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China–Pakistan Economic Corridor : News & Discussions

Discussion in 'South Asia & SAARC' started by Agent_47, Nov 16, 2016.

  1. A_poster

    A_poster Lieutenant FULL MEMBER

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    If Industries are set under CPEC, it may be beneficial for Pakistan. If only finished good comes, Pakistanis ,after a generation, would be selling their daughters to Chinese to pay for all the loans they are raking up.
     
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  2. Lion of Rajputana

    Lion of Rajputana Captain FULL MEMBER

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    Knowing Pakistanis, they would do it, and list it under National exports.
     
    A_poster likes this.
  3. Blackjay

    Blackjay Developers Guild Developers -IT and R&D

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    Pretty much the only journalist who is covering both sides of CPEC. Read his other articles at dawn too,very informative->


    Birth of another dependency

    KHURRAM HUSAIN — UPDATED about 9 hours ago
    [​IMG]
    The writer is a member of staff.


    THE latest quarterly report from the State Bank of Pakistan may sound like a dry affair, but read it a little closely and you’ll notice some startling revelations.

    For the past three years now we have grown accustomed to a steady drumbeat of positive news and statements about the economy — the reserves are rising, the circular debt has been contained for almost two years now, growth is ticking upward (even if very slowly), the fiscal deficit is coming down (targeted to hit 3.8pc of GDP this year, the lowest in over a decade).

    For a couple of years now we have been told that the country’s macroeconomic fundamentals are stabilising and a new round of investment coming in from China is laying the groundwork for a new growth spurt that will last far into the future.

    This story has not been without its skeptics. We have heard similar stories in the past too, only to watch the whole thing unravel very quickly.

    The skeptics have pointed out that the rise in reserves owes mostly to declining oil prices and increasing foreign borrowing, and as such is not sustainable.

    The continuous declines in exports, drying up of FDI are serious weaknesses, they maintain, and while remittances have shored up the external account, this could change given the fiscal difficulties of the GCC countries.

    In short, they have argued that the government’s narrative of an improving economy is built on shaky ground.


    The latest SBP report, although optimistic in its overall tone, points towards some changes in the first quarter of the current fiscal year that could lend lasting credence to the voice of the skeptics.

    Even though the SBP has taken pains to avoid letting its assessment become fodder for the skeptics to beat the government with, the underlying facts are too stark to now paper over.

    We seem to be substituting CSF inflows with commercial borrowings from China as a stopgap measure to plug our current account deficit.
    Here are some noteworthy developments the report brings up on the external sector.

    Pakistan saw net inflow of $1.1 billion in “net loan and FDI inflows from China in Q1-FY17” says the report.

    Out of this, $700 million (the lion’s share of the total) was a commercial loan from the China Development Bank whose only purpose, apparently, was to help pay for the nearly $2bn of machinery that Pakistan imported from China in the same quarter.

    In case you missed it, let me put it in plain English here: we’re borrowing money on commercial terms from a Chinese bank to pay for machinery imported from China under CPEC-related projects.

    Elaborating on this, the report says “[w]hereas Q1-FY16 had seen a dramatic pick-up in net FDI from China, it was long-term loan disbursements that dominated in Q1-FY17.”

    So last year in the same quarter, Pakistan saw net FDI inflow from China of $192m, but this year that figure dropped to $91m.

    And loans from China in the first quarter last year were $138m, and this year they jumped to $979m, of which $700m was the commercial loan mentioned above.

    These inflows helped cover up a hole that opened up in the country’s external account due to the drying up of Coalition Support Funds (CSF).

    In the same quarter last year, Pakistan ran a current account deficit that was less than half of what it ran this year. Last year the CSF inflows played a big role in helping cover the gap.

    This year the report says the commercial borrowing from China “helped to cover the increase in current account gap and lower foreign investment in the quarter”.

    This is important for a couple of reasons.

    First, we seem to be substituting CSF inflows with commercial borrowings from China as a stopgap measure to plug a running deficit in our current account.

    CSF was always billed as a “reimbursement”, and booked in our accounts as an export of a service (an awkward classification for what it implies).

    But the Chinese loans are on commercial terms and, unlike CSF, have to be repaid with interest.

    Another reason is that our three main non debt creating sources of foreign exchange inflows — exports, remittances and FDI — all registered declines in this quarter.

    For exports, this was the 10th consecutive quarter of declines that are now becoming alarming.

    For remittances, it was the first quarter of decline since 2012, and the report warns that an uptick is unlikely in the foreseeable future.

    So our current account is weakening almost irreversibly while imports from China are skyrocketing, and the gap is being plugged by commercial borrowing from Chinese banks.

    “[T]he structural weaknesses in the external account — reflected by the continuous drop in exports, lower FDI, and the drop in remittances — present a challenge,” says the report.

    How sustainable is this?

    What are the terms on these loans, and what sort of outflows will be created when repayment begins?

    Nobody knows, not even the State Bank it seems.

    But noting the shifting gears in the economy, the report does point out that “in the short run, it is imperative that CPEC projects (both power and infrastructure-related) continue at their projected pace, mainly to ensure steady arrival of associated FX inflows from China.”

    And then goes on to add that “[t]his financing will also be crucial to offset the rise in the import bill stemming from higher CPEC-related machinery imports.”

    Is this a new relationship of dependency being built here?

    Are we now getting locked into a cycle of borrowing and imports under the garb of CPEC even as the more important pillars of the external sector — exports, remittances and FDI — shrivel up?

    If so, the first quarter of fiscal year 2017 will be the moment when the gears shifted.

    Where these trends take us is difficult to foresee, but increasingly the government’s narrative of economic improvement is beginning to sound like a high-stakes bet instead of sound policy.

    The writer is a member of staff.

    khurram.husain@gmail.com

    Twitter: @khurramhusain

    Published in Dawn, January 5th, 2017
     
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  4. Butter Chicken

    Butter Chicken Lieutenant FULL MEMBER

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    Pak media on CPEC loans

     
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  5. Gessler

    Gessler Mod Staff Member MODERATOR

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    Just came across an excellent answer on Quora and I thought I should share it with you all here. The question was:

    Why is India so jealous of Pakistan CPEC's great success?

    The answer, by one Mehak Gupta from Gurugram (Gurgaon), Haryana follows: -

    Let me begin my answer by showing you a few photographs.

    [​IMG]
    [​IMG]
    [​IMG]

    HAMBANTOTA INTERNATIONAL AIRPORT, SRI LANKA

    Folks!!! Welcome to the world’s emptiest airport in Sri Lanka. It was built by Pakistan’s dearest friend, China. It looks swanky and better than most airports than in India except that it does not see much aviation.

    https://en.wikipedia.org/wiki/Mattala_Rajapaksa_International_Airport

    Developing the Hambantota region started as a dream of former president Mahinda Rajapaksa, and has become emblematic of his highly-controversial reign and a highly polarizing topic within Sri Lanka. The vision was to build a number two citythat would grow up around an emerging deep sea port in an under-developed, jungle area that’s best known for its pristine beaches and wildlife preserves.

    [​IMG]

    The Hambantota dream hasn’t quite worked out as designed. Without an accompanying industrial zone or other local businesses to drive demand, Hambantota’s deep sea port struggled to attract ships and cargo volumes.

    Mattala International Airport became known as the world’s emptiest because of the region's inability to attract passengers, newly paved, multi-lane highways provided thoroughfares for a severe lack of vehicles, the new cricket stadium wasdeficient of matches, and the conference center sat empty except for the odd local wedding. All the while, this loss-making infrastructure continued consuming massive amounts of national revenue to operate and maintain.

    [​IMG]

    CRICKET STADIUM IN HAMBANTOTA

    Hambantota has thus become a monumental debt trap that's rattled the country to its financial core and prompted a recent IMF bailout. Nearly all of the infrastructure built in Hambantota was done with Chinese money, bringing Sri Lanka’s debt to the superpower to the east up to over $8 billion.

    Facing the grim reality of neither having enough money to bring the Hambantota dream to fruition nor the cash reserves to make payments on the loans, Sri Lanka had to make an executive decision: cut bait and give up on Hambantota or find another, more economically-endowed party to take it over. The government opted for the latter option.

    Prime Minister Ranil Wickremesinghe announced before the Sri Lankan parliament that deals have been secured with China to run the Hambantota deep sea port and Mattala International Airport as public-private-partnerships (PPP) that will be driven by monumental debt-for-equity swaps.

    [​IMG]

    China Merchants Holdings (International) Company Ltd is set to take over an 80% share of the Hambantota deep sea port in exchange for eating $1.1 billion of Sri Lanka’s debt to China.
    This is the same shipping company that expanded and is now running Colombo’s South Container Terminal.

    Another unnamed Chinese company (possibly IZP, a Chinese informational technology firm) will also take over the debt-riddled, revenue-draining Mattala International Airport in an attempt to turn it around.

    Along with headway being made on a prospective 15,000 acre, China-led industrial zone near the Hambantota deep sea port, the development area seems well on the way from being a Sri Lanka national project financed by China to a full-fledged Chinese enclave at a very strategic position on the Indian Ocean.

    Sri Lanka had offered China debt-for-equity swaps that included the Hambantota port and Mattala airport before, but these were rejected on the grounds that China preferred to enact such deals via commercial entities rather than through government-to-government exchanges. Sri Lanka seems to have effectively eased China's qualms in this regard, and the deal is expected to be formalized in the near future.

    http://www.forbes.com/sites/wadeshe...he-worlds-emptiest-airport-go-to-the-chinese/
    http://www.forbes.com/sites/wadeshe...ational-airport-sri-lankas-mattala-rajapaksa/
    http://www.forbes.com/sites/wadeshe...t-mattala-international-hambantota-sri-lanka/
    https://www.linkedin.com/pulse/sold...anthi-somaweera?articleId=7614696453496082600

    So, the city of Hambantota is now a property of Communist Party of China.

    COMING TO PAKISTAN

    Just today an article was published in the Dawn, which is Pakistan’s most respected media group and its oldest newspapers. Let me quote a few straight lines out of it:-

    Pakistan saw net inflow of $1.1 billion in “net loan and FDI inflows from China in Q1-FY17” says the SBP report.

    Out of this, $700 million (the lion’s share of the total) was a commercial loan from the China Development Bank whose only purpose, apparently, was to help pay for the nearly $2bn of machinery that Pakistan imported from China in the same quarter.

    In case you missed it, let me put it in plain English here: we’re borrowing money on commercial terms from a Chinese bank to pay for machinery imported from China under CPEC-related projects.

    http://www.dawn.com/news/1306493/birth-of-another-dependency

    CONCLUSION

    1. China has given Pakistan a loan not a donation. The loan has to be returned with interest.
    2. The infrastructure being built as a result of the CPEC i.e. Gwadar Port, Airport, Motorways, Energy projects and Railways, are being built with Chinese money. This is to help Pakistan establish new industries and invite FDI into their country. So far, although many countries have expressed interest in the project, nothing really has materialised on the ground.
    3. Pakistan will have to improve its business environment. There is a simultaneous need of land reforms, taxation reforms, cutting down the red tape, building human capital, increasing the skills of its population, improving the overall healthcare and improving its perception in world media as a business destination by aggressive PR strategy.
    4. If Pakistan does not boost its industrial production, its exports and FDI, it will not be able to repay its loans back.
    5. This might push its economy into serious debt leading to the Chinese takeover of Gwadar port and city. Then there will be another property of the Communist party of China that too within 300 km of Indian coasts.
    6. Thats why India is worried about CPEC besides the usual reason of CPEC passing through POK if that remains a part of Pakistan lest it sells it too to China as it did in the past!!!!
    7. There is no reason of India being jealous of Pakistan. India is getting 40 times the FDI of Pakistan. India just received $44 Billion FDI in 2015 alone which is equivalent to the entire projected value of CPEC (over 15 years or more).
    8. China has invested similar amounts of money in large number of African and Asian Countries as well. CPEC may be large for Pakistan but its just a fraction of FDI, India will receive in the same time period.
    [​IMG]

    https://www.quora.com/Why-is-India-so-jealous-of-Pakistan-CPECs-great-success

    @Abingdonboy @randomradio @PARIKRAMA @vstol jockey @MilSpec @VCheng @Robinhood Pandey @Manmohan Yadav @R!CK @Grevion @Sathya
     
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  6. VCheng

    VCheng RIDER GEO STRATEGIC ANALYST

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    I already mentioned this elsewhere, and was promptly thread-banned. :D
     
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  7. randomradio

    randomradio Mod Staff Member MODERATOR

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    Yeah, a lot of us already know this and have pointed it out many times. CPEC is a major debt trap.

    The Pak Army would rather sell Pak to China than give in to peace with India.
     
  8. Robinhood Pandey

    Robinhood Pandey SECOND IN COMMAND Staff Member SECTION CHIEF

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    TBH i am happy to see Pakistanis thinking that CPEC will turn the things around for them and i ll be happy to promote this perception . . .let them have their hopes high . when the reality wont meet the expectations . . that'll hurt more :D

    so let the dollars flow through the drainage in Ruhani taqat wala mulk :p
     
  9. stephen cohen

    stephen cohen Lieutenant FULL MEMBER

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  10. stephen cohen

    stephen cohen Lieutenant FULL MEMBER

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    This is the condition of Pakistan when the Circular Debt is 675 Billion Rupees
    ie a little Over 6 Billion USD

    With Chinese expensive electricity coming in the Circular debt will cross 10 Billion USD

    http://dunyanews.tv/en/Pakistan/369762-Electricity-production-hits-a-record-low

    Government and private power plants have reduced their electricity production due to non-payments. Circular dead reached as far as PKR 675 billion because the private and government power plants were not granted billions of rupees in payment.
     
    Last edited: Jan 11, 2017
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  11. sherin616

    sherin616 FULL MEMBER

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    What the Marshall Plan Can Teach India About the China-Pakistan Economic Corridor
    BY ARUN MOHAN SUKUMAR ON 10/01/2017 • LEAVE A COMMENT
    SHARE THIS:


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    The CPEC may be a bilateral endeavour, but New Delhi cannot ignore its spillover effects on regional governance and regime creation in South Asia.


    The Chinese and Pakistani flags fly on a sign along a road towards Gwadar, Pakistan January 26, 2016. Credit: Reuters/Syed Raza Hassan
    Beyond sketching out the broad considerations, India’s foreign policy planners are yet to study the impact of the China-Pakistan Economic Corridor (CPEC) on South Asia’s politics.

    Views in New Delhi to the CPEC could be divided into two groups: the first believes the CPEC serves China’s singular agenda of extending its strategic footprint to Gwadar and beyond, and freeing the country of the Malacca Strait chokehold that currently serves as the lifeline for Beijing’s global commerce. Another section believes, with good reason, that many CPEC projects are simply not viable enough to sustain the interest of Chinese investors in the long run.

    Either outcome may materialise, but the CPEC is an important enough project whose economic and strategic consequences require methodical assessment. Three aspects of the CPEC in particular stand out as relevant questions for India to consider:

    Will economic cooperation through the CPEC lead to regional military architectures in South Asia?
    How will the US respond to the CPEC – will the Trump administration offer counter-benefits to Pakistan or other regional actors to blunt China’s overtures?
    Will Beijing see the CPEC as a case study for regime creation in Asia? That is, use it as a template to create and influence investment and trade standards in the region?
    The CPEC may be a bilateral endeavour, but New Delhi cannot ignore its spillover effects on regional governance. The inequities in the China-Pakistan relationship and the nature of proposed Chinese investment in the CPEC merit a comparison with the Marshall Plan, the most successful foreign assistance project of the 20th century.

    Analysts in India and Pakistan have expressed bewilderment at Pakistan borrowing from Chinese banks to pay for Chinese projects in the corridor, but Beijing is simply taking a leaf out of the US playbook. The Marshall Plan – known formally as the European Recovery Plan — involved the US extending lines of credit and assistance for Western European economies ravaged by the Second World War. Credited with restoring stability in Europe, one needs to look no further than the then US under secretary of state Dean Acheson’s words to gauge the real goals of the Marshall Plan. In May 1947, Acheson laid out the objectives of the recovery project in a speech at Cleveland:

    “Our [US] exports of goods and services to the world during the current year, 1947, are estimated to total 16 billion dollars […] In return for the commodities and services which we expect to furnish the world this year, we estimate we will receive commodities and services from abroad to the value of 8 billion dollars. […] The differences between the value of the goods and services which foreign countries must buy from the United States this year and the value of goods and services they are able to supply to us this year will therefore amount to the huge sum of about 8 billion dollars.

    How are foreigners going to get the US dollars necessary to cover this huge difference? [This is one] of the most important questions in international relations today.”
    In 1947, the US needed to finance and create captive markets that would continue buying American goods while offering their own services (cheaper labour, highly skilled professionals) to the US in return. China today is looking to move its assembly lines outside the country, create cheaper supply chains and limit its economic externalities (such as environmental pollution) at home. Then, as is the case today with the 2008 recession, the global economy had slowed down
     
  12. Grevion

    Grevion Think Tank TROLL ELITE MEMBER

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    That's what China is trying to do. Wouldn't it be nice to have 2-3 PRC colonies in the IOR region with deep sea ports??
    That's just what they needed and at the right time too. After the SCS it is obvious for China to increase its presence in the Pacific and Indian Ocean.
     
  13. Inactive

    Inactive Guest

    When will you learn? Sigh!:fighting1:
     
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  14. AbRaj

    AbRaj Captain FULL MEMBER

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    Intellectual bankruptcy of that country is more dangerous than financial .
    Look at this this gentleman's deep knowledge about evil Hindus


    PS. We admit that our society have a number of ills like gender, religious and caste discrimination ,poverty ,malnutrition, unemployment etc but we are not hate preachers
     
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  15. VCheng

    VCheng RIDER GEO STRATEGIC ANALYST

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    Apparently, never! :D

    Seriously, though, it becomes easier and easier not to care as much with every passing day. Pakistan's steady decline is now irreversible, the critical mass for overwhelming stupidity having been reached. An implosion is inevitable.
     

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