Capital suggestion CPEC

[abhay]

Capital suggestion

CPEC
November 9, 2014: PM Nawaz Sharif met Chinas President Xi Jinping and Premier Li Keqiang at the Great Hall of the People in Beijing. Pakistan and China signed a total of 19 agreements, including the CPEC Energy Projects Cooperation agreement. The total committed amount under CPEC is said to have gone up to $50 billion, of which $35 billion is being allocated for energy projects and the remaining $15 billion for infrastructure.

February 4, 2017: The Ministry of Water and Power submitted financing details of eight power sector projects being built under CPEC to the National Assemblys Standing Committee on Planning and Development. For the record, this is the first time that such financing details have been made public.

Projects: Engro Powergen Thar Coal-II, Port Qasim Power Plant, Thar Coal Power Plant, Hubco Coal Power, Thar Energy Limited, Sahiwal Coal Power, Suki Kinari Hydro and Karot Hydro. The projects will have a cumulative generating capacity of 7,680MW and will cost a total of $12.5 billion. Of the $12.5 billion roughly $9.5 billion will be debt and the remaining will be contributed as equity by the sponsors.

Financing cost: The Ministry of Water and Power disclosed that the debt amount of $9.5 billion shall carry an interest rate of LIBOR (London Interbank Offered Rate) plus 4.5 percent. In effect, the Chinese loan shall bear an interest rate of 6.21 percent (as the current one-year LIBOR hovers around 1.71 percent). Additionally and amazingly the Beijing-based China Export & Credit Insurance Corporation will charge an insurance premium of 7 percent (even though the Government of Pakistan has guaranteed to purchase each and every unit of electricity that will be generated).

Return on equity: The return on equity in the Sahiwal Coal Power Project shall be 27.2 percent and the return on equity in the 1,320MW Thar Coal Power by Shanghai Electric Power stands at 34.49 percent. For the record, these dollar-denominated, Government of Pakistan-guaranteed rates must be among the highest on the face of the planet-and an investors dream come true.

Financing burden: The annual financing burden for these eight projects will be around $2 billion plus an insurance premium of $650 million. And assuming that the entire amount of $35 billion is utilised for energy projects the annual financing burden shall go up to $5.3 billion plus an insurance premium of $2 billion (Budget 2016-17 allocated a total amount of $1.1 billion as mark-up on foreign debt).

National Savings Schemes: The Government of Pakistans guaranteed Bahbood Savings certificates for Pakistans widows and senior citizens are being paid 9.36 percent. Then why has the Government of Pakistan guaranteed Chinese and Qatari investors up to 13 percent (first year) on debt and up to 34 percent on equity?

Chinas investments in the US: For the record, China has invested more than $1.2 trillion (trillion not billion) into US Treasury instruments earning an average of 1.9 percent a year. Then why is Chinese money invested in Pakistan earning up to 13 percent (first year) on debt and up to 34 percent on equity?

Cost of electricity: The cost of electricity produced by power projects projects that will be paying a high rate of interest on debt and up to 34 percent return on equity will be one of the highest on the face of the planet. The mother of all questions is: what will we do with such expensive electricity? Is it a case of privatising gains, socialising risks?

The writer is a columnist based in Islamabad.

Email: [email protected].

Twitter: @saleemfarrukh

https://www.thenews.com.pk/print/187350-Capital-suggestion

 

[nepali.nationalist]

Pakistanis Dont Fall for Indian Propoganda !. They want to contain China and Pakistan which is why they are planting false stories in GEO related publications.

False propaganda against CPEC

NOVEMBER 15, 2016 BY MALIK MUHAMMAD ASHRAF

Use of the project as a political tool is unfortunate

It is a well known and established fact that CPEC is an eyesore for some of the regional and global powers who are hell bent to sabotage it as is evident from the recent spate of terrorist attacks in Balochistan and the arrest of Kalbhushan Yadav, an Indian naval officer who was fomenting insurgency and terrorism in the province.

But it is really painful to note that some political opponents of the government and vested interests within the country were also engaged in false propaganda about CPEC to mislead the masses with an ostensible purpose to grind their own axes at the cost of the national interests.

Unfortunately it has become almost visceral antipathy for the sitting government by the opposition parties to denigrate the policies and initiatives of the former instead of looking at them in an objective manner. This kind of conduct on the part of the political parties is a cause of great concern, particularly when a great friend like China is involved. I as an impartial observer and citizen of Pakistan feel it obligatory to unravel the truth about CPEC.

In a recent meeting of the Senate Standing Committee on Development and Planning, which is dominated by the opposition political parties, certain observations were made about CPEC by the senators who were divorced from reality and unpalatable. Perhaps it would be pertinent to mention some of them and check them against the ground realities to put the things in proper perspective for the information of the people of Pakistan.

The Chairman of the Committee senator Tahir Mashhadi said CPEC can become another East India Company if national interests are not actively protected. Most of the CPEC Projects were being financed from local funding instead of funding from Chinese or any other foreign investment. It will be hard on us if we have to bear the entire burden. Loans taken from China will have to be returned by the people of Pakistan. Will this be national development or national calamity?.

Senator Kakar remarked that the infrastructure being established in Gawadar would only benefit the Chinese and Punjab government and not the local community. The people of Balochistan will only get one benefit from this project, which is water supply. No electricity or railway projects have been planned for Balochistan under CPEC Senator Mandokhail observed. A sense of deprivation was being instilled in smaller provinces. We do not want CPEC at the cost of the federation.

First of all equating, the partnership between China and Pakistan in regards to CPEC with East India Company is the most preposterous suggestion. It is an arrangement between two sovereign states which is going to benefit not only the two countries but the entire region. Are our senators unaware of the role that China has made in the economic development of Pakistan ever since the establishment of relations between the two countries and the contribution made by her in bolstering our defence and nuclear capability?

The observation that most of the projects under CPEC are being funded from the PSDP and that the loans given by China would add to our debt burden, is also a travesty of the truth. Out of the $46 billion that China will provide for the CPEC, only the financing of the infrastructure projects costing $ 11 billion will be done through loans from China. The rest of $34 billion for energy projects will be financed by a consortium of private companies from China and Pakistan. In regards to the loan of $11 billion for the infrastructure projects it may be pointed out that the interest rate on that loan will be only 1.6 percent. This loan is subsidised by the Chinese government. Loans obtained by Pakistan for previous infrastructure development from World Bank carried an interest rate of 5% to 8.5% while interest rates on market loans are in the vicinity of 12%. In regards to funding of projects under CPEC the government at the outset had made it clear that they will be financed from PSDP, Chinese financing and funding from multinational agencies, which the minister for planning and development re-emphasised in his press conference on 29thSeptember as well.

But the fact remains that China would arrange for $46 billion for CPEC projects. If the recently announced loan of $5 billion promised by China on concessional rates for the up-gradation of railway line from Peshawar to Karachi is also included the total Chinese commitment becomes $ 51 billion.

It is said that investment under the CPEC would be equal to all foreign direct investment in Pakistan since 1970 and also equivalent to nearly 17% of Pakistans GDP. Impact wise it is likely to create about one million jobs between 2015 and 2030 and add 2 to 2.5% to the GDP growth rate.

The remarks by senator Kakar that infrastructure being developed at Gawadar will only benefit China and Punjab government is yet another misnomer which also has a tinge of parochialism. The projects that China is financing in Gawadar apart from port and international airport include East Bay Express Way, Breakwaters, coal power plant, dredging of the harbor and the construction of 300-bed hospital. These projects will cost $ 757 million which China would provide on zero rate of interest, meaning thereby that Pakistan will have to return only the principal amount. The amount of $230 million to be spent on Gawadar International airport will be given to government of Pakistan by China as a grant which will not be paid back.

A technical training centre named Pak-China Technical and Vocational Institute at Gawadar is also being established to impart technical training to the local residents to develop skills to operate and work at the expanded Gawadar Port. All these projects are designed to benefit the local population of Gawadar contrary to the claims of the senator.

The fact is that Balochistan will be the biggest beneficiary of CPEC projects and it is totally absurd to assert otherwise. The senator was also wrong in saying that no electricity and railway project has been planned for Balochistan. CPEC includes laying of a railway line from Kahghar to Gawadar which will through the length of the province. A 300 MW coal power plant is being set up at Gawadar.

CPEC is not an undertaking at the cost of federation as observed by Senator Mandokhaail. It is rather a perfect recipe for strengthening the federation because it will bring prosperity to all the federating units ultimately. Our politicians, particularly the legislators must learn to adopt a national outlook instead of fanning parochial feelings and harming national unity either to settle score with the government or to consolidate their own political interests at the cost of national interests. They should have a sense of proportion and understanding of the ground realities. Granted they have the right to criticise and oppose the policies of the government but that needs to be done in the light of the ground realities rather than contrived through misconceived notions. Utmost care needs to be taken when it concerns Pakistans relations with other nations, especially a friend like China. There are host of other internal issues on which they can indulge in politicking.

Malik Muhammad Ashraf

Malik Muhammad Ashraf is an academic. He can be contacted at: [email protected].

http://www.pakistantoday.com.pk/2016/11/15/false-propaganda-against-cpec/

 

[nepali.nationalist]

Leverage is being used and compensation being employed in other areas to make it a Win-Win Situation, this statement seals the fate :

The projects that China is financing in Gawadar apart from port and international airport include East Bay Express Way, Breakwaters, coal power plant, dredging of the harbor and the construction of 300-bed hospital. These projects will cost $ 757 million which China would provide on zero rate of interest, meaning thereby that Pakistan will have to return only the principal amount.