Chinese banks reluctant to fund CPEC projects in current climate: Sources

Lenore Staats

ISLAMABAD: China Pakistan Economic Corridor (CPEC) has reportedly hit snags as the Chinese banks/ financial institutions are reluctant to fund the projects due to current state of affairs, well informed sources told Business Recorder. In the past, the incumbent government’s Ministers openly accused former Chief Minister Punjab( currently Leader of […]

ISLAMABAD: China Pakistan Economic Corridor (CPEC) has reportedly hit snags as the Chinese banks/ financial institutions are reluctant to fund the projects due to current state of affairs, well informed sources told Business Recorder.

In the past, the incumbent government’s Ministers openly accused former Chief Minister Punjab( currently Leader of Opposition in National Assembly), Mian Shahbaz Sharif and former Minister for Planning, Development and Reforms, Ahsan Iqbal of taking kickbacks in Chinese projects being established in CPEC. National Accountability Bureau (NAB) also started investigations which were later on shelved.

The issue of banks/ financial institutions reluctance in funding the projects was raised by the Minister for Foreign Affairs, Shah Mehmood Qureshi, during his visit to China last week.

Sources further revealed that on August 13, 2020, Chairman, CPEC Authority, Lt. General, Asim Saleem Bajwa( retired) gave a detailed presentation on the progress of CPEC projects. He stated that significant progress had been made in energy sector projects during the FY 2019-20. There were total 22 power project under CPEC programme out of which nine projects had been commissioned, whereas eight were under construction and five were in the pipeline.

Engro Thar Power & Mine project (660 MW) and HUBCO Coal Power project (1320 MW) had been commissioned on July 10, 2019 and August 14, 2019 respectively. For Thar Block-1 Mine (Shanghai Electric-7.8 MTPA) and Thar Energy Limited, TCB-II (330 MW), financial close had been achieved on December 30, 2019 and January 30, 2020, respectively. Further, Concession Agreements of Kohala HPP (1124 MW) and Azad Pattan HPP (700,7 MW) were signed on June 25 and June 29, 2020, respectively.

The Chairman, CCoCPEC observed that future of Thar coal-based power plants was not very promising, therefore, there was a dire need to explore the possibility of setting up other projects in areas of chemicals, fuel, etc. He further stated that although groundbreaking of Gwadar 300 MW Power Plant had been held on November 4, 2019, however, there were some issues related to finance, transmission, distributions etc., which halted further progress. Qesco was reluctant to take responsibility for distribution of power in Gwadar because of its lack of capacity.

As regards the infrastructure sector projects, the meeting was informed that a number of milestones had been achieved on this account during FY 2019 20. The Peshawar-Karachi Motorway (Multan-Sukkur Section) was inaugurated on November 5, 2019. It was stated that work on the Hyderabad – Sukkur Motorway project would start in March, 2021. It is the first PPP-based project. On its completion, the Motorway on the Eastern Route from Peshawar to Karachi would be completed. The meeting was also apprised about the position of road projects on the Western Route .

While updating the status of the CPEC projects in Gwadar, the meeting was informed that the groundbreaking of New Gwadar International Airport was held on November 4, 2019. Gwadar Smart Port City Master Plan had been completed and approved from Governing Body of GDA on August 23, 2019. The groundbreaking of Gwadar Hospital and Technical & Vocational Institute was held on December 16, 2019. Tax Exemption for Gwadar Port & Tax-Free Zone had been granted in the Money Bill 2020. Further, Phase-1 of the necessary facilities of fresh water treatment and supply project has been completed. It was also revealed that PC-1 of the Main Line-1 had been approved by the ECNEC on August 5, 2020.

The meeting was also apprised about the status of CPEC projects under Industrial Cooperation. It was stated that considerable progress had been attained during the FY 2019-20 in this area. The groundbreaking of Allama Iqbal Industrial City SEZ (M3), Faisalabad was held on 3rd January 2020. The Industrial Diagnosis reports on textile were completed and presented in the 9th JCC held on 5th November, 2019. The plan for the FY 2020-21was highlighted as follows: (i) approval of Development Agreement Rashaki SEZ ;(ii) provision of electricity, gas and access road and groundbreaking of Rashaki and DhabejiSEZs;( iii) diagnosis studies for remaining priority sections (Mines a & Steel and Agriculture);( iv) signing of Framework Agreement for Industrial Cooperation and ; (v) inclusion of Hub Special Economic Zone in CPEC framework.

Regarding other Initiatives under CPEC programme, the following actions were taken during FY 2019-20:( i) promulgation of “CPEC Authority Ordinance” on October 6, 2019;( ii) notification of CPEC Business Council by BoI;(iii) establishment of two new Joint Working Groups under CPEC i.e. agricultural cooperation and cooperation in Science & Technology.

The meeting was further apprised that the O&M contract of Orange Line Metro Train Project had been awarded on Jan 31, 2020. There were two issues which were hampering the operationalisation of the Orange Line Metro Train Project which were i) power supply and ii) determination of train fare. The committee directed the Power Division to sort out the issue of power supply to Orange Line Train from LESCO on an urgent basis and report thereof may be submitted to the CCoCPEC for its consideration.

Minister for Foreign Affairs briefed the meeting about his visit (last week) with respect to the very important component of the Chinese vision of Belt & Road Initiative (BRI). The Chinese side was very concerned about slow progress on CPEC projects. Since the inception of COVID-19 pandemic world scenario had been changing rapidly. The Chinese economy was also under stress, therefore, there was a dire need to show to the Chinese side Pakistan ‘s resolve / commitment towards completion of different projects agreed under CPEC programme. It was pointed out that currently, the Chinese banks/financial institutions were showing no or limited interest in financing the CPEC projects. It was suggested that the Minister for Foreign Affairs may take up this issue with the Chinese side during his visit to China which he undertook last week.

It was also stated that no meeting of JCC was held since November, 2019, therefore the Chinese side may also be requested to convene the next JCC meeting in October, 2020. It was felt that there was a dire need to improve the government’s media management policy for highlighting a positive image of the CPEC projects.

The Minister for Maritime Affairs, Ali Zaidi observed that Karachi was the biggest city of Pakistan , however, no project had been conceived for Karachi under CEPC programme except Dhabeji which was in interior Sindh. He suggested that the land of Machar Colony in Karachi which was in fact constructed on the land owned by the KPT, had great potential for construction of low cost houses / blocks ( 1+4) under CPEC infrastructure projects. The committee agreed to the proposal.

The committee observed that the two areas of agriculture and Science & Technology would be on priority in the next phase of CPEC programme. Keeping in view their importance new JWGs for these areas had already been established. Therefore, the meeting would focus on these two areas in its next meeting.

After a detailed discussion, the committee decided that the Minister for Foreign Affairs may take up the following important issue with the Chinese side during his visit to China ;(i) financing by the Chinese banks/ financial institutions for the projects under CPEC program, with ML-1 being the highest priority and ;(ii) convening the next JCC in October, 2020.

It was also decided that Ministry of Energy would explore the possibility of setting up Thar coal-based projects in the areas of chemical. It will also sort out the issue of power supply to Orange Line Train by Lesco on urgent basis and report thereof may be submitted to the CCoCPEC for its consideration.

Ministry of Information and Broadcasting has been directed to improve media management policy for highlighting a positive image of the CPEC projects.

Ministry of Maritime Affairs will engage with the Ministry of Housing and Works / Naya Pakistan Housing & Development Authority (NAPHDA) to discuss their proposal regarding utilization of the land of Machar Colony in Karachi ( constructed on the land owned by KPT) for construction of low-cost houses/ blocks( 1+4) under CPEC infrastructure projects. The proposals finalized by the two Ministries will be placed before the JWG on infrastructure.

Copyright Business Recorder, 2020

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