Sunday May 19, 2024

Pakistan becomes largest recipient of Chinese soft loans

By Waseem Abbasi
January 03, 2018

ISLAMABAD: Pakistan has become the largest recipient of Chinese concessional loans in the world with over $4 billion soft loan already approved for ongoing infrastructure projects and an additional $8 billion being considered for upgrading railway line under the China Pakistan Economic Corridor (CPEC), sources in foreign office claim.

“Despite this massive cooperation with Pakistan, negative and inaccurate reporting against China is creating grave concerns in Beijing,” a source privy to Chinese discussions said on Tuesday.

He added that Chinese are complaining about false reporting in some Pakistani media outlets about CPEC amidst external propaganda by the enemies of the two countries. Giving example of fake news, he quoted examples of reports that China has halted financing for CPEC project and reports about massive Pakistan borrowing for the corridor.

China is already providing Pakistan with $4 billion soft loan for two ongoing projects namely Karakoram Highway (KKH) and Multan-Sukkur Motorway. Sources said another crucial infrastructure project namely Karachi-Peshawar Main Line (ML-1) will be started soon with $8.2 billion Chinese concessional loan. Under the project the entire railway track will be upgraded to enable train to run between Karachi and Peshawar at 160km/hour speed instead of existing 70km/hour.

They said soft loans offered to Pakistan for various infrastructure projects including under the CPEC are payable only in 20 years at just 2.5 percent to 2.6 percent interests rate. In addition, Gwadar Airport and master city are being constructed with a grant from Beijing.

Sources said it was incorrect that Pakistan was taking massive loans for CPEC. “Most of the energy projects are funded by Independent Power Producers (IPPs) which are obtaining loans from Chinese banks to later sell power to Pakistan under power purchase agreement. The infrastructure projects are being financed by China with soft loans,” they added.

They also claimed that it was totally fictitious that China had halted financing for any project. For some CPEC projects financial arrangements have not been agreed upon yet, they said but there is no halting as claimed in media reports.

Talking about reports in Pakistani media, sources said CPEC is not lifeline for China as claimed by some people. They said CPEC is not the only option available to China as there are five other corridors being built under Belt and Road Initiative (BRI) of China. “Last year alone about 3,000 cargo trains shuttled between China and Europe, a fact which speaks volumes about Chinese economic outreach”.

On the other hand, according to the Foreign Office, CPEC is a great opportunity for Pakistan under which apart from power and infrastructure projects, nine industrial zones would be constructed across all regions of Pakistan which will greatly boost country’s economy and create employment opportunities.

To a question about concerns over cost of Chinese produced electricity, sources said at the time China agreed to work on power projects no one was ready to invest in Pakistani power sector and country was facing severe loadshedding of up to 18 hours a day.

Sources said there is absolutely no truth in claims that China wants to colonise Pakistan through CPEC. “We have 60-year history of exemplary bilateral cooperation and never once China has dictated terms on Pakistan”.

In 2013, at a time when no country was interested in investing in Pakistan, China stepped forward and extended full support to Islamabad.

To another question, sources said Chinese are not concerned about change of government after the elections as they know that it is a state-to-state cooperation and there is a political consensus in Pakistan about the future of CPEC. “The chief ministers of all the four provinces have attended the Joint Cooperation Committee (JCC) meeting and working groups also represent all four provincial governments” they added.

Under CPEC, work is underway on 16 development projects in Sindh, 10 in Balochistan, 10 in Punjab and 9 in KP which shows that each province is getting its share in the development pie. Currently there are about 25,000 to 26,000 Chinese nationals in Pakistan, according to Chinese Embassy. However, Foreign Office sources denied the impression that CPEC projects are being constructed exclusively with Chinese workforce.

“For example, at Sahiwal Power Plant, only 30 percent workforce is Chinese. It is true that Chinese bring their own managers for projects but for other staff positions mainly local labour force is employed,” said a source. He added that China offered special concessions to Pakistani banks and financial institutions to setup their branches inside the country. Taking advantage of these relaxes conditions, Habib Bank Limited (HBL) has opened up its branch in Urumqi, China.