OBOR News & Developments

[Project Dharma]

About 3 quarters Pakistani Economy is consumer class, but the population growth rate and high fertility rate seems to be hindering per capita growth rate from last few years, stock markets are performing good though in recent days.
So, how's their growth (per capita) outlook for 20 years to 50 years?
I mean per capita growth rate compared to India's, Bangladesh's or Sri Lanka.

Is this a serious question? Which Muslim country is independently successful without oil money? As Pakistan moves away from Indian culture to Arabic/Middle Eastern one so it will descend into chaos. If liberal countries like Iran and Turkey became what they are today, imagine what Pakistan will become.

Pakistan is plagued by crippling power shortage, sub standard human resources, religious extremism, you name it. The way I see it, CPEC is a final Hail Mary before it becomes the next Syria. Best case scenario, it becomes a pawn of China to be used against India with no power of its own, worst case scenario, well use your imagination - Islam and Nuclear weapons.

 

[Neo]

India used to have just 52% GDP per capita, low HDI, GHI etc. of Pakistan in 80s. Then, it sustained significantly higher per capita growth every year.
Usually, expanding consumers and labour (if utilized properly) aid consumption and productivity, so economic growth. As population ages, people have less children, it slows down because of less overall population growth. As we can see in China, Japan and Russia while US has pluspoint on developed economies and India has over emerging economies and most countries.
But because of low fertility rate, India must also slow down and decline after 3-4 decades like China or Japan. So, I do believe, they (Pakistanis) can have better growth outlook later.
@Neo

Pakistan doesn't follow the same formula to calculate GDP as India does hence a comparison is unrealistic specially when you take recent credit suisse reports into account where Pakistan scores slightly better than India, but that's another discussion and I don't want to drag India into this thread.

We need to bring in the informal sector and grey/black economy which according to some analysts varies between 45-80% of current GDP of $320 billion.
Correct data on population is also needed and will be available at the end of this year, census is to kick off on March 15 in Sindh.

 

[Neo]

Balochistan agrees on tax breaks for domestic investors
By Salman Siddiqui
Published: January 3, 2017

KARACHI: The government of Balochistan has, in principle, agreed to offer similar tax breaks to domestic investors at the Chinese-run Gwadar industrial estate that are being enjoyed by foreign investors for up to 40 years.

“Balochistan’s chief minister has assured us that he will declare it {the industrial estate) a free zone,” Waqas A Lasi, GM Finance of the Gwadar Industrial Estate Development Authority (GIEDA), said while briefing a group of journalists from Karachi.

Balochistan sweetens terms for investment

The Balochistan government was in contact with the federal government, which was overseeing development projects in Gwadar, in a bid to offer tax exemptions to the domestic investors as well, he said.

The federal government has provided 23-year tax holiday, including all federal, provincial and local taxes, charges and levies, to foreign investors on corporate income at the industrial estate.

Other benefits include exemption from import duties and sales tax on all imports of material and equipment required for the construction, expansion and operation of the Gwadar port for 40 years; exemption from duties on oil in ship bunkers; exemption from income tax on the interest income on loans and exemption from stamp duties on loans.

GIEDA Managing Director Fareed Ahmed M Hasni said, “If the government provides similar tax benefits for the domestic investors for 10 to 20 years, it will help woo them easily and quickly.”

The industrial estate is spread over an area of 3,000 acres, which is 35 km from the main Gwadar deep-sea port.

Highways, the under-construction airport and proposed railway tracks are close to the estate, as these are the three basic infrastructure demands of the industrialists the world over.

According to Lasi, GIEDA has received Rs1.75 billion for development of the industrial zone under the China-Pakistan Economic Corridor.

With the available funds, the land development authority is building basic infrastructure, including road networks and street lights, over 500 acres of land.

Gwadar’s development – misgivings must be addressed

The government is charging Rs1.5 million per acre for development work from the interested industrialists as land is being provided free of charge to them.

Almost all the available land in the estate has been allocated to the industrialists. This includes the 900 acres whose allocation had been cancelled earlier after the industrialists could not show progress on their proposed projects.

Land for overseas Pakistanis

Lasi revealed GIEDA was in talks with the government to provide more land in and around the industrial estate. “The land, which is expected to be handed over to the authority soon, will be allotted to overseas Pakistanis…My email box is full of such inquiries from overseas investors.”

He said Zeal Pakistan Cement would be the first industrial unit in the estate that was likely to begin distribution in the next one year. Baosteel of China has also expressed interest in setting up a huge production plant.

“We expect 50 to 100 industrial units to start construction work by December 2017 and they will begin production by 2020,” Lasi said. “Industrialisation will be at its full pace here in the next three to four years.”

With the availability of electricity, gas and water, for which projects were either being developed or at the planning phase, he said, the process of setting up more industrial units would pick up pace.

Canadian and South Korean companies have offered electricity supply round the clock at Rs11 per unit, which was much cheaper than the cost of power being consumed right now.

Besides, the industrial estate may have its own facility to import gas – liquefied natural gas – for mega power houses.

Published in The Express Tribune, January 3rd, 2017.

 

[Indx TechStyle]

Correct data on population is also needed and will be available at the end of this year, census is to kick off on March 15 in Sindh.

That's something I'm too waitin for.

 

[Neo]

Russia to set up 60 LPG AirMix plants in different areas in Pakistan

ISLAMABAD (Dunya News) – Russia is all set to install as many as 60 Liquid Petroleum Gas (LPG) AirMix plants in various areas of Pakistan.

Keeping in view increasing demand of energy, 24 LPG plants would be set up in Balochistan whereas 36 will be divided in Murree, Gilgit Baltistan and Azad Kashmir.

Experts said that the LPG AirMix plants would assist in sorting out the deficiency of the gas in the country.
http://dunyanews.tv/en/Business/367926-Russia-to-set-up-60-LPG-AirMix-plants-in-different

 

[LETHALFORCE]

http://www.news18.com/news/world/ru...china-pakistan-economic-corridor-1324977.html

Russia Rejects Reports of Involvement in China Pakistan Economic


Sent from my iPhone using Tapatalk

 

[Neo]

The economics of CPEC
ISHRAT HUSAIN

The writer is a public policy fellow at the Woodrow Wilson Centre, Washington, D.C.

IN a country where negativity and cynicism reign supreme, critics and detractors of all kinds are revered, and emotional outbursts and fabricated stories dominate the air waves and social media, it is difficult to present a dispassionate analysis of national issues.

Since China announced the China Pakistan Economic Corridor (CPEC), more time and energy has been spent in finding faults, poking holes and raising doubts based on speculation and conjecture. Had this investment been announced in another developing country, the national reaction would be: how do we plan to ensure maximisation of benefits to the economy? What are the weaknesses and deficiencies in the existing set-up we need to overcome? But this type of thinking is not in our DNA. We are either in a mood for celebration and self-congratulations or outright condemnation and depiction of exaggerated pitfalls.

There are three types of reservations against CPEC. First, those who believe that this whole endeavour is designed to benefit Punjab to the neglect of the three smaller provinces. Fanning parochial and ethnic prejudices, doubts are created about the narrow impact of these projects. Second, that the country would be saddled with costly external loans and outflows forcing Pakistan to go for another bailout. Frightening numbers such as totals of $110 billion are floating around. Third, some Baloch youth believe that they would become a minority in their own province. Mistrust and not perceived economic gains underlies such anxiety.

The government has not helped matters as it has not placed all the data and information about capital structure, detailed sources of financing, project sponsors etc pertaining to CPEC, in the public domain.

There are three types of reservations against CPEC. How can we address them?
This article, to allay some of the reservations, proposes that the Planning Commission and PIDE use the well-established framework of cost-benefit analysis to evaluate and monitor the net benefits of CPEC projects. Benefits can be of three kinds: (a) direct, measured by incremental contribution to gross value added in energy and infrastructure. Assuming energy elasticity of greater than one, a two per cent growth in energy production and usage would increase GDP by more than 2pc from the current level (b) indirect, measured by the multiplier effect of activities resulting from the direct demand of goods and services and (c) induced effects or externalities: eg bringing in roads and electricity may make some economic activities feasible and reduce outmigration of skilled labour from those areas. Costs can be of four types: (a) direct costs associated with investment in electricity generation , transmission and distribution or construction of roads; (b) indirect costs: large scale investment projects create scarcity premiums and domestic prices of some goods and services are bid up. These premiums get reduced when competition sets in; (c) unavoidable incremental costs: in the absence of the required amount of domestic supplies of quality and specifications, imports have to make up the shortfall; and (d) avoidable incremental costs: proper planning, coordination and active management can substitute high-cost inputs by low-cost inputs keeping quality intact.

Net benefits are thus estimated as the difference between the discounted flow of aggregated benefits and the discounted flow of all types of costs over the given time horizon. This calculation is not straightforward and is beset with many conceptual, empirical and measurement difficulties. The most problematic area is the aggregation of easily quantifiable direct benefits or costs with estimated indirect and induced benefits and costs. The latter are sensitive to the assumptions on which they are based. Economists, by setting up monitoring experiments, discover new data that helps in fine-tuning and refining the original estimates. The outcomes therefore depend upon minimisation of avoidable costs and expansion of induced benefits thus enlarging the quantum of net benefits.

The avoidable costs phenomenon can be illustrated with the help of two examples. If the Chinese managers, skilled and technical staff continue to be deployed throughout the duration of the project, the unit cost of labour after taking into account the expatriate wage premium, security, housing and mobility expenses would be relatively much higher compared to a situation where preponderantly Pakistanis were employed. If the government makes advance plans for these positions to be transferred to Pakistanis over a staggered period through training, on the job apprenticeship, attachments and under study assignments supervised by Chinese trainers, cost savings would be substantial and net benefits much larger. This requires coordination, target setting, monitoring and outsourcing to vocational and technical training institutes, private providers and the provincial governments.

Similarly, it is guesstimated that at least 100,000 additional trucks would be needed to transport construction materials, movement of export-import trade and increased volume of goods. If investment in the sub sector is not carried out well ahead of the CPEC projects’ peak load demand, the prices of trucking would escalate, putting Pakistani exports at a competitive disadvantage. The cost matrix of CPEC projects would also move upwards thus increasing the indirect costs. However, if Pakistani truck manufacturers are provided ballpark figures they can invest in expansion of existing capacity in tandem with the suppliers of parts and components. Indirect benefits would increase through creation of new jobs in the industry and efficiency gains from the economies of scale.

On the benefit side, it must be ensured that the most dynamic and enduring benefits from CPEC accrue to the people living in the deprived districts of Balochistan and southern KP. The opening up and integration of these districts with the unified national market of goods and services would make their fisheries, mining, livestock, horticulture and other activities economically feasible, creating incomes and jobs and helping lift them out of poverty. Roads and electricity are precursors for broad-based development as they minimise post harvest losses, waste and spoilage of perishable agriculture commodities, reduce the cost of delivery to market towns, and confer purchasing power in the hands of farmers who then use it to buy consumer goods, generating a second round of economic activities in these districts

By playing a more active role in maximising the benefits to the people of deprived districts and containing avoidable costs, the government would be able to allay a lot of misapprehensions and doubts.

The writer is a public policy fellow at the Woodrow Wilson Centre, Washington, D.C.

Published in Dawn, January 3rd, 2017

 

[Indx TechStyle]

Birth of another dependency

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.

Examine: CPEC: The devil is not in the details

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.

 

[Butter Chicken]

Paki media about CPEC loans

 

[Mikesingh]

@Neo All said and done, can you tell us how the acute water situation in Gwadar is going to be sorted out? Any projects in the pipeline to augment water supply?

 

[IndianHawk]

Forbes
China Wants Russia To Calm India And Save CPEC

Panos Mourdoukoutas ,

CONTRIBUTOR

I cover global markets, business and investment strategy

(Photo credit should read ASIF HASSAN/AFP/Getty Images)

China is eager to see Russia join The China-Pakistan Economic Corridor (CPEC) project, according to a recently published article in Globaltimes, though the Russian embassy in Islamabad denied the reports.

“Russia’s participation in the CPEC, including the use of the Gwadar Port, could give a boost to Sino-Russian cooperation and be a demonstration project of One Belt and One Road (OBOR) that will enhance future multinational cooperation,” writes Li Xing.

That’s certainly true. A sound infrastructure isa pre-condition for the economic integration of neighboring countries. But the real reason behind China’s eagerness to bring China to CPEC project is elsewhere in my opinion: use Russia to appease India, which claims control of a crucial part of CPEC.

regions claimed by India. That makes it a bumpy road, to say the least — Pakistan and India continue to fight for control of these regions.
That’s why China needs to make peace with India.

So far, China has done very little to appease India. In fact, it has done quite the opposite: repeatedly blocking India’s efforts to join the Nuclear Supplier Group (NSG).

And it has sided openly with Pakistan in the India-Pakistan Kashmir impasse, as evidenced by statements by China’s senior officials on the sidelines of the ongoing 71st session of United Nations General Assembly in New York.

Perhaps, Russia could broker a peace accord between India and Pakistan, and save CPEC. That would be good news for the markets in the region.

 

[Butter Chicken]

It passes through PoK.There is no peace.

 

[square]

gwader is s navy base , nothing to do with economics...

 

[DingDong]

Forbes
China Wants Russia To Calm India And Save CPEC

Panos Mourdoukoutas ,

CONTRIBUTOR

I cover global markets, business and investment strategy

(Photo credit should read ASIF HASSAN/AFP/Getty Images)

China is eager to see Russia join The China-Pakistan Economic Corridor (CPEC) project, according to a recently published article in Globaltimes, though the Russian embassy in Islamabad denied the reports.

“Russia’s participation in the CPEC, including the use of the Gwadar Port, could give a boost to Sino-Russian cooperation and be a demonstration project of One Belt and One Road (OBOR) that will enhance future multinational cooperation,” writes Li Xing.

That’s certainly true. A sound infrastructure isa pre-condition for the economic integration of neighboring countries. But the real reason behind China’s eagerness to bring China to CPEC project is elsewhere in my opinion: use Russia to appease India, which claims control of a crucial part of CPEC.

regions claimed by India. That makes it a bumpy road, to say the least — Pakistan and India continue to fight for control of these regions.
That’s why China needs to make peace with India.

So far, China has done very little to appease India. In fact, it has done quite the opposite: repeatedly blocking India’s efforts to join the Nuclear Supplier Group (NSG).

And it has sided openly with Pakistan in the India-Pakistan Kashmir impasse, as evidenced by statements by China’s senior officials on the sidelines of the ongoing 71st session of United Nations General Assembly in New York.

Perhaps, Russia could broker a peace accord between India and Pakistan, and save CPEC. That would be good news for the markets in the region.

Russia should not meddle in regional issues, joining the CPEC is equivalent to siding with India's enemies. CPEC threatens India's territorial integrity, it must be turned into dust.

 

[Mikesingh]

gwader is s navy base , nothing to do with economics...

Spot on!

This isn't a purely economic project which we are led to believe it is. The CPEC is a logistics life line from Kashgar in Xinjiang to Gwadar which is the future Chinese naval base being set up there which would have four geostrategic advantages:

1. Dominate the Strait of Hormuz.

2. Dominate the Arabian Sea and the Indian Ocean Region.

3. A Chinese naval base along with the Pak Navy at Gwadar will be a guarantee against any Indian strike on Gwadar and other Pakistani military assets there in war due to the presence of the Chinese navy.

4. Lateral movement of Pakistan Army reserve field formations from one theater to another would become much faster during war, thus reducing reaction time considerably.

That's the prime reason why the Pakistani Army is interested in getting the CPEC moving and completed as soon as possible. As a first step, Gwadar Port has already been handed over lock stock and barrel to the Chinese on an extendable 40 year lease.

 

[square]

Russia should not meddle in regional issues, joining the CPEC is equivalent to siding with India's enemies. CPEC threatens India's territorial integrity, it must be turned into dust.

joining cpec in pure term is selling out on loan.......we need someone to checkin after pakistan became a chinese colony...

 

[IndianHawk]

Russia should not meddle in regional issues, joining the CPEC is equivalent to siding with India's enemies. CPEC threatens India's territorial integrity, it must be turned into dust.

Russian are on a high horse now. They are severely mis-interpreting their achievements in Ukraine and Syria.

They need to be reigned in.

Spot on!

This isn't a purely economic project which we are led to believe it is. The CPEC is a logistics life line from Kashgar in Xinjiang to Gwadar which is the future Chinese naval base being set up there which would have four geostrategic advantages:

1. Dominate the Strait of Hormuz.

2. Dominate the Arabian Sea and the Indian Ocean Region.

3. A Chinese naval base along with the Pak Navy at Gwadar will be a guarantee against any Indian strike on Gwadar and other Pakistani military assets there in war due to the presence of the Chinese navy.

4. Lateral movement of Pakistan Army reserve field formations from one theater to another would become much faster during war, thus reducing reaction time considerably.

That's the prime reason why the Pakistani Army is interested in getting the CPEC moving and completed as soon as possible. As a first step, Gwadar Port has already been handed over lock stock and barrel to the Chinese on an extendable 40 year lease.

That is precisely why logistics agreement with USA was important. In time of war or extreme tension. Some US forces could dock at indian bases and ports thus. This is a checkmate to sino-pak design.

We need to invest heavily into proxy force in gwadar region . That port should be attacked by non state actors.:biggrin2:

We must also declare gwadar port as prime target in case of conflict that will make port operations much too costly.

 

[IndianHawk]

There is no such economic model that guarantees economic development merely through a trade route. The increase in GDP from 0.5% to 1% is expected, but it also depends on the terms and conditions of the trade agreement.

In Pakistan, we are also facing the danger that our government might act in order to be true to its lies.

Pakistan remained among the bottom 20 in the list of 138 countries ranked on the influential Global Competitiveness Index of the World Economic Forum and is at the bottom among South Asian economies, trailing behind even Nepal and Bangladesh.
http://nation.com.pk/blogs/10-Jan-2017/what-s-wrong-with-cpec

paki accepting CPEC will add only 1% to the GDP that too if it is successful.

Also paki govt lies first then acts to make it true

 

[hriday]

must watch hahsa...............................

 

[Mikesingh]

I don't know why these Porks atre getting orgasms on Chinese investment of $46 billion. Compare this to our own investment of $100 billion on the
Delhi-Mumbai Industrial Corridor!

Besides DMIC, the government plans the development of Amritsar-Kolkata Industrial Corridor (AKIC), Bengaluru- Mumbai Economic Corridor (BMEC), Chennai-Bengaluru Industrial Corridor (CBIC), Visakhapatnam-Chennai Industrial Corridor (VCIC) and Chennai-Kolkata Industrial Corridor.

The investments on these corridors would amount to a whopping $400 billion!! That's far more than the entire GDP of Porkistan!!