFTA infrastructure in Mexico to ship goods to the US for example.
Therefore it's not fear or uncertainty. Simply it doesn't make much business sense.

Riaz Haq said...

One Lifebelt, One Road
China makes Pakistan an offer it cannot refuse

MOVE OVER, DUBAI. Some day soon, cruise ships will disgorge frolicking pensioners not by the palm-fringed Persian Gulf but on the balmy Pakistan Riviera. From the muddy delta of the Indus to the barren Baloch coast, a twinkling constellation of attractions is set to rise: luxury hotels, water parks, golf courses, health spas, yacht harbours, night clubs, the works. To top it all, this “vacation product” will be developed in such a way that “Islamic culture, historical culture, folk culture and marine culture shall all be integrated.”

Or so promises a prospectus, drafted for the Chinese government by the China Development Bank, that sets out a detailed vision of the China-Pakistan Economic Corridor (CPEC). Billed as a flagship of China’s $900bn One Belt, One Road initiative to build an Asia-wide infrastructure system tying China more firmly to its markets, CPEC promises to inject some $60bn of Chinese investment into Pakistan. More than half is earmarked for power generation, but there is plenty left over for roads, seaports, airports, fibre-optic cables, cement factories, agro-industry and tourism.

For a country that has struggled to nudge its capital-investment ratio to 15% of GDP—compared with around 30% for India and 28% for Bangladesh in recent years—this gush of Chinese money comes as a godsend. Not only does it promise to energise the economy and fix such problems as chronic power shortages; it represents a strategic insurance policy against India. China has long been Pakistan’s chief arms supplier, and has quietly provided diplomatic cover and technical aid for its nuclear programme. As Chinese officials are fond of saying, China is an “all-weather friend”—unlike America, which has lavished some $78bn in economic and military aid on Pakistan since independence, but periodically gets stingy when Islamabad fails to curb terrorists.


India views China’s spreading footprints next door with dismay. Officials put on a brave face. The Chinese are naive, say some, and will end up getting stung by Pakistan’s generals just as the Americans did. Others hope that once China discovers how far Pakistan’s deep state is entwined with Islamist radical groups, it will show less patience than the Americans.

Privately, however, Indian officials worry that Pakistan’s new patron may play the same role as America once inadvertently did, or as Pakistan’s nuclear deterrent still does: to allow Pakistan to sustain the awkward status quo. “Indian leaders have always calculated that sooner or later Pakistan would have to seek a normal relationship with us,” says Ashok Malik of the Observer Research Foundation, a Delhi think-tank. “CPEC gives them a new narrative: it puts them in China’s sphere.”

Riaz Haq said...

How #China beats #India hollow in trade and dominates #Indian homes, #markets #economy #trade via @economictimes

China seems to be grabbing most of it (solar panels). “The US and Europe are taking measures to protect themselves against Chinese dumping. We (Indians) have instead offered them a direct train to the Indian market. The government must ring fence Indian firms to allow them to grow,” says Chaudhary.

Miles away in Delhi, Rakesh Kumar Yadav shows you another Chinese-flavoured world. He is the president of the Federation of Sadar Bazar Traders Association. The umbrella platform for The umbrella platform for 83 other associations with 35,000 wholesale traders does business worth over Rs 3,000 crore annually and employs at least 100,000 people directly and indirectly.

About a decade back, the traders often used to source products — toys, plastic buckets, idols of Indian gods, among others — from domestic manufacturers. In toys alone, Yadav knows many Indian manufacturers who employed 500-plus people and were their suppliers. “They have all shut down and now import from China. Cheaper and better Chinese imports have wiped out the domestic industry,” says Yadav.

On the border, India is trying to ward off Chinese aggression. In the cold Himalayan plateau, temperatures have shot up as an old political rivalry heats up. India and China are sparring over the Doklam tri-boundary area (the third country being Bhutan), near Chicken’s Neck which connects India’s north-eastern states to the rest of the country. Shrill calls for a boycott of Chinese goods are getting louder, with the Rashtriya Swayamsevak Sangh (RSS) and its affiliate, the Swadeshi Jagran Manch, ..

Read more at:

Kaptaan said...

Couple of things here to note.

1. China is not going "rip off" Pakistan. I say this not because I think China is a saint but because I know they are smart. Pakistan is important to China in a geo-strategic sense and is only one of few countries that are inside Chinese "close circle". For a few billion dollars to wreck a stategic allies economy which would send Pak into a tailspin would be suicidal thing to do for Beijing. China for it's own strategic strength needs Pakistan as a strong, prosperous country, that it can trade with, build military alliance with and have a long term strategic alliance with. Do you chop a apple tree for short term benefit or do you nurture it to gain fruit year after year?

2. Having looked at CPEC more few things have become apparent to me. I always felt it difficult to comprehend exactly how Gwadar would act as a port for China. The location is too far from mainland China and given the huge distance only high quality rail link would offer any chance of this happening - even at lower levels. I now understand that CPEC is not about finding a alternative route to the Arabian Sea that gives competition to the sea route through the Straits of Malaca. The real intention behind CPEC appears to be a Chinese effort to bring Pakistan into Chinese economic engines influence. That is it is a way for Chinese to enter Pakistan's economy and drive standards up which has win win effect for both Pak and China. In other words Pakistan has to open up to China and learn to walk the walk Chinese style. This will requite culltutal change inside Pakistan.

The full details of CPEC are in the link below. It's important to note that lot of sensitive details are left out and Chinese are subtle with teir language but you can read in between the lines what they want and what they expect of Pakistan. As long as Pakistan plays ball there is no chance of Pakistan losing. Indeed it will come out better even while it has to surrender some space to Chinese wishes and habits. Pakistan will by definition have to chill with Islamic rhetoric and move gently toward secularism without openly saying so.

I see nothing wrong with this. I see similarities in how America brought poor European countries into it's arc of influence (resulting in significant US influence and culture permeating ) after WW2. Here I am thinking of Greece, Spain, Italy etc and I would even include Turkey in this category. These countries gave space to US and in return were assured entry into American economic/military order which assured kiving standards and military security through NATO. Presently countries like Poland etc are getting the same benefits from Uncle Sam.Economc investment/trade is normally linked with military agreements entailing opening of US military bases under NATO architecture. Turkey has also been recipient of this and we know NATO has bases in Turkey.

In the same way I see CPEC as a vehicle for Chinese economic ingress into Pakistan which will tie Pakistan economically within the Chinese arc. This down the road will mature into full spectrum economic, military (expect Chinese bases ) and social relationship. For instance Chinese see Baloch coast as a place for Chinese holiday makers to visit as they do for instance Antalya in Turkey. Presumably full scale resorts that cater for Chinese holiday makers including drinks, food and other pursuits will be needed further down the road. It's all exciting stuff and I see Pakistan changing over the decades.

In short CPEC appears to be way for Chinese to move into Pakistan and help Pak economy on a road to development using Chinese technology and skills that they have learned in the miracle that country has witnessed in last 3 decades. CPEC will harvest the potential Pakistan has that at the moment lies latent. CPEC is not aboy funneling Chinese trade through Pakistan but switching on and turboboosting Pak trade and economy which has lied dormant all this time.

Majumdar said...

Brofessor sb,

That was quite useful, sir, thank you. However, I cud do with some additional info:

The important thing is the rate of return guaranteed which is 17%

Is the RoR guarantee only on the equity component; or the entire capital, I suspect it will be only equity.

But more fundamentally, is the 17% calculated on dollar basis or PKR. If the latter fine, if the former quite usurious. India for instance offers only 15% on INR basis.


Riaz Haq said...

Woodside sees Qatar LNG expansion hurting U.S. LNG growth

MELBOURNE (Reuters) - A plan by top global liquefied natural gas (LNG) exporter Qatar to ramp up output will stall the expected growth of U.S. LNG exports, the head of Australia's Woodside Petroleum, operator of the country's biggest LNG plant, said.

Qatar surprised rivals this month when it lifted a self-imposed ban on development of the North Field, the world's biggest natural gas field, saying it would boost LNG output by 30 percent to 100 million tonnes a year in five to seven years.

That put it on course to it wrest back the title of the world's top LNG exporter from Australia, which is set to overtake Qatar in the next two years.

Woodside, operator of the North West Shelf project, said Qatar's plan showed the emirate shares its outlook for solid demand growth for LNG and gives importers like China, India, Pakistan and Bangladesh the supply certainty they need to lock in gas expansion plans.

"The Qataris will not take up all of the available market," Woodside Chief Executive Peter Coleman told Reuters in an interview on Thursday.

Qatar's expansion plan will compete directly with Woodside, which is looking to develop the Browse and Scarborough fields off Western Australia within the next decade - its so-called Horizon 2 projects - by processing gas through the North West Shelf plant or other existing facilities.

"On the challenge side, low cost will get into market, and that's what we're doing with our Horizon 2 projects. We're trying to make sure they're low cost, and they're well positioned, because we're targeting the Asian market," Coleman said.

Projects that will find it harder to compete will be those that need billions of dollars in new infrastructure and coal seam gas-to-LNG projects that need continuous capital spending to drill new wells, he said.

The International Energy Agency last week forecast the United States would become the world's second largest LNG exporter by the end of 2022, but Coleman said the Qatari expansion would stymie that growth.

"It'll keep a lid on U.S. expansions, because U.S. expansions are transportation-challenged," he said.

U.S. LNG flows largely into the Atlantic market, where it competes against pipeline gas from Russia and Norway.

Riaz Haq said...

#US to support #Pakistan to add at least 3,000 MW of clean power. #energy #renewables via @NewIndianXpress

Giving a major relief to Pakistan, which has been facing chronic shortage of energy, severely limiting economic development, the United States will support Pakistan to add at least 3,000 megawatts of clean power generation infrastructure to Pakistan’s national electricity system by 2020. The U.S. assistance to Pakistan is being provided under U.S.-Pakistan Clean Energy Partnership, through which the USAID will support capacity building, technical assistance, USAID Development Credit Authority financial guarantees, business-to-business sales arrangements, and the construction of transmission lines to private projects to stimulate increased levels of private investment in clean power.

The U.S. has already made more than 2,400 megawatts available to Pakistan’s electricity grid, benefiting some 28 million Pakistanis, and has helped Pakistan take steps to reform its troubled energy sector since 2009. The U.S. has also funded the refurbishment or construction of nearly 1,100 kilometers of roads, enabling trade, security, and mobility.


“The U.S. Agency for International Development’s (USAID’s) on-budget investments in energy generation, facilitated by the Energy Policy Program (EPP), contributed to increasing generation capacity, energy production, and the reliability of power. EPP helped Pakistan develop the contractual framework that led to the first importation of liquefied natural gas,” report says.

It further says, “In 2016, the United States continued to focus on five sectors determined in consultation with the Pakistani government in 2011. Energy, economic growth including agriculture, stabilization of areas vulnerable to violent extremism, education and health with emphasis on improving democracy, governance, and gender equity are integrated into programming across the five sectors”.

The report stated that U.S. assistance has helped Pakistan improve governance and management systems, and increase the country’s distribution companies’ revenue collection by more than US $400 million, as well as provide commercial opportunities for U.S. businesses. The United States continued to fund infrastructure rehabilitation projects, especially in clean energy, and provided technical assistance to Pakistani energy institutions, including distribution companies, to increase power generation and improve performance.
The U.S. has also trained more than 5,600 police and 1,000 prosecutors across Pakistan; provided scholarships to approximately 15,000 Pakistanis to attend Pakistani universities, 50 percent of whom were women; and supplied better access to comprehensive family planning services to more than 100,000 women since 2009.

In 2016, the United States continued to build strong cooperation with Pakistan, including through U.S. assistance, as a stable, secure, prosperous, and democratic Pakistan is in the long-term U.S. national security interest.

Riaz Haq said...

Majumdar: "Is the RoR guarantee only on the equity component; or the entire capital, I suspect it will be only equity"

It is return on equity (ROE) and it's in US$ terms. Here's an analysis by ex State Bank of Pakistan governor Dr. Ishrat Hussain:

The total committed amount under CPEC of $50 billion is divided into two broad categories: $35bn is allocated for energy projects while $15bn is for infrastructure, Gwadar development, industrial zones and mass transit schemes. The entire portfolio is to be completed by 2030.


The entire energy portfolio will be executed in the IPP mode —as applied to all private power producers in the country. Foreign investors’ financing comes under foreign direct investment; they are guaranteed a 17pc rate of return in dollar terms on their equity (only the equity portion, and not the entire project cost). The loans would be taken by Chinese companies, mainly from the China Development Bank and China Exim Bank, against their own balance sheets. They would service the debt from their own earnings without any obligation on the part of the Pakistani government.

Import of equipment and services from China for the projects would be shown under the current account, while the corresponding financing item would be FDI brought in by the Chinese under the capital and finance account. Therefore, where the balance of payments is concerned, there will not be any future liabilities for Pakistan.

To the extent that local material and services are used, a portion of free foreign exchange from the FDI inflows would become available. (Project sponsors would get the equivalent in rupees). For example, a highly conservative estimate is that only one-fourth of the total project cost would be spent locally and the country would benefit from an inflow of $9bn over an eight-year period, augmenting the aggregate FDI by more than $1bn annually. This amount can be used to either finance the current account deficit or reduce external borrowing requirements. Inflows for infrastructure projects for local spending would be another $4bn over 15 years.

Taking a highly generous capital structure of 60:40 debt-to-equity ratio for energy projects, the total equity investment would be $14bn. Further, assuming the extreme case that the entire equity would be financed by Chinese companies (although this is not true in the case of Hubco and Engro projects, where equity and loans are being shared by both Pakistani and Chinese partner companies) the 17pc guaranteed return on these projects would entail annual payments of $2.4bn from the current account.

CPEC’s second component, ie infrastructure, is to be financed through government-to-government loans amounting to $15bn. As announced, these loans would be concessional with 2pc interest to be repaid over a 20- to 25-year period. This amount’s debt servicing would be the Pakistan government’s obligation. Debt-servicing payments would rise by $910 million annually on account of CPEC loans (assuming a 20-year tenor). Going by these calculations, we can surmise that the additional burden on the external account should not exceed $3.5bn annually on a staggered basis depending on the project completion schedule.

As a proportion of our total foreign exchange earnings of 2016, this amounts to 7pc. These calculations do not take into account the incremental gains from GDP growth that will rise because of investment in energy and infrastructure. As the loan amounts would be disbursed in the next 15 years and repayments would be staggered, the adding of the entire $15bn to the existing stock of external debt and liabilities is not an accurate representation. The more realistic approach would be a tapered schedule, with $2bn to $3bn getting disbursed in the earlier years and slowing down in the second half.

Kadeer said...

Equity = Assets - Liabilities

On equity you are guaranteed 17% return and there will be little liabilities owed by Pakistan for the $35 billion power projects portion. Keeping assets constant (in reality they go up), 17% of $35 billion is 600 million.
Add interest payments in the loan portion of CPEC = $1.2 billion that is the minimum that needs to be paid yearly.
Is that correct?

Riaz Haq said...

Kadeer: "17% of $35 billion is 600 million."

No, it's not 17% of all of $35 billion....the 17% return only applies to the equity portion of the project that'll likely be around 60% at most.

Here's Dr. Ishrat Husain: " Taking a highly generous capital structure of 60:40 debt-to-equity ratio for energy projects, the total equity investment would be $14bn. Further, assuming the extreme case that the entire equity would be financed by Chinese companies (although this is not true in the case of Hubco and Engro projects, where equity and loans are being shared by both Pakistani and Chinese partner companies) the 17pc guaranteed return on these projects would entail annual payments of $2.4bn from the current account."

Kadeer: " Add interest payments in the loan portion of CPEC = $1.2 billion that is the minimum that needs to be paid yearly.
Is that correct? "

The interest rate on infrastructure projects is only 1.6%.

Ishrat Husain: " CPEC’s second component, ie infrastructure, is to be financed through government-to-government loans amounting to $15bn. As announced, these loans would be concessional with 2pc interest to be repaid over a 20- to 25-year period. This amount’s debt servicing would be the Pakistan government’s obligation. Debt-servicing payments would rise by $910 million annually on account of CPEC loans (assuming a 20-year tenor). Going by these calculations, we can surmise that the additional burden on the external account should not exceed $3.5bn annually on a staggered basis depending on the project completion schedule."

Javaid said...

"..... the additional burden on the external account should not exceed $3.5bn annually on a staggered basis depending on the project completion schedule." Per RH.

$3.5 billion annually that is a big amount to pay.

Riaz Haq said...

Javaid: "$3.5 billion annually that is a big amount to pay."

It's about 1% of Pakistan's current GDP and about a third of Pakistan's current remittances from overseas workers,

Increasing investment via CPEC will accelerate GDP growth to 6-7% and make $3.5 billion in repayments even a smaller fraction of GDP and Pakistan's expected earnings from exports from many of the 46 SEZ's planned for CPEC.

The alternative to CPEC is to condemn Pakistan to a slow growth trajectory with power shortages and infrastructure deficits.

Munir said...

{Increasing investment via CPEC will accelerate GDP growth to 6-7%}

That will be very impressive but I have not come across that prediction. What is the time frame for 6-7% growth to happen? IMF and OECD predictions are lower in the short term.

Riaz Haq said...

Munir:" What is the time frame for 6-7% growth to happen? IMF and OECD predictions are lower in the short term"

It doesn't take a rocket scientist or brain surgeon to figure out the basics :-)

Pakistan has managed to grow its economy 4% plus with current investment to gdp ratio of about 15%.

Every 4% investment to gdp boosts GDP growth by 1%..... Bangladesh and India have managed around 7% growth by virtue of about 28-30% investment to GDP.

I expect CPEC projects to create a highly competitive infrastructure to attract greater investment to increase investment to gdp ratio to 25% to 30%.

Read more to learn:

Riaz Haq said...

#Pakistan to quadruple #carbon emissions in 15 years despite feeling pain of #climatechange - The Ecologist #energy

At the same time, as Pakistan has developed, its carbon emissions have grown. Between 1994 and 2015, the country’s carbon emissions grew 123 percent.

And as the country continues to push forward with economic development, under its Vision 2025 strategy and the CPEC, the prime minister recently reiterated the goal of becoming one of the top 20 economies of the world by 2025.

To achieve this economic growth, there will be a focus on the energy and transport sectors, which already account for a sizeable amount of Pakistan's emissions.

In a recent statement, Pakistan’s minister for climate change stated that given the projected economic growth trajectory, emissions in Pakistan were expected to increase from 405 metric tons carbon dioxide to more than 1,603 metric tons of CO2 in the next 15 years - that means increasing by almost four times.

And although this will still not make Pakistan a big emitter, especially in comparison to its neighbours India and China, it will still have significant environmental impacts, as well as implications for Pakistan’s position as a country that has historically painted itself as a sufferer of the impacts of climate change, and not a contributor.

From an energy perspective, Pakistan’s development plans do include investment in renewables under the China Pakistan Economic Corridor, such as the $ 1.6 billion hydropower project in Karot, the $ 1.2 billion solar power park in Bahawalpur and the $ 260 million 100-megawatt wind farm in Jhimpir.

However, these are dwarfed by the huge investments in coal energy at the same time. As a country with a growing population, which faces an energy crisis, the government is justified in investing in energy, but at what future cost?

Recent reports also suggest that the price per unit of renewable energy in Pakistan is much higher than that of its neighbours, despite being tax free.

There are also a number of other hurdles, such as Pakistan’s rapid urbanization - more than half of the country will be living in urban areas by 2025, according to UN estimates. Karachi, the port city, is already the 7th largest megacity in the world.

Not only do urban areas consume a lot of energy, they are also responsible for producing the most emissions - UNHABITAT put the total emissions from carbon from cities at 60 percent, while putting the global consumption at 78 percent.

While Pakistan surges forward with its economic development plans, which is not only encouraging but much needed, it has two options: either to continue in its current role as a vulnerable country, and position itself through its policies as such, or to think 20 years into the future, when it will have a larger economy and a larger population, and create a balance in its policies between curbing emissions growth and adaptation needs.

Given the frequency and rate at which climate change is impacting Pakistan, it will always be a vulnerable country. However, experts are optimistic about Pakistan catching up to its neighbours, India and China, in terms of economic development, albeit with external assistance.

This also means that emissions are set to rise, and Pakistan’s current planning and policies are not fully addressing the implications this may have.

Ahmed F. said...

Plain Truth about the Economy is a perceptive and analytical piece in Pakistan's Dawn newspaper by a former World Bank economist Anjum Altaf. I believe some of you attended the engineering university in Lahore with him. One of my cousins did and he thinks highly of him.

He has questioned some of the hype and for that he will be called a liberal who is the darling of the West, a son of Macaulay and so on. Perhaps it is comforting for some of us to write off the entire English media in Pakistan for that very reason, not just Hoodbhoy. But what does that accomplish? How is that different from pulling wool over our eyes?

Riaz Haq said...

Ahmad F: "Plain Truth about the Economy is a perceptive and analytical piece in Pakistan's Dawn newspaper by a former World Bank economist Anjum Altaf."

I'm amazed at Anjum Altaf's sheer ignorance about per capita income levels for Pakistan and how to interpret them.

Pakistan's PPP GDP per capita is about $6,000 and the purchasing power parity conversion factor is Rs. 30 per dollar that translates into Rs. 180,000 per year or nearly Rs. 15,000 per month per person. For a household of 4-5 people, it comes to Rs. 60,000 to Rs. 75,000 per household.

He also doesn't seem to understand that the minimum wage is not per capita for the entire population but per worker. Being demographically a young country with low percentage of female employment, the workers make up less than 50% of the population. The average household income in Pakistan is about 6X minimum wage.

And going by median incomes, Pakistan is the most egalitarian country in its region.

Ahmad F. said...

Also savor this piece "Economic Bullshit" by Anjum Altaf . By the way, he is a very qualified economist. Saying that he does not know basic economic concepts is a simple emotional reaction.

Riaz Haq said...

Ahmad: "Also savor this piece "Economic Bullshit" by Anjum Altaf . By the way, he is a very qualified economist. Saying that he does not know basic economic concepts is a simple emotional reaction."

My responses are based on logical arguments backed by data. And I know BS when I smell it. And I see that Anjum Altaf is full it it.

A litmus test of the size of the middle class population and its growth in a developing country is what is happening in terms of standards of living as defined by access to things such as motorcycles, refrigerators, washing machines, etc .

This is what Dr. Jawaid Abdu Ghani, a professor at Karachi School of Business and former faculty at MIT Sloan and Wharton, did in a paper he published arlier this year. I discussed in a post I am sharing below:

Riaz Haq said...

The Asian Development Bank (ADB) has agreed to enhance its annual lending to Pakistan to about $2 billion over the next three years, from presently less than $1.5 billion, subject to speedy readiness of project designs and procurement.

ADB agrees to increase annual lending to Pakistan to $2bn

to journalists after his meetings with the Finance Minister Ishaq Dar and the chief minister of Punjab, the Bank’s Vice President Wencai Zhang said Pakistan had requested an increase in its financing flows to more than $2.5bn.

He said that he is here for finalisation of the three-year Country Partnership, Strategy and Operation Plan for 2018-21 under which the ADB would continue to support infrastructure projects in transport and railways, including interconnection facilities with the neighbours including South Asia, Central Asia and South-East Asia.

He said the government wanted the ADB ‘to deliver funds more than $2.5bn’ per annum but depending on finalisation of projects the annual funding to the country would range between $1.8-2.1bn, depending on the processing time of the projects.
Mr Zhang said the ADB will also continue to work for reforms in the public sector entities and energy sector reforms, particularly in transmission and distribution network and energy efficiencies.

He added that the Bank is now looking with greater interest at the urban transport system and has recently approved $335m for Peshawar Bus Rapid Transport Project in collaboration with other international lending agencies and is examining to enter more transportation projects starting with Punjab.

A new area of interest for the ADB is the urban water and sanitation projects as part of integrated water management systems as a move on to financial inclusiveness through Public-Private Partnership, starting with a project in Sindh and then in Punjab.

He said the ADB was also exploring how it could increase its support for social sectors particularly in technical and vocational education for skill development of the youth and secondary health sector.

Responding to a question, he conceded the project preparation and approval process had been a cause of project delays, cost over-runs and delay in achievement of intended results that also involved commitment charges but added the ADB was improving its procedures and wanted the government to also streamline its project design, procurement and approval processes.

Riaz Haq said...

Pakistan refuses ADB loan for railway as China becomes sole financier

Pakistan has refused part financing from the Asian Development Bank (ADB) for the $8 billion Karachi-Peshawar Railway Line (ML-1) after China said it wanted to fund the project single-handedly.

“China strongly argued that two-sourced financing would create problems and the project would suffer,” Minister for Planning and Development Ahsan Iqbal told a news conference on Thursday.

The minister said he would not comment whether the Ministry of Railways has resisted the Chinese request for fears of monopoly, but said the entire financing would now come from China. The project was originally planned to be partly funded by the Manila-based ADB.

He said the ADB would be accommodated in some other projects, such as those under the Central Asian Regional Economic Cooperation programme.

Under the original plan, the ADB had to provide $3.5bn for the 1,700-kilometre-long line considered the backbone of the country’s logistics connecting two major ports with the rest of the country for transporting goods and passengers.

The minister said the Chinese government therefore wanted that the project financing should be kept single-sourced. Pakistan and China are expected to sign a formal agreement in this regard next month.

Mr Iqbal said the Planning Commission was making efforts to maximise allocation of funds for the next year’s development programme as it would be the final year of the current government. Therefore, the government would like to complete maximum number of projects during this period so as to support the growth momentum.

He said it was also important to have larger development portfolio for the next year because it would trigger activity in the construction industry on which a number of other growth-oriented industries were dependent because of its potential to create jobs.

“But we also have to balance ways and means,” he said, adding that the Planning Commission demanded Rs1 trillion for the of next year’s public sector development programme (PSDP), but the finance ministry has put a ceiling of Rs700bn.

He said the finance minister and the prime minister would be requested to increase development allocations. The minister said the annual plan coordination committee would meet on May 17 to finalise next year’s development programme. And for a formal approval, the Planning Commission has proposed a meeting of the National Economic Council on May 21 or 22, depending on prime minister’s availability.

Riaz Haq said...

Nigel: "Biggest benefit in GDP growth comes from "neighbourhood trade". Pakistan has nearly closed links with its neighbours. Even if firms decide to set up shop in Pakistan trade with bigger India is shut off. Many Euro firms use NAFTA infrastructure in Mexico to ship goods to the US for example."

Pakistan sits between two economically very dynamic regions: Central Asia (and Western China) and South Asia. Which region is better suited for its economic connectivity and integration? Should Islamabad focus on CAREC (Central Asia Regional Economic Cooperation) rather than SAARC (South Asian Association of Regional Cooperation)?

Ideally, Pakistan should be a major player in both vibrant regions. However, Indian Prime Minister Narendra Modi's policy of attempting to isolate Pakistan has essentially forced it to choose.

First, Mr. Modi decided to boycott this year's SAARC summit that was scheduled to take place in Islamabad, Pakistan. Then, he unsuccessfully attempted to hijack the BRICS economic summit in India to use it as a political platform to attack and isolate Pakistan. The signal to Pakistan was unmistakable: Forget about SAARC.

Central Asia Regional Economic Cooperation (CAREC):

CAREC is a growing group of nations that is currently made up of 11 members, including China and a list of STANs. The current membership includes Afghanistan (joined CAREC in 2005), Azerbaijan (2003), People's Republic of China (1997), Georgia (2016), Kazakhstan (1997), Kyrgyz Republic (1997), Mongolia (2003, Pakistan (2010), Tajikistan (1998), Turkmenistan (2010) and Uzbekistan (1997).

Riaz Haq said...

Big Power for Little #SriLanka in the #India-#China Rivalry. #Bhutan #Nepal #Doklam #HambantotaPort #Pakistan #CPEC

When it comes to this periphery, one particular concern for New Delhi is Sri Lanka's Hambantota deep sea port project. This new port and others at Gwadar in Pakistan, Chittagong in Bangladesh and Djibouti constitute the Indian Ocean leg of China's 21st Century Maritime Silk Road. And ever since construction began in Hambantota in 2008, China has taken on an increasingly prominent role in the project, which includes not only the $1.4 billion port but also an airport, numerous highways and an as-yet-unbuilt 15,000-acre industrial zone. Initially, Sri Lanka intended to build the project with massive Chinese loans and operate the port on its own, but it has confronted the difficulty of making the port profitable. Thus, in late 2016, Colombo announced a potential deal to trade an 85 percent stake in the project, which would include a 99-year lease on land there, to China Merchants Port Holdings in exchange for $1.1 billion in debt relief. Sri Lanka is $8 billion in debt to China, and over one-third of its government revenue goes to servicing that debt.

Domestic tensions over India's involvement in Trincomalee will only continue. And ultimately, the revised deal with China over Hambantota will not end competition over Sri Lanka and its ports. After the tumultuous conclusion of the Sri Lankan civil war in 2009, the country was left internationally isolated and at odds with India. New Delhi notably did not offer Colombo substantial assistance in defeating the Tamil Tigers, and Sri Lanka instead relied on Chinese, Pakistani and Iranian involvement. In the wake of these events, restoring a balance between patronage from India and other nations does not mean Colombo will be making a full tilt toward New Delhi. Moreover, India simply does not have the economic heft or state control of businesses needed to assist Sri Lanka in the way that China does.

On a broader scale, the regional rivalry between China and India grows ever stronger, as the two nations push for dominance over their shared border and India's various neighbors. But direct military confrontation between Beijing and New Delhi is extremely unlikely, and the tensions will instead play out in nearby countries. Bhutan, for example, has already been caught up in this rivalry with the ongoing Doklam Plateau crisis. East Africa, too, has become the target of an early stage Indo-Japanese attempt to counterbalance China's infrastructure initiatives. For its part, Sri Lanka appears to have used its political savvy to square the circle for now, but the country will no doubt remain involved in the affairs of India and China in the future. And while being sandwiched between two great powers can be a precarious position for a small nation like Sri Lanka, the country has proved itself adept at playing these powers off one another for its own benefit.

Majumdar said...

After reading about Sri Lanka's Hambantota, do you think CPEC is a great idea? What say, Brofessor sb? Regards

Riaz Haq said...

Majumdar: "After reading about Sri Lanka's Hambantota, do you think CPEC is a great idea? What say, Brofessor sb?"

Pakistan and Sri Lanka situations aren't comparable in terms of the debt-to-gdp ratio, size of the economy and the market etc.

Read this Forbes story:

Sri Lanka's Debt Crisis Is So Bad The Government Doesn't Even Know How Much Money It Owes

Trying to develop its infrastructure to increase its economic potential has plunged Sri Lanka deep into a pit of debt, pushing the country to the brink of bankruptcy and prompting an IMF bailout.

The official estimate of what Sri Lanka currently owes its financiers is $64.9 billion — $8 billion of which is owned by China. The country’s debt-to-GDP currently stands around 75% and 95.4% of all government revenue is currently going towards debt repayment.

This debt situation is clearly not sustainable, but there’s more:

In addition to racking up large amounts of government debt via the usual channels, it's now becoming evident that the previous government also utilized state-owned enterprises to take out additional loans on its behalf. While the full extent of this extracurricular lending seems unknown, current estimates peg it at a minimum of $9.5 billion — which is all off the books of the finance ministry.

“We still don’t know the exact total debt number,” Sri Lanka’s prime minister admitted to parliament earlier this month.

Much of Sri Lanka’s pile of debt accrued in the process of initiating an entire buffet of large-scale and extremely expensive infrastructure projects under the direction of former president Mahinda Rajapaksa.

Between 2009 and 2014 Sri Lanka’s total government debt tripled and external debt doubled, as the country engaged in a number of costly undertakings -- such as attempting to build a new, multi-billion dollar city in the middle of a jungle (which includes the world’s emptiest international airport), constructing one of the most expensive highways ever made, as well as other pricey endeavors, such as spending $42 million just to remove a rock from the harbor at Hambantota.

But this doesn’t necessarily mean that Sri Lanka's current administration is doing much better. Under President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe, who came to office at the beginning of 2015, domestic debt grew by 12% and external debt by 25% without starting any new large-scale infrastructure projects.

This fact has not gone unnoticed by former president Mahinda Rajapaksa, who recently issued a series of public taunts, claiming that with the money the current administration has so far borrowed he could have built “two Mattala Airports, one Hambantota Port, one Norochcholai Coal Power Plant, one Colombo-Matara Highway, one Colombo-Katunayake Highway, not one, but two Colombo Port cities and one 500 MW Sampur Coal Power Plant...”

Sri Lanka may be in a debt trap that it can’t get out of. This year alone $4.5 billion is due to foreign lenders and next year $4 billion is owed — bills which the country has not yet figured out a way to pay.

Various interim solutions to the debt crisis have been proposed, such as offering debt-for-equity swaps to countries, such as China, that Sri Lanka owes big and privatizing and outright selling loss-incurring SOEs, which have yet to receive much interest.

The IMF did agree to provide Sri Lanka with a $1.5 billion bailout in the form of a loan in April after the country agreed to a set of criteria to attempt to right the course of its wavering economy. However, as reported by East Asia Forum, Sri Lanka’s Central Bank has stated that it is their intention to secure an additional $5 billion in loans after receiving these funds -- and corresponding seal of approval -- from the IMF as the debt trap continues getting deeper.

Riaz Haq said...

5 Most Profitable Business Sectors in Pakistan:

Pakistan business sector is growing fast, a country with 193.2 million estimated population in 2016 has shown strong growth in the past five years which is expected to grow further. A study published by Harvard indicates that Pakistan’s economic growth will surpass China’s in the next 20 years, growth statistics and current development in the country including China Pakistan Economic Corridor CPEC attracts more businesses to invest in Pakistan from across the globe. Recently, France, United Kingdom, Turkey and China has shown special interest to start bilateral trade with Pakistan and private sector companies from these countries are also leapfrogging to make considerable investments in Pakistan.

Despite, these are many sectors in Pakistan that are underdeveloped but these five sectors including; FMCG, Chemicals and Fertilizers, Automotive, Textile and Energy/Petroleum are the most growing and profitable in Pakistan.

The data acquired from Karachi Stock Exchange KSE from 2013 to 2017 indicates that top companies who performed well are from the above five sectors. The companies witnessed strong growth and profitability over the four years.


FMCG is the most lucrative and huge business sector in Pakistan, companies that are consistently growing and becoming more profitable includes; Colgate Palmolive, Unilever, Nestle and Engro Foods. The market is huge and still in growing stage whereas industry has few multinational players covering the whole market.

2 Chemicals and Fertilizers

“Chemicals and fertilizers” is another big sector which caters even bigger market, companies like ICI Pakistan, Fauji Fertilizer, Engro Fertilizers and Chemicals, Abbot, Lucky Cement and some other are dominating the market with strong growth over time and profitability.

3 Automotive

The automotive industry in Pakistan forms oligopoly, global players like Toyota, Honda and Suzuki dominates the market. However, Pakistan has allowed other automakers to setup car assembly plants in Pakistan, increasing disposable income and the transport needs in the country make the market more attractive, potential and profitable.

4 Textile

Pakistan’s textile industry is popular in all over the world; however, due to lesser facilities and government support Pakistan is not able to streamline its textile growth but the textile industry accounts for 57% of the country overall exports. There are several companies in this sector including Premium Textile and Din Textile that are quite lucrative.

5 Energy/Petroleum

Where there are people there is a need for energy in all segments of life whether you are at home, traveling, working, playing and having leisure energy and petroleum products are inevitable, Pakistan’s energy and petroleum needs are growing rapidly, it is estimated that Pakistan’s energy needs will surpass 50,000 MW by 2025. Petroleum and energy sector in Pakistan is expected to grow further and become more profitable in the future.

Anonymous said...

Government debt as share of GDP. Japan: 250% India: 70%
Pakistan: 66% Vietnam: 62% China: 46% Philippines: 42%
S Korea: 38% Indonesia: 28%

Riaz Haq said...

#Pakistan #auto sales stay buoyant as volumes rise 14% in 10 months July 2016-April 2017

Local automobile sales, including light commercial vehicles (LCVs) and jeeps, in the first 10 months (Jul-Apr) of the current fiscal year totalled 176,937 units, up 14% compared to 154,949 units (excluding Punjab taxi scheme sales of 29,150 units) in the same period of previous year, according to data released by the Pakistan Automotive Manufacturers Association (Pama).

Auto industry seeks tax relief at retail stage

“Car sales remained robust and are expected to touch 270,000 units (including 60,000 imported cars) by the end of fiscal year in June 2017,” Topline Securities commented on Thursday.

Imran Z said...

Are these conjectures or based on evidence based research (I mean increased exports to pay obligations back in $$$) ?

Riaz Haq said...

Imran: "Are these conjectures or based on evidence based research (I mean increased exports to pay obligations back in $$$) ?"

Economics is not an exact science. There's no such thing as a "one handed economist". However, these are educated guesses and analyses by eminent economists like Dr Ishrat Husain

Riaz Haq said...

#IMF says #CPEC outflows from #Pakistan to peak at $4.5 billion in Year 2024

In a detailed look at the China-Pakistan Economic Corridor (CPEC), the International Monetary Fund (IMF) cautions that corridor projects will generate outflows of as much as $4.5 billion by 2024, while the export benefits of the projects “will likely accrue gradually over time”. Filling the gap in between could pose a policy challenge.

“These considerations warrant policymakers’ attention to two priority areas in order to realise the transformational potential of Pakistan’s investment programme while maintaining external stability,” the IMF report says.

The first challenge is to ramp up export revenue and build foreign exchange buffers, which “will be important to cushion the period of increased BoP outflows”. Ramping up exports will require “improving competitiveness and the business climate” in order to realise the potential benefits from the increased energy supplies and transport infrastructure that the corridor projects will create.

The second big challenge is bringing “full cost recovery” in power distribution. “Routing the increased generation capacity through a loss-making distribution sector could result in faster accumulation of circular debt and fiscal costs, as well as undermine long-term financial sustainability of the new energy projects,” the report adds.

The report stops short of advocating a specific path for improving recoveries, but points towards greater private-sector participation in metering and recoveries while “maintaining a strong and enabling regulatory framework”. The language could be aimed at the government’s proposed reforms to the Nepra Act that seek to parcel out many of the powers the regulator currently enjoys to the federal and provincial governments and their departments.

The report also cautions against going too far down the road of granting incentives to certain categories of investor. It urges the government to “rationalise and limit tax incentives and exemptions [and] maintain uniformity of the tax regime with respect to all investments” and ensure that new external commitments are in line with expected balance of payments trends.

The report notes the positive impact that CPEC projects can have on Pakistan’s economy. It says the direct impact of corridor projects on GDP will go from $2bn in 2017 to $4bn by 2024. By that point in time, the indirect, second-round impacts could commence, which could be “significant” but “will depend on many other supportive factors.”

The report notes that the investments coming under the early-harvest scheme could close Pakistan’s power deficit as 8,600MW are envisaged to be commissioned under CPEC over the next seven to nine years, out of a total capacity expansion of 24,000MW currently in the investment plan. “[T]his expansion will help eliminate Pakistan’s deficit of about 6GW in 2016 to a surplus as early as end-2018.”

Riaz Haq said...

#CPEC provides avenues for #Pakistan to get a big slice of $100 billion #China's food imports

The China-Pakistan Economic Corridor (CPEC) is a golden opportunity for overall development of this region and Pakistan should reorganise its agriculture sector to get a major slice of the $100 billion worth of agriculture produce imports by China, suggested Muhammad Mehmood, Punjab Agriculture Secretary.

Speaking at the launch of a study on “CPEC – Prospects & Challenges for Agriculture”, Mehmood pointed out that nearly one-fourth of the world’s population was living in China and most of its exports would be routed through Pakistan after the completion of CPEC. “Containers full of exportable surplus will be sent to various international markets, but on their return, these containers will be empty and we must capitalise on the opportunity to export our surplus agriculture produce to China,” he said.

Mehmood revealed that per capita income of China was increasing substantially, bringing a visible change in people’s lifestyle and food habits there. “Like other affluent societies, they also prefer rich and costly food and fruits,” he said, adding Pakistan could get maximum benefit of the emerging change.

“We are concentrating on high-value crops and a 10-year programme has been evolved to develop one lakh acres of land in the Potohar region for planting grape and other high-value crops.”

Major Chinese importers will also be invited to utilise this land for growing high-value fruits in addition to developing the agriculture processing industry on modern scientific lines.

“Its trickle-down effect will provide an opportunity to our farmers to upgrade their technologies and develop agriculture as a profitable business by shunning centuries-old practices,” Mehmood said.

He told the audience that foreign consultants had been engaged to analyse why Pakistan had not been able to get its due share in Chinese imports despite its friendly relations and close proximity.

He suggested that Pakistan should renegotiate the bilateral trade agreement and a meeting was expected in the current or next month. After that, “we would be in a position to decide which strategy is suitable for Pakistan to enhance its share in Chinese imports.”

Responding to a question about a research project on the China-Pakistan agricultural technical cooperation, the agriculture secretary insisted that the Punjab Agriculture Research Board was extending liberal grants to the viable projects planned by the public and private sectors.

“Initially, Rs259 million had been allocated for this purpose. The funding was immediately increased to Rs750 million and it would be further enhanced to Rs3 billion in the next three years,” he said.

He asked the Faisalabad Chamber of Commerce and Industry president to send the project to the research board where a group of experts would review its viability and approve the requisite grant.

Riaz Haq said...

Banyan: Massive #Chinese investment is a boon for #Pakistan. #CPEC #China … via @TheEconomist

Never has Pakistan been so wooed. The original promised dowry, of $46bn in Chinese grants and soft loans for infrastructure projects, has only grown, to $62bn. This munificence is dubbed the China-Pakistan Economic Corridor (CPEC), launched amid fanfare in 2015, on a visit to Pakistan by President Xi Jinping.

Most of the money is earmarked for power plants to improve Pakistan’s notoriously unreliable electricity supply. The rest is going on roads, railways, dams, industrial zones, agricultural enterprises, warehousing, pipelines and a deepwater port in the coastal settlement of Gwadar. Some of the promised money is bound not to materialise, and the claim by the interior minister, Ahsan Iqbal, of “benchmarking” Singapore and Hong Kong when turning remote, dusty Gwadar into a container-shipping hub speaks more of hope than experience. Yet over $14bn has already been spent. CPEC is very different from earlier schemes, when co-operation was promised only to run into the sands.

For Pakistan, the scale of ambition is unprecedented—a “game- and fate-changer” as overwrought locals put it. If CPEC gets electricity and goods flowing efficiently, then growth could jump by over two percentage points a year, by one estimate. Better yet, CPEC could shift the national narrative—too often dominated by coups, extremists and a chippy kind of nationalism—towards economic construction.

What is in it for China is often misunderstood, especially by Sinophobes in Delhi, Tokyo and Washington. They make much of the “corridor” in the plan, concluding that China’s chief aim is to gain access to the Indian Ocean, the better to encircle India. In fact, argues Andrew Small of the German Marshall Fund, an American think-tank, improving transport links through the mountainous neck of land that joins Pakistan to Xinjiang province in China’s far west is one of CPEC’s lesser aims. Yes, Gwadar, as a port on the Indian Ocean, interests the Chinese navy, but would have done so regardless of CPEC. Most of CPEC’s investments are aimed at improving Pakistan’s domestic economy.

China does have strategic motives, of course. A more dynamic Pakistan would certainly act as a counterbalance to the deepening security relationship between India and America, which also provides military aid to Pakistan. Then there is Islamist militancy, which spills back into Xinjiang; development might, as Li Keqiang, China’s prime minister, put it, “wean the populace from fundamentalism”. China needs new markets for its products, as well as new terrain for infrastructure and industrial projects. Most importantly, CPEC has become the main plank of Mr Xi’s ambitious “belt-and-road” initiative, whereby improved infrastructure will help to strengthen economic ties and thus spread China’s influence through Asia and beyond. As Mr Small points out, CPEC has to be seen to work for the broader scheme to seem both credible and appealing.

Even if CPEC is not the neo-imperialist exercise its critics make it out to be, it still has its flaws. The IMF warns that Pakistan may struggle to repay China’s loans, which could in turn prompt a balance-of-payments crisis. Pakistan’s central bankers have in the past deplored a lack of transparency surrounding CPEC contracts; suspicion abounds that Pakistani taxpayers have been shortchanged. And security is a problem. Just one example is the new Chinese-funded road to Gwadar, which runs through an area long gripped by insurgency in the remote, backward province of Balochistan. Mr Iqbal argues that the road and the development it is bringing will help extinguish the conflict. It might equally pour fuel on it, if locals feel excluded.

Riaz Haq said...

ADB says Pakistan enjoys growth despite trade contraction

Pakistan has experienced economic growth despite contraction in external trade, pointing to the movement towards the localisation of supply to serve domestic demand, Asian Development Bank (ADB) said on Friday.

The country, which is one of the most populous economies in the region, recorded a decade high growth of 5.3 percent during the last fiscal year of 2016/17.

Manila-based lender, in a report, said share of exports of goods and services in GDP has been decreasing during the last six years, while share of imports has been increasing during the period.

The country’s household consumption is growing year on year. It soared 6.9 percent during the last year, ADB said in its 48th edition of ‘Key Indicators for Asia and the Pacific 2017’ report. Share of household consumption expenditure to GDP ratio stands at 80 percent.

ADB’s statistical review provides data on a comprehensive set of economic, financial, social, environmental, and sustainable development goal indicators for its 48 regional members. The Bank said private sector offtake is on the upward trend.

Banking credit to private sector is, however, one of the lowest in the region as it accounts for half of GDP as compared to more than 100 percent in Fiji, Vietnam, China, Australia and Japan, its data revealed.

Nonperforming bank loans to GDP ratio is one of the highest at 10 percent, only less than Afghanistan and Maldives. The Asian Development Bank said Pakistan is one of the region’s four largest recipients of official development assistance and other official flows to the agriculture sector, amounting to $291.7 million in 2015.

Alone South Asia’s agriculture sector received nearly $1.5 billion in dole-outs during 2015. Agriculture sector’s value addition to GDP ratio stood at 24.6 percent in 2016 in the country where acreage covers half of its land.

Forest area covers a minuscule 1.9 percent of total land area, which is one of the lowest in the region. The country has been annually receiving an average $744 million as financial and technical assistance between 2008 and 2015.

Share of gross capital formation in GDP declined during the past six years. Non-infrastructure investment accounted for 63 percent of gross fixed capital formation. Meanwhile, President Takehiko Nakao at ADB said the bank would continue to lend financial and technical support to Pakistan to improve infrastructure and regional connectivity.

“There is an immense potential for regional connectivity projects in the CAREC (Central Asia Regional Economic Cooperation) region,” Nakao said in a statement on Friday. He met with Finance Minister Ishaq Dar in Urumqi, China.

The Bank further said external debt to gross national income ratio is one of the lowest in the region, standing below 50 percent. It said stock markets in Fiji, New Zealand, and Pakistan were the region’s top performers in 2016.

“In Pakistan, an improved growth outlook—supported by better security, macroeconomic stability, and strengthened economic fundamentals—was reflected in a sovereign rating upgrade from Standard & Poor’s and significant gains in share prices of 13.2 percent on an annual basis,” it added. ADB said more than half of urban population in Pakistan lives in slums, informal settlements or inadequate housing.

The proportion, however, slid 3.2 percent during the four years for which data is available, it added. Urban population living in slums in the country dropped to 45.5 percent in 2014 from 48.7 percent in 2000. India brought this proportion down to 24 percent from 41.5 percent during the period.

Riaz Haq said...

Chinese perceptions of CPEC

The Chinese have voiced concerns regarding negative CPEC talk, security and red tape.

Under its One Belt One Road Initiative announced in 2013, China is planning to invest more than $1 trillion in 60 countries all over the world to establish six different corridors. The receptivity in other countries to this proposal has been anything but enthusiastic; however, some Chinese friends are puzzled by the sceptical and negative reactions from certain quarters in Pakistan expressed in the media, particularly on social media. This comes to them as a surprise because of the long uninterrupted record of strong bilateral relations between the two countries that were not even affected by changes in political leadership in either country. CPEC is the first project of its kind to foster economic cooperation on a massive scale for building large infrastructural projects in Pakistan.

Although realising that there are some external forces hostile to this initiative, Chinese analysts and participants are concerned about what they see as the misrepresentation of facts by many Pakistanis. It is not obvious to them as to what purpose is served by raising doubts and fears about CPEC in the minds of the Pakistani population. The aspersions being cast on the motives of the Chinese, such as the analogy with the East India Company or Pakistan becoming a satellite of China, are very unnerving: external detractors of CPEC pick up these reports and after bundling them as ‘risks’ of CPEC to Pakistan, disseminate them widely.

The Chinese argue that the IPPs have been a policy instrument for investment in Pakistan’s energy sector for a very long time. When the country was facing serious energy shortages no one else came to Pakistan’s rescue and invested in the sector. Now that China has come forward with a planned investment of $35 billion or 70 per cent of the total CPEC allocation under the same policy, questions are being raised.

Had it involved extraction of natural resources from Pakistan for the benefit of the Chinese, this criticism would have been justifiable. On the contrary, the benefits of this investment would be exclusively appropriated by Pakistan’s industries and households that would no longer face load-shedding while the country would record a 2pc annual rise in GDP growth.

Chinese state-owned companies, designated by the Chinese government based on their expertise and experience, are executing the projects with loans provided by government-owned banks on concessional terms both in tenor and pricing. In several projects, Chinese and Pakistani companies have entered into joint ventures. The repatriation of profits and debt-servicing in foreign exchange arising out of these obligations would become possible after an increase in the volume of exports as a result of the Chinese-Pakistani joint ventures relocating their industries to the Gwadar Free Economic Zone and the nine industrial zones to be established under CPEC.

In the opinion of some, the negative feelings can have unintended adverse consequences for the personal security of Chinese nationals working on these projects, particularly in some sensitive areas of Balochistan. Some elements unhappy with the Pakistani state and government and possibly acting at the behest of foreign powers hostile to CPEC appear to have created conditions in which the murders and kidnappings of Chinese nationals that were almost non-existent have begun to take place. Our interlocutors were grateful for the new division being raised by the Pakistan Army for protection of the Chinese; but the security risk is raising premiums for relocation to some of the vulnerable areas.

Riaz Haq said...

Long term plans to be finalised in 50th CPEC review meeting

The long term Pakistan-China cooperation plan (2015-2030) will be finalised in the 50th China-Pakistan Economic Corridor (CPEC) 'review meeting' scheduled to be held today (Thursday) under the chair of Ahsan Iqbal, federal minister for planning and interior, a statement said on Wednesday.

“The meeting will finalise the long term plan in consultation with federal ministries and provincial governments, while ministry of railways will brief the meeting about the upcoming financing plan for the up-gradation of Mainline-1 (ML-1) from Peshawar to Karachi will be discussed,” the ministry said in the statement.

The ministry added that Pakistan and China were in the process of finalising the financing plan of $8.5 billion for the ML-1, whereas the next joint working group (JWG) meeting was expected to be held probably next month as the financing plan for the track was also expected to be finalised by November this year.

“Admitting the requirement for having overriding institutional framework to execute $46 billion China-Pakistan Economic Corridor (CPEC) under long term plan till 2030, Beijing and Islamabad have also agreed to build model industrial parks, each in all provinces, with Chinese financing of multimillion dollars,” the ministry said.

Moreover, it said that it was also under consideration to build model cities along the bank of Indus River, having a range of 300 kilometers, but it was yet to be seen as to how this ambitious plan was going to be finalised in a synergised manner.

“Officials from Chinese Embassy at Islamabad probably Chinese Ambassador, Chinese companies and officials from ministry of planning, line ministries and provincial governments would participate in the meeting,” the ministry said. It further said the forum would review progress on the ongoing projects including schedule and agenda of the next JWGs of energy, transport infrastructure, planning, and Gwadar. “It will further review the progress on consortium of business schools and Pakistan Academy of Social Sciences,” the statement said.

Riaz Haq said...

Value Added Sector Helps #Pakistan’s #Exports Upsurge. Textiles up 11.8%, non-textiles up 23.5% - … via @pakwired

According to a recent report by the Pakistan Bureau of Statistics (PBS), Pakistan’s exports have shown a positive trend backed by rising exports via the value added sector. The growth pattern has been observed during the first two months of the current fiscal year 2017-18. The upward trend in the value added sector has given a significant boost to cummulative export numbers as the New Year kicked off.

Total exports during the two month period, July-August, increased to $3.49 billion as compared to $3.12 billion showing a growth of 11.8%. While the increase in non-textile goods has been registered at 23.5% reaching $1.31 billion during July-August 2017-18 versus $1.06 billion during the same period last year.


Readymade garments have given a major upward push to the overall exports pie increasing by 15.65% on a yearly basis reaching $418.63 million during July-August period. Garments in general have also surged by 16.4% showing volume based growth.

Another integral value-added product, knitwear managed to go up by 7.53% to reach $439 million during July-August. The volume based increase of knitwear exports was 8.23%. Additionally, bed wear exports grew by 8% amounting to $384.32 million while its quantity wise growth stood at 8.79%. Furthermore, the value based growth of towel exports showed 0.67% rise while its volume based growth was registered at 0.03%.

Conversely, the picture has not been equally nice for the intermediate goods like cotton yarn, as their exports slumped by 4% (value) and by 3.3% (volume). Deteriorating demand of cotton yarn and fabric from China is considered a crucial reason for their low sales. Another slump has been seen in the exports of cotton cloth, down by 7.8% in terms of value and quantity. Exports of raw cotton have also seen a downward trend with 14.7% in value and 14.15% in volume during July-August 2017-18.

A major blow has emanated from exports of non-value added products such as cotton carded, which dropped by a whopping 100% in value and volume. In addition, exports of tents and canvas declined by 22% in terms of value. On the other hand, exports of yarn slumped by 0.2% in value but increased in terms of volume.

Quick Read: When will Pakistani companies really value their human resource?


From the non-textile related goods, rice exports grew by a significant 40% during the two months. Basmati and other types of rice exports took a major leap.

From the food category, a major jump was seen in exports of wheat, sugar, fruits during the given period. Crude petroleum and petroleum naphtha registered a growth of 100% and 404% accordingly. Nonetheless, exports of sports goods and carpets saw a downward trend.

Value added leather products increased by 5.8% which was witnessing continuous slump during the last two years. Footwear showed a feeble growth of 0.1% during July-August 2017-18. Furthermore, surgical and engineering goods managed to rise by 26% and 23% respectively.

Riaz Haq said...

#Pakistan exported #food commodities worth $500m in July-Aug 2017. #exports #rice #wheat #fish #sugar

The country earned US$ 512.3 million by exporting different food commodities during the first two months of the current financial year as compared the earnings of the corresponding period of last year.

During the period from July to August 2017, food group exports from the country increased by 30.6 percent as compared the exports of the same period of last year.

According to the data of Pakistan Bureau of Statistics, since the last two months exports of rice grew by 40 percent as around 428,993 metric tons of rice worth US$ 223.97 million were exported.

The rice exports, during first two months of last financial year, were recorded at 3810,861 metric tons, which were worth US$ 159.54 million, it added.

Meanwhile, the exports of basmati rice grew by 10.35 percent and about 59,433 metric tons of basmati rice, worth US$ 62.741 million, were exported as compared the exports of 59,192 metric tons, valuing US$ 56.857 million, in the same period, last year.

The exports of rice other than basmati also witnessed an increase of 58.98 percent, around 369.580 metric tons of rice costing US$ 161.198 million exported as compared to the exports of 251,669 metric tons worth US$ 102.888 million last year.

From July-August, 2017-18, fruit and vegetable exports increased by 8.74 percent and reached at 56,280 metric tons worth of US$ 20.58 million against the exports of 73,751 metric tons of US$ 18.88 million of the same period last year, it added.

The other commodities which witnessed an increase in their exports during the period under review include fish and fish production, which increased by 19.63 percent, wheat and sugar increased by 100 percent respectively.

It may be recalled here that imports of the food commodities into the country also witnessed an increase of 27.18 percent and about US$ 1.123 billion was spent on the import of different food items to fulfill the domestic requirements.

Riaz Haq said...

#Pakistan’s #exports to #China will rise in second phase of #FTA. #CPEC #Trade

Chinese Ministry of Commerce Vice Minister Wang Shouwen said on Thursday that after conclusion and implementation of the second phase of China-Pakistan Free Trade Agreement (CPFTA), Pakistan will be able to expand its exports to China with the help of low tariff rates and attract more Chinese investment in the next five years.

“In the next five years, China will import products worth $8 trillion and once the second phase of our FTA is concluded and implemented, Pakistan will be able to expand its exports to China due to low tariff rates. In addition, Pakistan will also be able to attract more investment from China,” he said. He was speaking at the opening session of the eighth meeting of the second phase of FTA negotiations held at the Chinese Ministry of Commerce.
He said China was a huge market and home to 1.3 billion people and its domestic consumption was booming, adding economic and trade cooperation was the anchor and propeller of relations between China and Pakistan.

“In recent years, our cooperation has developed remarkably and benefited many enterprises and people in both the countries,” he added.
Terming CPFTA one of the earnest FTAs of China, he said it had played a significant role in promoting Sino-Pakistan cooperation and made China Pakistan’s largest trading partner.
He was of the view that the first phase of the FTA had given a lot of impetus to the economic and trade ties.
“However, with the trade liberalisation level of only 36%, there is still a huge space for both sides to raise the current level,” he said. “I believe a relatively high level of liberalisation will promote common development and provide benefits for more people of our countries.”
The vice minister said the leadership of the two countries attached great importance to the FTA negotiations. A statement of Chinese President Xi Jinping during his visit to Pakistan in April 2015 clearly pointed out that both sides had decided to speed up negotiations on the second phase of FTA, he added.
While reciprocating the warm feelings of the Chinese official, Federal Commerce Secretary Younus Dagha said, “China is now Pakistan’s major trading partner with volume of trade reaching an all-time high at $16 billion in 2016-17 from $4 billion in 2006-07.”
“However, keeping in view the respective sizes of the two economies, the gains for both sides should be equal,” he emphasised. Following the FTA, Pakistan’s trade deficit with China has widened markedly, surging from $2.9 billion in 2006-07 to $12.7 billion in 2016-17. Last year, Pakistan’s global imports grew 18.5% while exports edged down 1.6%.

He said imports from China alone accounted for 36% of Pakistan’s global non-oil imports.

Dagha underlined the need for sending positive signals to the people of both countries that benefits of the China-Pakistan Economic Corridor (CPEC) and CPFTA would be shared equitably and that the economy of Pakistan would be a major beneficiary.

Riaz Haq said...

Bank of #China (BoC) is 2nd Chinese bank to open in #Pakistan after Industrial and Commercial Bank of China (ICBC)

The Industrial and Commercial Bank of China (ICBC) has already opened two of its branches in Karachi and Islamabad and is providing various services, including corporate finance, investment banking, foreign deposits, project loans, and working capital loans.

The Bank of China (BoC) became operational in Pakistan as it inaugurated its first branch in Karachi on Tuesday.

Emphasising that it was "a great honour" for the bank to be launched in Pakistan, BoC Chairman Chen Siqing noted that the Karachi branch was its first in South Asia.

The Dawn quoted him as saying that the bank would strengthen the "brotherly relations" between the two countries in the financial sector.

Siqing also highlighted that the bank could help Pakistan effectively reap the benefits of Beijing's economic prosperity.

Welcoming the bank to Pakistan, State Bank of Pakistan (SBP) Governor Tariq Bajwa, said that the increased diversity of foreign banks would increase the country's economic resilience.

He also expressed hope that Pakistan would learn from BoC's expertise in the small and medium enterprises sector.

Speaking during the launch, Acting Chinese Ambassador to Pakistan Zhao Lijian said that the opening of the bank "marked the confidence of the Chinese corporate sector in Pakistan's economic situation."

President Mamnoon Hussain, who was also present on the occasion, expressed confidence that the newly-launched bank will help accelerate infrastructure development and overall economic growth of the country.

He termed the BoC's arrival to Pakistan a "memorable event in the everlasting friendship between Pakistan and China".

President Hussain assured the BoC of the continued support of the government and State Bank of Pakistan in expanding its operations in the country.

The BOC was allowed to commence banking business in Pakistan on September 19 this year.

This is the second Chinese bank which has been allowed to operate in Pakistan. The State Bank of Pakistan had issued a license to BoC in May 2017.

The Industrial and Commercial Bank of China (ICBC) has already opened two of its branches in Karachi and Islamabad and is providing various services, including corporate finance, investment banking, foreign deposits, project loans, and working capital loans.

Riaz Haq said...

China Outbidding US For Pakistan’s Future – Analysis

Trump has accelerated the process of deteriorating relations at breakneck speeds, and China is well-poised to pick up the replace the U.S. as Pakistan’s global backer. It’s not just the tweet or fraying of diplomatic relations, but the lack of concerted effort to secure Pakistan as a partner as U.S. interests are drowned out by other powers.

As Trump works on “Making America Great Again,” China is literally building inroads to become West Asia’s hegemon.

During Trump’s short tenure, his administration has overseen the rapid retrenchment of U.S. power from West Asia and the Middle East: Trump has relinquished Iraq to Iran, stepped back on the Iranian nuclear deal, withdrawn from the Trans-Pacific Partnership, retreated from a meaningful part in the Israeli/Palestinian peace process, and now is seemingly turning its back its alliance with Pakistan.

Both economically and militarily, China is successfully implementing a plan to outbid the U.S. for Pakistan’s future.

According to John Fei, an independent consultant who has previously served as a manager to John D. and Catherine T. MacArthur Foundation’s Asia Security Initiative, China views Pakistan as a vital part of a larger initiative to establish a globally dominant economy.

“China’s interests in Pakistan dovetail closely with its Belt and Road Initiative. Through the China Pakistan Economic Corridor (CPEC), China will be able to exert economic influence and gain a strategic foothold in the region.”

The Belt and Road Initiative is a massive project spanning nearly the entire world, and involves China forging accessible trade routes between China and countless other countries. Part of that initiative is CPEC, a $62 billion investment in Pakistan’s infrastructure to facilitate China’s economic agenda.

In other words, China is essentially reworking Pakistan’s entire infrastructure and economy so that it is routed to China. The project not only promises to fundamentally reshape the world economy around China, but it also spells danger for the U.S., which risks losing leverage over countries that could simply sign on to China’s economic world vision.

CPEC also looks to renovate Pakistan’s businesses, agriculture, defence and telecommunications, and societal structures. In the words of Firstposts’ Tara Kartha, “The currency was the last bastion of the Pakistani state that remained inviolate. It seems that this is now about to be breached.”

According to Fei, now that CPEC is well underway and Pakistan has adopted the Chinese yuan, it no longer needs the U.S. dollar to conduct international trade.

China has quickly become Pakistan’s most critical trade partner, importing far more from China ($17.2 billion) than the closest competitor, the U.S. ($2.1 billion). China has also rapidly rose through the ranks to become Pakistan’s second-largest export destination, just behind the U.S.

So while Trump attempts to revitalize the U.S. economy by ‘bringing jobs back,’ and advocating for a kind of anti-globalist isolationism, he has largely remained silent on the slow leaching of critical U.S. assets abroad which bolster the American economy.

Tamaaz Khan said...


Can you please provide sources for the rates you are quoting:
- Chinese interest of Debt
- WB interest on Debt
- Alabama plant return on equity

As far as I'm aware, return on equity for power projects are not guaranteed. The equity return is an incentive for sponsors to keep capital costs and operation costs in line. In fact guaranteeing equity returns in non-competitive tender processes should be a red flag in terms of transparency.

Power Projects are generally quoted on capacity price, expressed in $/kwh.

In India, a developing economy, projects are developed on auctions rates of power supply to the central purchasing authority. They have been able to achieve 3.9/kWh for 750MW SOLAR.

How come there is no transparency on wthat the Pakistani central purchasing authority and ultimately the tax payer will paying for the COAL capacity installed by the Chinese?

Finally, considering China is phasing out exactly the same coal plants that they providing us (without competitive tender mind you), what is your view on this obsolete and environmentally harmful technology?

Riaz Haq said...

TK: "As far as I'm aware, return on equity for power projects are not guaranteed."

It is guaranteed either directly in Pakistan's IPP policy or indirectly through power purchase agreements by Central Power Purchasing Authority (CPPA).

As of last month, Pakistan National Electric Power Regulatory Authority (NEPRA) has cut electricity price by 2.99 rupees (2.7 U.S. cents) per unit under the fuel adjustment for the month of December, 2017, according to news reports. This reduction brings the price per kilowatt-hour to Rs. 5.11 (4.60 US cents), down from Rs. 8.10 (7.30 US cents).

Reduction brings the price per kilowatt-hour to Rs. 5.11 (4.60 US cents), down from Rs. 8.10 (7.30 US cents). The CPPA (Central Power Purchasing Authority) said total energy was generated at the cost of Rs. 25.24 billion, or Rs. 3.52/unit for the month of November, 2017.

The reduction in the actual generation cost is mainly because of a decline in fuel prices, zero use of high-speed diesel in the power plants and higher contribution from the cheapest source – hydropower. The furnace oil (Rs. 9.03 per unit) has been replaced by domestic natural gas at Rs. 4.49 per unit and liquified natural gas (LNG) at Rs. 6.33 per unit.

TK: "In India, a developing economy, projects are developed on auctions rates of power supply to the central purchasing authority. They have been able to achieve 3.9/kWh for 750MW SOLAR. "

One or two projects at this rate will not affect the overall mix much. As explained above, the average cost per unit in India is currently higher than in Pakistan.

TK: " considering China is phasing out exactly the same coal plants that they providing us (without competitive tender mind you), what is your view on this obsolete and environmentally harmful technology? "

China currently generates 77% of its power from coal. It's not phasing out coal; it's just adding it at a slower rate. Even after a few coal plats, Pakistan will still have only a fraction of power from coal.

And the plants Pakistan is getting are the state of art now, cleaner than most coal power plants in operation around the world today.

Riaz Haq said...

#China’s #loans to #Pakistan should drive #economic development, boost its #manufacturing, #exports and #debt repayment ability. #CPEC - Global Times

Pakistan expects to obtain $1 billion to $2 billion of fresh Chinese loans to help it avoid a balance-of-payments crisis, Reuters reported. Some observers hope China's economic assistance will help the country avoid having to go to the IMF for a bailout, but the key issue is the sustainability of China's financial help.

China will not be stingy in offering help to Pakistan to strengthen its infrastructure, but China's bank loan is a market-driven commercial decision in line with international practices. The main point is Pakistan's debt repayment ability.

China-based financial organizations stick to a principle of not imposing additional political conditions when providing loans to other countries, distinguishing them from most Western financial institutions like the IMF.

This might be one reason why Chinese loans are welcomed in Pakistan. China is likely to continue to finance new projects in the country but will also assess their debt repayment ability to avert the risk of bad debt. After all, Chinese loans to Pakistan are not a gift.

The multi-billion dollar China-Pakistan Economic Corridor (CPEC) has begun to bring tangible benefits to Pakistan's economy, which is likely to boost Pakistan's debt repayment ability. It's possible that we're entering a virtuous cycle in which Chinese loans promote the development of the CPEC, and this then improves Pakistan's debt repayment ability. However, the South Asian country may need to propel economic reforms to ensure the effectiveness of the loans and allow the local economy to benefit more from CPEC projects.

It is hoped that people will learn a lesson from the IMF's operations. In 2013, the IMF approved a loan plan for Pakistan to support its program to stabilize and rebuild the economy, but the multilateral lender failed to strictly monitor the use of the loans, and in the end they did little for Pakistan's economic development.

Now Pakistan's economy is on an upswing with the help of Chinese loans. Nadeem Javaid, who advises Prime Minister Nawaz Sharif's government and works closely on the CPEC program, was quoted by Reuters as saying last year that debt repayments and profit repatriation from CPEC projects will reach $1.5 billion to $1.9 billion in 2019, rising to $3 billion to $3.5 billion by the following year.

China is likely to strengthen economic collaboration with Pakistan under the CPEC program, in a bid to ensure the effectiveness of the loans. The key to stronger cooperation between the two countries lies in how to improve Pakistan's economic innovation capability and allow the country to develop its own capacity for long-term economic sustainability.

China's loans to Pakistan essentially aim to drive Pakistan's economic development, and thus the loans should be offered in a way that aligns with the local economy and helps restructure the South Asian economy and boost its manufacturing and exports.

Riaz Haq said...

Former 'Economic Hitman' Reveals to Sputnik How CIA, NSA Conceal Activities

Sputnik: Mr. Perkins, how did you know that your employer executed orders from the CIA and the
NSA? Was that a moment of truth?
John Perkins: I need to clarify – I never worked directly for intelligence agencies. As for the company I worked
for, I can say that we received orders from the World Bank or the US Agency for International Development
(USAID) or through the Treasury Department. We had an agreement on Saudi Arabia with the Treasury
So, my company received money from these institutions and, in my turn, I received a salary from the
company. We never had real contacts with the NSA and the CIA. All operations ran through some mediating
contracts, mediators and subcontractors, at least as far as I know.
My contacts with the NSA were rather mediated. The person who hired me at Chas T. Main was in the US
military reserve and, possibly, he had contacts with US intelligence. So, our contacts were not direct.
(Chas T. Main was an American consulting company headquartered in Boston. Perkins was a senior
economist and economic adviser there. His job was to arrange credits from the World Bank for developing
countries, making their governments dependent on American companies. In addition, loans were used
to pressure those governments toward American political and economic interests. Read more on the issue
in the rst
part of the interview with John Perkins.)
Sputnik: So, you didn’t meet CIA or NSA operatives as part of your work?
John Perkins: Maybe, I met some of them, but they didn’t identify themselves. It is normal for intelligence
agencies ocers.
They don’t have visiting cards and usually work under ocial
cover, including as diplomats,
trade representatives in embassies or employees in private companies. So, I never met a person who I knew
was a CIA or NSA agent, but I can suggest that there were some of them in my work.
Sputnik: What is the current role of intelligence agencies in the global economy?
John Perkins: The NSA, the CIA and other agencies often employ representatives of the economic world, just
like the NSA did to me. Why? This is the perfect cover. In other words, they employ business representatives
who secretly work for intelligence agencies.
I never got paid from the NSA or the CIA. I always got paid by my employer, Chas T. Main. In its turn, the
company received money from those agencies for certain infrastructure projects in undeveloped countries.
Thus, the government could always say it was not involved and was not aware of those activities while private
companies did the job.
Sputnik: Why did you quit?
John Perkins: In the rst
years, I thought that my job was a good business for all, including for developing
countries. We invested money there and those countries really developed, which was proved by statistic data.
But in course of time, I realized thatonly certain rich local families and American companies, including my
company, were getting benet
from those investments.
When a country, like Ecuador or Indonesia, received a loan there was a must that the money could be used
on infrastructure only with the participation of American companies, such as Halliburton and General Electric;
and local oligarchy was also involved.

Riaz Haq said...

Former 'Economic Hitman' Reveals to Sputnik How CIA, NSA Conceal Activities

Sputnik: What happened after you quit?
John Perkins: My former employer did their best to convince me to stay. But I nally
resigned and started
writing a book about what I did. I talked to other people in this business, so-called "jackals." They were called
when we, "economic hit men," failed to convince the government of a country to cooperate. "Jackals" used
coups, mutinies or even assassinations to topple governments that refused to cooperate.
After I quit, I received threats, including against my family and my daughter. I also received a quite tempting
from another consulting company, a rival of my former employer. They told me: "Accept our oer
don’t write the book." At the time, I felt some pressure and started writing other books. And many years later,
I wrote "The Confessions of an Economic Hit Man," my most famous book.
Sputnik: In the rst
part of our interview, you already said that you want to change the world. Please,
tell us what you are doing? What is the main goal of your organization Dream Change?
John Perkins: Dream Change is a non-commercial organization I co-founded. Our goal is to change the dream,
to change the paradigm of "predatory capitalism." Our goal is to change perception. We need to realize that
our reality is determined and formed by perception. … Everything exists because people perceive it in this
very particular way. When a lot of people have the same vision of one or another thing this begins
to inuence
the reality. My goal now is to change this vision.
We know that the world is in a deep crisis today. The world has been caught in the trap of the currently
economic and military systems that pose a threat to the whole planet. But the reason is that global
corporations that control the world ignore the negative consequences of their actions. I want to help change

Riaz Haq said...

#Pakistan hits back at #US for what it says are attempts by the US to use the country’s impending economic crisis to drive a wedge between #Islamabad and #Beijing. #CPEC #China #IMF #economy

Pakistani officials have criticised what they say are attempts by the US to use the country’s impending economic crisis to drive a wedge between Islamabad and Beijing.

Officials in Islamabad have accused Washington of trying to strong-arm Pakistan into scaling back billions of dollars’ worth of Chinese investment in their country’s infrastructure as part of a potential bailout by the IMF.

One senior Pakistani government adviser told the Financial Times: “The US is trying to spoil China's biggest contribution to our future.”

Another added: “The Americans are trying very hard to put pressure on Pakistan because they have their own interests. But making it so hard for Pakistan to successfully negotiate a new program with the IMF makes no sense. Ultimately, Pakistan will search for other options if the road to the IMF is blocked.”

The Financial Times revealed this week that Pakistani officials had drawn up plans to ask the IMF for a $12bn bailout soon after Imran Khan comes to power as the country’s new prime minister. Pakistan is suffering an acute shortage of foreign reserves after years of high imports and low exports have taken their toll.

But even before Pakistan even makes a request, there are signs of resistance from the US, which is the IMF’s biggest shareholder.

Mike Pompeo, US secretary of state, on Monday warned the IMF not to grant a bailout to Pakistan that would compensate Chinese investors in Pakistani projects.

Mr Pompeo told CNBC: “We will be watching what the IMF does. There is no rationale for IMF tax dollars, and associated with that American dollars that are part of the IMF funding, for those to go to bail out Chinese bondholders or China itself.”

His remarks were echoed in a blog post published by Mark Sobel, a former US representative to the IMF. Mr Sobel said: “The fund needs to have at its fingertips comprehensive data on all China-Pakistan Economic Corridor lending [a showpiece Chinese infrastructure programme] — its terms, maturities, and parties involved. Chinese lending should be on realistic terms and consistent with Pakistan’s sustainability.”

He added: “Otherwise, China should reschedule or write down its loans, sharply reducing the value of its claims.”

Beijing is planning to invest about $60bn in its southern neighbour as part of a wider plan by President Xi Jinping to establish a new silk road of global trading routes. It has so far refused to publish any details of the terms of those loans however.

While Islamabad says the project will revolutionise Pakistan’s infrastructure, there are signs it is creating short-term economic problems, with loan repayments further depleting its foreign currency reserves.

Belt and Road, or debt trap?
Earlier this month, the Wall Street Journal revealed Pakistan had fallen behind on some of its payments, including plans to build new power plants.

Beijing has not yet commented on the potential terms of an IMF bailout for Pakistan. Geng Shuang, a spokesman for the Chinese foreign ministry, said when asked about how the fund would deal with Pakistan: “I believe they will handle it appropriately.”

But any demands by the US for China to publish the terms of its CPEC loans, as well as to scale back its investments and even write some down, could set up a bruising clash between Beijing and Washington. China is the second-biggest shareholder in the IMF, but does not have a veto on its board-level decisions.

For now, China is continuing to keep Pakistan afloat with short-term lending. According to local reports, Beijing has agreed to lend Islamabad a further $2bn since last week’s election, adding to the $5bn Pakistan borrowed from Chinese commercial banks in the previous financial year.

Riaz Haq said...

US: "No debt relief for #Africa". Africa’s current #debt load consists of commercial debt to western financial institutions or Eurobonds, which are more expensive to service than loans from #China which #UnitedStates accuses of "debt trap" #BRI #China

PRETORIA (Reuters) - African countries running up debt they won’t be able to pay back, including to China, should not expect to be bailed out by western-sponsored debt relief, the United States’ top Africa diplomat warned.

The International Monetary Fund and World Bank began the Heavily Indebted Poor Countries (HIPC) Initiative in 1996 to help the world’s poorest countries clear billions of dollars worth of unsustainable debt.

But Africa is facing another potential debt crisis today, with around 40 percent of low-income countries in the region now in debt distress or at high risk of it, according to an IMF report released a year ago.

“We went through, just in the last 20 years, this big debt forgiveness for a lot of African countries,” said U.S. Assistant Secretary of State for Africa for African Affairs Tibor Nagy, referring to the HIPC program.

“Now all of a sudden are we going to go through another cycle of that? ... I certainly would not be sympathetic, and I don’t think my administration would be sympathetic to that kind of situation,” he told reporters in Pretoria, South Africa, late on Sunday.

Under Donald Trump’s administration, the United States has criticized China for pushing poor countries into debt, mainly through lending for large-scale infrastructure projects. It has warned those nations risk losing control of strategic assets if they can’t repay the Chinese loans.

Sri Lanka formally handed over commercial activities in its main southern port in the town of Hambantota to a Chinese company in 2017 as part of a plan to convert $6 billion of loans that Sri Lanka owes China into equity.

U.S. officials have warned that a strategic port in the tiny Horn of Africa nation of Djibouti could be next, a prospect the government there has denied.

From 2000 to 2016, China loaned around $125 billion to the continent, according to data from the China-Africa Research Initiative at Washington’s Johns Hopkins University School of Advanced International Studies.

And a number of African countries form part of China’s $126 billion Belt and Road Initiative to link China by sea and land through an infrastructure network with southeast and central Asia, the Middle East, Europe and Africa.

China has rejected criticism of its lending in Africa. And debt campaigners point to the fact that much of Africa’s current debt load consists of commercial debt to western financial institutions or Eurobonds, which are more expensive to service than Chinese loans.

“All of these countries are sovereign states, so it’s for them to decide who they want to trade with,” Nagy said. “We feel we have an obligation to point out to them when we believe they are getting into severe economic difficulties.”

Riaz Haq said...

Sri Lanka wants its ‘debt trap’ Hambantota port back. But will China listen?

Critics view the deal as a symbol of the problems associated with Chinese lending and the Belt and Road Initiative, but Beijing so far shows little sign of changing its mind

Newly elected President Gotabya Rajapaksa promised on the campaign trail to revisit the agreement, but observers say he will need to offer China something else in return

Sri Lanka’s new government wants China to hand back a port it was given two years ago to cover its debts – but its chances of success appear slim.
The port, located at the heart of a busy shipping route in southern Sri Lanka, has been held up by critics as a symbol of the worst aspects of China’s “debt trap diplomacy” with many locals regarding it as a sign of subordination to Beijing.
Gotabaya Rajapaksa, brother of the former leader Mahinda Rajapaksa, was elected president last month after a campaign where he promised to undo the port deal.
“The perfect circumstance is a return to the norm,” Ajith Nivard Cabraal, a former central bank governor under Mahinda Rajapaksa, who is now serving as prime minister.
“We pay back the loan in due course in the way that we had originally agreed without any disturbance at all.”

But so far Beijing has given no indication that it will rethink its plans – instead suggesting that development plans for the port should be speeded up.

On Monday, Chinese diplomat Wu Jianghao met Gotabaya Rajapaksa to congratulate him on his election victory – but an account of the meeting by Xinhua indicated that the two countries should “speed up the implementation of cooperation on big economic projects, including the Colombo Port City and the Hambantota Port, under the existing consensus”.

Sri Lanka is not the only country in South and Southeast Asia where a new government has tried to renegotiate deals agreed as part of China’s Belt and Road Initiative.
But while Malaysia succeeded in renegotiating the contract to build the East Coast Rail Link, others such as Pakistan and Myanmar, have been less successful.
International observers said Sri Lanka’s ongoing reliance on international investment as it continues to rebuild after a lengthy civil war limited its scope to negotiate with China.
“The ability of a country to renegotiate deals would depend on its economic size, performance and strategic outlook,” said Amitendu Palit, an economist specialising in international trade and investment policies at the National University of Singapore said.
“Malaysia has been far superior in this regard. It is a middle-income country with a much stronger economy and is part of a stable regional order. Sri Lanka does not enjoy the same advantages

Sri Lanka’s debt is currently 78 per cent of its GDP – one of the highest ratios in South and Southeast Asia.
Between 2010 and 2015, China lent the country about US$5 billion for infrastructure projects including Mattala Airport – which has been widely criticised as a white elephant – and the Hambantota port.
By 2018, Chinese lending to the country had reached US$8 billion, according to the International Monetary Fund.
Sufian Jusohm, an international trade and investment professor at the National University of Malaysia, said the Sri Lankan government would need to offer China an alternative if it wanted to revise the deal.
“Sri Lanka may revoke the lease but risks paying compensation to the Chinese company for expropriating the port. In addition, this will result in a diplomatic conflict between the country and China,” he said,
“In any event, Sri Lanka may be able to persuade China to agree to a review if it can offer an alternative deal.”

Riaz Haq said...

Pakistan request opens door for Belt and Road project debt relief
COVID-19 economic hit gives China little choice but to help cash-strapped allies

Pakistan's economy is taking a hit due to the COVID-19 crisis. According to the latest country report by the Economist Intelligence Unit, Pakistan's GDP is set to contract by 1.6 percent in the 2019-20 fiscal year. Concerned about worsening economic conditions, the government on Saturday eased coronavirus lockdown restrictions, even as the total number of infections crossed the 30,000 mark with 661 deaths.

In response, Pakistan has also requested that G-20 countries provide debt relief, which could potentially result in the deferment of $1.8 billion in obligations for a year, Hafeez Shaik, a government adviser, was quoted as saying after a Ministry of Finance meeting. Pakistan has also secured a loan of $1.386 billion from the International Monetary Fund and another of $305 million from the Asian Development Bank.

In such a context, Krzysztof Iwanek, head of the Asia Research Centre at War Studies University in Warsaw, argues that Beijing agreeing to payment delays would give Pakistan short-term financial breathing room.

But Iwanek cautions against expecting significant debt relief from China. "[Beijing] may cancel some of [the] lesser value [loans] and allow Islamabad to defer some of the payments, at best, " he told Nikkei.

The German Marshall Fund's Small, meanwhile, said that China accepting Pakistan's request would underscore the reality that it can't aggressively push the CPEC projects. "[China] has largely figured out the terms of what a slimmed-down CPEC would look like and the current situation doesn't make it easier to deal with any of the continued obstacles," Small said.

Riaz Haq said...

The #Chinese ‘Debt Trap’ Is a Myth. #SriLankan Writer Michael Ondaatje says “In Sri Lanka a well-told lie is worth a thousand facts.” And the debt-trap narrative is just that: a lie, and a powerful one. #Hambantota #CPEC #SriLanka #Pakistan #China

Seen this way, China’s internationalization—as laid out in programs such as the Belt and Road Initiative—is not simply a pursuit of geopolitical influence but also, in some tellings, a weapon. Once a country is weighed down by Chinese loans, like a hapless gambler who borrows from the Mafia, it is Beijing’s puppet and in danger of losing a limb.

The prime example of this is the Sri Lankan port of Hambantota. As the story goes, Beijing pushed Sri Lanka into borrowing money from Chinese banks to pay for the project, which had no prospect of commercial success. Onerous terms and feeble revenues eventually pushed Sri Lanka into default, at which point Beijing demanded the port as collateral, forcing the Sri Lankan government to surrender control to a Chinese firm.

The Trump administration pointed to Hambantota to warn of China’s strategic use of debt: In 2018, former Vice President Mike Pence called it “debt-trap diplomacy”—a phrase he used through the last days of the administration—and evidence of China’s military ambitions. Last year, erstwhile Attorney General William Barr raised the case to argue that Beijing is “loading poor countries up with debt, refusing to renegotiate terms, and then taking control of the infrastructure itself.”

As Michael Ondaatje, one of Sri Lanka’s greatest chroniclers, once said, “In Sri Lanka a well-told lie is worth a thousand facts.” And the debt-trap narrative is just that: a lie, and a powerful one.

Our research shows that Chinese banks are willing to restructure the terms of existing loans and have never actually seized an asset from any country, much less the port of Hambantota. A Chinese company’s acquisition of a majority stake in the port was a cautionary tale, but it’s not the one we’ve often heard. With a new administration in Washington, the truth about the widely, perhaps willfully, misunderstood case of Hambantota Port is long overdue.

The city of Hambantota lies at the southern tip of Sri Lanka, a few nautical miles from the busy Indian Ocean shipping lane that accounts for nearly all of the ocean-borne trade between Asia and Europe, and more than 80 percent of ocean-borne global trade. When a Chinese firm snagged the contract to build the city’s port, it was stepping into an ongoing Western competition, though one the United States had largely abandoned.

It was the Canadian International Development Agency—not China—that financed Canada’s leading engineering and construction firm, SNC-Lavalin, to carry out a feasibility study for the port. We obtained more than 1,000 pages of documents detailing this effort through a Freedom of Information Act request. The study, concluded in 2003, confirmed that building the port at Hambantota was feasible, and supporting documents show that the Canadians’ greatest fear was losing the project to European competitors. SNC-Lavalin recommended that it be undertaken through a joint-venture agreement between the Sri Lanka Ports Authority (SLPA) and a “private consortium” on a build-own-operate-transfer basis, a type of project in which a single company receives a contract to undertake all the steps required to get such a port up and running, and then gets to operate it when it is.

The Canadian project failed to move forward, mostly because of the vicissitudes of Sri Lankan politics. But the plan to build a port in Hambantota gained traction during the rule of the Rajapaksas—Mahinda Rajapaksa, who served as president from 2005 through 2015, and his brother Gotabaya, the current president and former minister of defense—who grew up in Hambantota. They promised to bring big ships to the region, a call that gained urgency after the devastating 2004 tsunami pulverized Sri Lanka’s coast and the local economy.

Riaz Haq said...

#US led #G7 to raise $600 billion to counter #China's #Belt-#Road that involves #infrastructure development in over 100 countries. #Biden, other G7 leaders relaunch newly renamed "Partnership for Global Infrastructure and Investment". #CPEC #Pakistan

Group of Seven leaders on Sunday pledged to raise $600 billion in private and public funds over five years to finance needed infrastructure in developing countries and counter China's older, multitrillion-dollar Belt and Road project.

U.S. President Joe Biden and other G7 leaders relaunched the newly renamed "Partnership for Global Infrastructure and Investment," at their annual gathering being held this year at Schloss Elmau in southern Germany.

Biden said the United States would mobilize $200 billion in grants, federal funds and private investment over five years to support projects in low- and middle-income countries that help tackle climate change as well as improve global health, gender equity and digital infrastructure.

"I want to be clear. This isn't aid or charity. It's an investment that will deliver returns for everyone," Biden said, adding that it would allow countries to "see the concrete benefits of partnering with democracies."

Biden said hundreds of billions of additional dollars could come from multilateral development banks, development finance institutions, sovereign wealth funds and others.

Europe will mobilize 300 billion euros for the initiative over the same period to build up a sustainable alternative to China's Belt and Road Initiative scheme, which Chinese President Xi Jinping launched in 2013, European Commission President Ursula von der Leyen told the gathering.

The leaders of Italy, Canada and Japan also spoke about their plans, some of which have already been announced separately. French President Emmanuel Macron and British Prime Minister Boris Johnson were not present, but their countries are also participating.

China's investment scheme involves development and programs in over 100 countries aimed at creating a modern version of the ancient Silk Road trade route from Asia to Europe.

White House officials said the plan has provided little tangible benefit for many developing countries.

Biden highlighted several flagship projects, including a $2 billion solar development project in Angola with support from the Commerce Department, the U.S. Export-Import Bank, U.S. firm AfricaGlobal Schaffer, and U.S. project developer Sun Africa.

Together with G7 members and the EU, Washington will also provide $3.3 million in technical assistance to Institut Pasteur de Dakar in Senegal as it develops an industrial-scale flexible multi-vaccine manufacturing facility in that country that can eventually produce COVID-19 and other vaccines, a project that also involves the EU.

The U.S. Agency for International Development (USAID) will also commit up to $50 million over five years to the World Bank’s global Childcare Incentive Fund.

Friederike Roder, vice president of the non-profit group Global Citizen, said the pledges of investment could be "a good start" toward greater engagement by G7 countries in developing nations and could underpin stronger global growth for all.

G7 countries on average provide only 0.32% of their gross national income, less than half of the 0.7% promised, in development assistance, she said.

"But without developing countries, there will be no sustainable recovery of the world economy," she said.

Riaz Haq said...

CPEC Results According to Wang Wenbin of China

Bilal I Gilani
CPEC projects are creating 192,000 jobs, generating 6,000MW of power, building 510 km (316 miles) of highways, and expanding the national transmission network by 886 km (550 miles),” Foreign Ministry spokesman Wang Wenbin told reporters in Beijing."

Associated Press of Pakistan: On July 5, Prime Minister Shahbaz Sharif while addressing a ceremony to mark a decade of signing of the China-Pakistan Economic Corridor (CPEC), said that CPEC has been playing a key role in transforming Pakistan’s economic landscape. He also said that the mega project helped Pakistan progress in the region and beyond. What is your response?

Wang Wenbin: The China-Pakistan Economic Corridor (CPEC) is a signature project of China-Pakistan cooperation in the new era, and an important project under the Belt and Road Initiative. This year marks the 10th anniversary of the launch of CPEC. After ten years of development, a “1+4” cooperation layout has been formed, with the CPEC at the center and Gwadar Port, transport infrastructure, energy and industrial cooperation being the four key areas. Projects under CPEC are flourishing all across Pakistan, attracting USD 25.4 billion of direct investment, creating 192,000 jobs, producing 6,000 megawatts of electric power, building 510 kilometers of highways and adding 886 kilometers to the core national transmission network. CPEC has made tangible contribution to the national development of Pakistan and connectivity in the region. China and Pakistan have also explored new areas for cooperation under the framework of CPEC, creating new highlights in cooperation on agriculture, science and technology, telecommunication and people’s wellbeing.

China stands ready to work with Pakistan to build on the past achievements and follow the guidance of the important common understandings between the leaders of the two countries on promoting high-quality development of CPEC to boost the development of China and Pakistan and the region and bring more benefits to the people of all countries.

Riaz Haq said...

The mega undertaking (China-Pakistan Economic Corridor or CPEC) has created nearly 200,000 direct local jobs, built more than 1,400 kilometers (870 miles) of highways and roads, and added 8,000 megawatts of electricity to the national grid, ending years of blackouts caused by power outages in the country of 230 million people.

Chinese Foreign Ministry spokesman Wang Wenbin told reporters in Beijing earlier this month that CPEC projects "are flourishing all across Pakistan," making a "tangible contribution" to the national development of the country and to regional connectivity.

But critics say many projects have suffered delays, including several much-touted industrial zones that were supposed to help Pakistan enhance its exports to earn much-needed foreign exchange.

The country's declining dollar reserves have prevented Islamabad from paying Chinese power producers, leading to strains in many ties.

Pakistan owes more than $1.26 billion (350 billion rupees) to Chinese power plants. The amount keeps growing, and China has been reluctant to defer or restructure the payment and CPEC debts. All the Chinese loans – both government and commercial banks – makeup nearly 30% of Islamabad's external debt.

Some critics blame CPEC investments for contributing to Pakistan's economic troubles. The government fended off the risk of an imminent default by securing a short-term $3 billion International Monetary Fund bailout agreement this month.

Security threats to its citizens and interests in Pakistan have also been a cause of concern for China. Militant attacks have killed several Chinese nationals in recent years, prompting Beijing to press Islamabad to ensure security measures for CPEC projects.

Diplomatic sources told VOA that China has lately directed its diplomats and citizens working on CPEC programs to strictly limit their movements and avoid visiting certain Pakistani cities for security reasons.

"They [Chinese] believe this security issue is becoming an impediment in taking CPEC forward," Senator Mushahid Hussain, the chairman of the defense committee of the upper house of the Pakistani parliament, told VOA in an interview earlier this month.

"Recurring expressions of concern about the safety and security of Chinese citizens and investors in Pakistan by top Chinese leaders indicate that Pakistan's promises of 'foolproof security' for Chinese working in Pakistan have yet to be fulfilled," said Hussain, who represents Prime Minister Shehbaz Sharif's ruling party in the Senate.