China Watch [January 31- February 6] : Chinese Firms Interested in Pakistan

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Chinese firms have shown an increasing interest in investing in Pakistan. Pakistan has reiterated its invitation to India to join the multi-billion dollars project of the China Pakistan Economic Corridor (CPEC). China has said that it supports Pakistan’s counter-terrorism strategy. Minister for Planning, Development and Reforms, Ahsan Iqbal, has said that Pakistan will be capable of repaying the soft loans to China in the future. The National Accountability Bureau (NAB) has inked a Memorandum of Understanding (MOU) with China to enhance transparency in projects of the CPEC. Pakistan has welcomed Egypt’s proposal to join the CPEC. Leader of the Awami National Party (ANP), Asfandyar Wali, has warned the central government against the denial of share to Khyber Pakhtunkhwa (KP) in the CPEC.

Chinese Firms Eye Pakistan:

A report by Reuters found out that after signing two major deals in recent months, many Chinese firms are interested in acquiring new businesses and land in Pakistan so as to expand the footprint of Chinese investments in the country.[1] The news agency quoted executives of some of Pakistan’s top firms as saying that the Chinese companies were interested in the cement, steel, energy and textile sectors, the bedrock of Pakistan’s economy. A Chinese consortium recently bought 40 percent strategic shares in Pakistan Stock Exchange and Shanghai Electric Power acquired Karachi-Electric Power, one of Pakistan’s biggest energy producers. It is a positive development for Pakistan’s economy as the foreign direct investment tumbled sharply from the peak of $5.4 billion in 2007-08 to $1.9 billion in 2015-16. China has already been engaged in carrying out the $46-$55 billion project of the CPEC that can be pivotal in opening up Pakistan’s economy to foreign investments and businesses.

India Invited to Join CPEC:

Pakistan has reiterated its invitation to India to join the multi-billion dollars project of CPEC. Pakistan’s Minister for Planning, Development and Reforms, Ahsan Iqbal, stated that instead of opposing the project, India should become part of it and explore the prospect for different opportunities.[2] Iqbal added that India’s response to CPEC was based on “knee-jerk” reaction. He highlighted that the corridor would provide India the shortest land route to trade with China. The Minister added therefore “we are hopeful and we continue to work to normalize our relations with India” to pave the way for latter’s inclusion in the CPEC. It is not the first time that Pakistan has invited India to become part of this project. Contrary to all the invitations of Pakistan, India has openly opposed the CPEC both for being a strategic threat and its passing through the territory that New Delhi claims as its own. With such a huge gap between Pakistan’s desire and the ground reality, these invitations are rather symbolic in nature.

China Reaffirms Support for Pakistan’s Counter-terror Strategy:

Chines Foreign Ministry Spokesman, Lu Kang, has said that “China supports the independent strategies made by Pakistan in counter terrorism and engage in international cooperation on counter terrorism.”[3] The statement has come in the wake of the arrest of Hafiz Saeed, Jamaat ud Dawa (JuD) chief, by Pakistan. Some analysts think that Islamabad has most probably moved against the JuD’s head at the behest of ‘all-weather’ friend China.[4] Lu also revealed that China will send Vice Foreign Minister, Cheng Guoping, to Islamabad for the purpose of talks on counter-terrorism.[5] At times when Pakistan’s counter-terrorism approach has come under increasing criticism of the United States and India, cooperation between Pakistan and China has dramatically increased on this issue. China has reiterated its support for Pakistan’s efforts in the war against terrorism at many important international forums. The two friends have also conducted jointly high level anti-terror military exercises.

Pakistan can pay back Chinese Loans:

Minister for Planning, Development and Reforms Ahsan Iqbal has said that Pakistan will be capable of repaying the soft loans to China for the $50-plus billion of funding under the CPEC. The minister argued that once the projects are implemented, Pakistan’s economic growth will reach 6 to 7 % that will put the country “in a very comfortable position” to pay back the loans.[6] He added that “[T]he bulk of investment coming into CPEC is through private sector investment, foreign-direct-investment, therefore it will not disturb our debt-to-gross domestic product ratio.” However, the current figures do not support the stance of the government. The International Monetary Fund says that Pakistan’s debt-to-GDP ratio has in fact increased from 64.2% in 2013 to 66.1% in 2016. Balancing the outflows of finances – to be payed for loans – against the income from these investments will be a major challenge for Pakistan’s economy in the future.

Miscellaneous:

ANP’s leader Asfandyar Wali has warned the central government against the denial of share to KP in the CPEC.[7] Prime Minister Nawaz Sharif inaugurated the 75-kilometer long section of the Karachi-Hyderabad Motorway (M-9) under the CPEC.[8] Pakistan has welcomed Egypt’s proposal to join the CPEC.[9] NAB has inked an MOU with China to enhance transparency in projects of the CPEC.[10] KP’s Governor Iqbal Zafar Jhagra has encouraged the entrepreneurs and traders to avail themselves of the opportunities offered by the CPEC.[11]

This report is compiled and written by Abdur Rehman Shah, Research Associate at the Center for Research and Security Studies (CRSS), Islamabad.

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Notes

[1] Jorgic, Drazen. (2017, February 02). Amid Beijing’s ‘Silk Road’ splurge, Chinese firms eye Pakistan. Retrieved February 06, 2017, from http://www.reuters.com/article/us-pakistan-china-investment-idUSKBN15H2ZE

[2] PTI. (2017, February 04). India should join CPEC instead of opposing it, says Pakistan minister – Times of India. Retrieved February 06, 2017, from http://timesofindia.indiatimes.com/india/india-should-join-cpec-instead-of-opposing-it-says-pakistan-minister/articleshow/56967265.cms

[3] Verma, K. (2017, February 3). China to send top official to Pakistan for counter terrorism talks. Retrieved February 06, 2017, from http://ptinews.com/news/8366281_China-to-send-top-official-to-Pak-for-counter-terrorism-talks-.html

[4] Kugelman, M. (2017, February 01). China, not America, likely behind Hafiz Saeed’s house arrest. Retrieved February 06, 2017, from http://www.dawn.com/news/1311971

[5] PTI. (2017, February 03). China to send top official to Pakistan for counter-terrorism talks. Retrieved February 06, 2017, from http://indianexpress.com/article/world/china-to-send-top-official-to-pakistan-for-counter-terrorism-talks-4506334/

[6] APP. (2017, February 01). Minister confident Pakistan can pay back Chinese loans. Retrieved February 06, 2017, from https://tribune.com.pk/story/1313175/minister-confident-pakistan-can-pay-back-chinese-loans/https:/tribune.com.pk/story/1313175/minister-confident-pakistan-can-pay-back-chinese-loans/

[7] The News International. (2017, February 4). Asfandyar warns against share denial in CPEC. Retrieved February 06, 2017, from https://www.thenews.com.pk/print/183920-Asfandyar-warns-against-share-denial-in-CPEC

[8] Reuters. (2017, February 03). Pakistan kicks off $11.5 billion road-building plan. Retrieved February 06, 2017, from http://www.reuters.com/article/us-pakistan-highway-idUSKBN15I20P

[9] Our Correspondent. (2017, February 06). Egypt’s inclusion to boost CPEC, says NA speaker. Retrieved February 06, 2017, from https://tribune.com.pk/story/1318081/game-changer-egypts-inclusion-boost-cpec-says-na-speaker/

[10] APP. (2017, February 2). NAB to watch over CPEC transparency. Retrieved February 06, 2017, from https://epaper.tribune.com.pk/DisplayDetails.aspx?ENI_ID=11201702010317&EN_ID=11201702010114&EMID=11201702010053

[11] Bureau Report. (2017, January 31). Governor urges businessmen to benefit from CPEC project. Retrieved February 06, 2017, from http://www.dawn.com/news/1311824/governor-urges-businessmen-to-benefit-from-cpec-project

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