OBOR and CPEC Developments

Discussion in 'China' started by Raja.pakistani, Aug 30, 2015.

  1. Butter Chicken

    Butter Chicken Senior Member Senior Member

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    Chinese-built Neelum-Jhelum unit-1 no more functional

    ISLAMABAD: The Rs503 billion Neelum-Jhelum project of 969MW has sustained another blow as its unit-1of 242.25MW has also started leaking oil and the management has halted its operation on May 31. The unit-4 is already closed down after its rotor was damaged.(Pakistan has already started fining Chinese companies for shoddy work and delays)

    According to the management of the project, the unit-4 will take at least four months to come on stream, but officials at the site insisted claiming the unit-4 will take 8-9 months to start generating electricity as it has been dismantled by Chinese experts from Herbin city who will get it repaired.

    Now, under the new scenario, the unit-1 of the project has also been closed down on May 31 -- the last day of the PML-N government on account of oil leaking from its seal. The oil was leaking for more than one week, but the management decided to keep the unit-1 operational till May 31 to avoid the wrath from the top man of the PML-N government, putting aside the fact that the unit-1 may sustain more damage if it was run till May 31. However, on the last day of the government, the management has closed down the unit-1. Officials privy to the development said that this unit may also take 1-2 months to repair the seal to avoid the oil leakage. This means that the project would not be able to inject half of its electricity into the system for certain period.

    The Wapda press release issued on Wednesday said that unit-2 has also been successfully synchronised and has started generating 180MW and with due course of time, the unit-2 will attain its maximum generation of 242.25MW. It also mentioned in the press release that Unit-3 of the project has started generating 242.25MW of electricity, but the snapshot of electricity record of today (Thursday) arranged from NPCC telling a different story that Neelum-Jhelum project is contributing only 242MW of electricity.

    This means that only one unit is operational, which is unit-3. This means that unit-1 has hit snags and is no more functional. The NPCC record also does not mention the electricity in the system from the unit-2 which has been synchronised and generating 180MW as was mentioned in the Wapda press release issued on Wednesday. The officials said that so far Neelum-Jhelum project has injected the electricity in the system of worth Rs01 billion.
     
  2. Bhumihar

    Bhumihar Jako Rakhe Saiyan Mar Sake Na Koi Senior Member

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  3. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    Myanmar reviews $9bn China-backed port project on cost concerns

    Officials in the country fear a default could force the venture into Chinese hands

    June 04, 2018 11:57 JST
    [​IMG]A Chinese lead port project in Kyaukpyu, Myanmar (Photo by Yuichi Nitta)
    YANGON (Financial Times) -- Myanmar’s government is reviewing a $9bn deepwater port project backed by China over concerns it is too expensive and could ultimately fall under Beijing’s control if Myanmar were to default on its debt.

    Two people with direct knowledge of the discussions within Aung San Suu Kyi’s government said that economic officials were looking for ways to negotiate down costs for the planned port at Kyaukpyu in Myanmar’s western Rakhine state.

    The port is set to give China’s south-west a direct trading corridor to the Indian Ocean via Myanmar, allowing companies to avoid the Malacca Straits if needed. As such, it is part of Beijing’s $1tn push to shore up transport and energy supply routes across Eurasia under its so-called Belt and Road Initiative. The port at Kyaukpyu will be one of the biggest infrastructure projects in Myanmar’s history.


    The project “should be welcomed as a useful addition to the country’s stock of infrastructure,” said Sean Turnell, an Australian academic who advises Myanmar’s government on economic policy, However, he added: “It would seem at first glance also to be a project that comes at excessive financial cost and, with this, poses grave risks for Myanmar it may require the country to take on to participate.”

    The current estimated costs of the port, which sits at the terminus of recently built oil and gas pipelines that run to southern China’s Yunnan province, are about $7.5bn, with another $2bn envisaged for an adjoining economic zone.

    The project is due to be built by a consortium led by Citic Group, one of China’s largest and most powerful state-backed conglomerates. Citic won a tender in 2015, with the Chinese side taking 70 per cent and Myanmar’s government and local companies taking 30 per cent.

    “A port of [that] scale that could be usefully employed by Myanmar, under any plausible scenario, should cost just a fraction of this,” said Mr Turnell, an economics adviser who is on secondment from Australia’s Macquarie University as a close adviser to Myanmar’s government. He noted that his comments were his “personal assessment” but also confirmed that officials were looking at ways to negotiate the project’s cost down.

    A second foreign official in Myanmar briefed on the discussions inside the government was blunter, saying the project was giving policymakers “nightmares”, amid fears the port could come under Chinese control if Myanmar failed to service its debt.

    https://asia.nikkei.com/Politics/In...bn-China-backed-port-project-on-cost-concerns
     
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  4. Butter Chicken

    Butter Chicken Senior Member Senior Member

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    Eid for the Chinese, say manufacturers

    KARACHI: Manufacturers have expressed concern over the massive influx of Chinese products in local markets even before the completion of the China-Pakistan Economic Corridor (CPEC).

    “It is really Eid for Chinese producers every year while the local industry suffers,” stakeholders said. They cite low prices of Chinese goods which hold a lot of attraction for many Pakistani consumers. However, the consumers are also aware of the lack of quality and durability of Chinese goods, they add.

    Many manufacturers that Dawn spoke with question the future viability of local industries as the share of Chinese goods will increase once CPEC reaches its apogee.

    Chairman Council of All Pakistan Textile Mills Association (CAPTA), Zubair Motiwalla said the share of China in suiting, which was 10 per cent some five years ago, now stands at 25-30pc.

    “I think China’s share in suiting will swell to 50-60pc after completion of CPEC,” he said. He feared for the future survival of his industry under such circumstances as the Chinese have “a different style of working” and massive economies of scale for running industries.

    A vast price difference exists between Chinese and Pakistani suiting. Giving an example, Mr Zubair said full suiting is available at Rs700 while shirt piece costs Rs300 while Pakistani products of the same type are available for at least Rs1,000-1,200.

    He said shalwar kameez clothes are also arriving from China, holding 5-10pc market share as the local industry is trying hard to compete.

    “I think China now has 25-30pc market share in readymade children’s garments,” he said.
     
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  5. sorcerer

    sorcerer Senior Member Veteran Member Senior Member

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    Chinese engineer found dead in China embassy in Pakistan
    A Chinese engineer working in Pakistan was found dead in the premises of the Chinese embassy here, apparently 12 days after his death when the officials from the mission checked his room following a foul smell, media reports said on Monday.

    The Chinese national identified as Yan Peng (35) was working at the mission as a construction engineer. He was given a room at the embassy to stay as he was not involved in any construction work currently, local media reports said, citing police.

    On June 3, a stench began emanating from the room. The engineer’s body was found in the room when it was opened, police said.

    No torture marks
    There were no visible marks of torture on the body, police said, adding the Chinese national had apparently died around 12 days ago.

    Emergency services have shifted the body to a hospital for further examination.

    Thousands of Chinese workers are employed in Pakistan, working on a host of projects connected with the $50-billion China-Pakistan Economic Corridor (CPEC).

    The Pakistan Army has raised a special force consisting of thousands of personnel to provide security to Chinese personnel working in Pakistan.

    Not an isolated incident
    In February, a Chinese national, working at a non-CPEC related private shipping firm in Karachi, was shot dead in broad daylight in the city.

    Last year, two Chinese nationals, who were believed to be Christian missionaries, were abducted from Quetta and allegedly killed by the Islamic State terror group, which sent shock waves in China.

    http://www.thehindu.com/news/intern...china-embassy-in-pakistan/article24079871.ece
     
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  6. Butter Chicken

    Butter Chicken Senior Member Senior Member

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    Hambantota project: Chinese firm holds back US$ 585m

    The Chinese company involved in the Hambantota Port project has put on hold the last tranche of US$ 585 million to Sri Lanka over a dispute involving infrastructure facilities.

    The China Merchants Port Holdings Company (CMPort) Ltd is insisting that in accordance with the existing Concession Agreement, an artificial entertainment zone on reclaimed land is among the issues it wants resolved.

    However, Sri Lanka Ports Authority (SLPA) Chairman Parakrama Dissanayake said the port area had been gazetted (under the SLPA Act) and would only be used for marine and port related activities. No land would be used for entertainment or tourism purposes, he said.
    Until the issues are resolved, the money due to Sri Lanka in US dollars will lie at the CMPort’s Standard Charted Bank account, a source said yesterday. “It will only be transferred to the Central Bank after the issues in dispute are resolved.”

    Ports Minister Mahinda Samarasinghe, when contacted for details of the disbursement of the last tranche, said he was unable to comment as he was in hospital.

    SLPA Chairman Dissanayake said the money would be transferred to the SLPA account and transferred to Central Bank after meeting certain conditions in the agreement.

    He noted that the whole Hambantota Port area had been gazetted under the SLPA Act and it would be utilised for marine and port related activities and no land would be used for entertainment or tourism purposes.

    Declining to comment or clarify on the commitments or obligations relating to infrastructure that has to be fulfilled by the Government, he said that no artificial land in the port area would be earmarked for entertainment or tourism purposes.

    He said no permission would be given to any party to set up casinos or introduce tourism-related activities as the whole area has been declared for port and marine-related activities.

    Several rounds of talks were held between top Finance Ministry officials, relevant ministries, state agencies and CMPort representatives to arrive at an amicable settlement on conditions that are to be fulfilled by all parties to the agreement recently without much progress, a senior official involved in the discussions said.

    He disclosed that according to the concession agreement, “The parties agreed the Company shall not be required to pay (by itself or through its affiliates) Tranche 3 of the consideration under the Concession Agreement until all of the original conditions precedent have been fulfilled or waived by parties signatories to the agreement”.


    Therefore, he pointed out, it is essential to arrive at a settlement on the fulfillment of conditions through consultation, compromise and consensus without dragging the issues as the country could not afford to lose much needed foreign exchange.


    “Objections have been raised against the unusual structure of the deal where infrastructure including breakwater, utilities and the islands are handed over to a third-party operator instead of the port agency as landlord only leasing out terminal and revenue generating sections, as is the international practice’, he added.


    Once the land reclamation has been completed, the President would have to officially include the Port premises in the Sri Lankan territory and vest it in the relevant local authority making a declaration in special gazette notification, a senior legal official said.
     
  7. Mikesingh

    Mikesingh Senior Member Senior Member

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    Lol! The shit has finally started hitting the fan!! :pound::rofl:
     
  8. aystle

    aystle Regular Member

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    'CPEC is not a gift': Professor Jia Yu at the CPEC 2018 Summit

    Pakistan should not take CPEC for granted, writes Dr. Jia Yu. Both public and private sectors must take ownership of the opportunities.

    THE economic relations between the two countries have been phenomena
    especially since the turn of the century. Early economic cooperation was based on political and security interests, like Karakoram Highway, nuclear capability, arms trade etc. Also, it was focussed on energy and mining, but there is now a need for diversification. Pakistan has to take advantage of China’s rise on the global scene. There is a tendency towards having even better economic relations based on market forces and there is a lot of under-exploited potential.

    When it comes to win-win cooperation, of course there is a lot at stake for both countries. Pakistan’s interests lie in promoting growth, private sector investment, employment, exports, technology and transfer of skills as well as in the relocation of Chinese firms. China’s interests lie in overseas production bases, new export markets, energy cooperation, and its need for production capacity relocation.

    A successful execution of CPEC will ensure economic progress and stability for both the countries, particularly along the border region.

    The two countries signed the FTA in 2006 which came in to effect a year later. The FTAs play a major role in the general tendency of increasing trade. Surprisingly, the trade has been relatively low compared to the other neighbours (India, Vietnam, Philippines etc.). And there is a large and widening trade imbalance that needs to be worked on.

    There has been a considerable increase in FDI since 2014 which is a positive sign for both China and Pakistan. The main FDI sectors by priority are: power, construction, financial services, and communication. There is, however, very little FDI in the light manufacturing sector.

    The Belt and Road Initiative (BRI) is a $900 billion investment, with finance channels targeting green development. It connects more than 60 countries, 60pc of the global population, 30pc of global GDP, and 35pc of global trade.

    CPEC, a central link of BRI, cuts 10,000 miles of shipping by sea, and connects ports from Shanghai to Africa and Europe through Gwadar.

    PAKISTAN AND CPEC
    If things work out smoothly, Pakistan could use the FDI in its power and transport infrastructure and then in the manufacturing sector with the experience of leveraging SEZs to unlock this trio’s potential for rapid gains in job-rich industrialisation. This can be done without unrealistic pre-requirements as the work to lay the foundations for industrialisation has already begun.

    The potentials are outlined below along with policy options needed to convert them into actions. At regional level, Pakistan has been growing steadily in terms of GDP per capita since 2010, according to the World Bank. Investors are very keen to a growing economy. Consistent growth of purchasing power (GDP per capita) really matters for domestic consumption; therefore the growth rate must be maintained to catch up with competitors.

    Pakistan is one of the world’s largest reservoirs of human capital and has a tremendous potential consumer base. In 2016, the country was home to 193,203,476 people, being the world’s 6th most populous country. World Economic Forum estimates that it will be among the top five populous countries in the world by 2060.

    However, a large population is necessary but not sufficient to attract investors. The population has to be equipped with adequate skills to meet industrialisation needs. Effort is also needed to attract global buyers.

    Thirdly, China and Pakistan have long hailed each other as “all-weather friends”, or “iron brothers” as close as “lips and teeth” in the words of The Economist. There is already solid trust between the two countries, but the Pakistani officials need to visit China more often to convince the private investors for investment opportunities in Pakistan.

    The CPEC will improve road, air, sea, and energy infrastructure. It will ensure land, sea and air security. It will enhance trade and investment facilitation and will establish free trade areas that meet high standards, maintain closer economic ties, and deepen political trust. Also, it will enhance cultural exchanges and promote mutual understanding, peace, and friendship between the people of the two countries.

    Having said that, the CPEC should not be considered just a ‘gift’ from China, but the Pakistani government should also establish an FDI Advisory Board that shall promote the new image of the country. This includes visiting China more often and ensuring that investors understand the opportunities and benefits available under the CPEC.

    Besides, according to the State Bank of Pakistan in November 2017, the country received net FDI worth $207 million out of which $206 million came from China. Potential investors pay significant attention to first movers, other Chinese investors may follow and eventually stay in Pakistan if the government helps the pioneers to be successful.

    In terms of binding constraints, a study case of Malaysia estimates that FDI can effectively contribute to growth if it is at least 3.14pc of GDP. Pakistan should be able to compete. This requires overcoming the binding constraints by addressing security issues and risks, hard infrastructure challenges, especially SEZ-specific constraints like energy, roads to SEZs etc. Soft infrastructure challenges include corruption, rule of the law, coordination among institutions, inadequate capacity and cultural biases. Absorption capacity can be adjusted by setting yearly realistic targets of FDI amount.

    There are six steps to identify the right industries, as narrated by Prof. Justin Lin. They include identifying countries with consistent growth, with GDP per capita three times as Pakistan’s or was at the same level as Pakistan 30 years ago.

    Next comes investigating the existing private investment in those target industries and encourage its development by leasing the market regulations. Attracting global investors into the target industries which lack existing domestic private investment is the third step, followed by paying attention to new enterprises and supporting innovation in the target industries.

    Establishing and developing SEZs to eliminate entering barriers, attracting foreign investment, and encouraging industrial cluster. And, finally, providing policy incentives for the first movers, including tax reduction, foreign exchange access, etc.

    THE WAY FORWARD
    Development can start from ‘low-hanging fruit’ through SEZs. The government should attract first movers to invest and help the pioneers succeed.

    CPEC should not be taken for granted. Proactive and systematic approach is needed for attracting investors, together with strong market factors.

    Despite long-term and solid trust at the government level, more mutual dialogues and exchanges need to be enhanced in the private sector. Let the peoples get to understand each other.

    CPEC and SEZs are open for all investors, including those from other countries beyond China.

    The writer is a professor at the Institute of New Structural Economics (INSE), Peking University, China.

    https://www.dawn.com/news/1409721
     
  9. Mikesingh

    Mikesingh Senior Member Senior Member

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    I thought that was obvious? The CPEC is not a gift from China but a gift to the Chinese by their concubine, Pakistan! The Chinese are laughing all the way to the bank and the Indian Ocean! :tongue:
     
  10. Butter Chicken

    Butter Chicken Senior Member Senior Member

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    Circular debt and late-payments: ‘Chinese investors may withdraw from Pak power sector’

    Amid the ballooning power sector’s circular debt, private sector investors have expressed the apprehension that Chinese investors may withdraw their investment from the sector due to late payment of their dues.

    Mansoor said that due to delay in payments to the bank, they are paying extra mark up and the government is not ready to pay it. Chinese investors also have reservations over late payment interest and they may withdraw their investment, he said.

    Due to delay in payments to the bank, they are paying extra mark up and the government is not ready to pay it. Chinese investors also have reservation over late payment interest.


    HUBCO CEO further said that America has changed its policy regarding coal power projects and China is the only country that is providing help for the coal projects.

    He said that the average price of electricity in Pakistan is Rs 13 per unit which is only Rs 7 in India
    , he added.

    there is presence of oil mafia and the country is being kept on the ventilator.

    He said that the power sector debt is more than Rs 1000 billion [​IMG]

    “if we didn’t change the practice the country will be in big crises”.
     
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  11. HariPrasad-1

    HariPrasad-1 Senior Member Senior Member

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    We did that at the time of kargil conflict and your Navy chief resigned subsequently. do you know that?
     
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  12. john70

    john70 Regular Member

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    CPEC – an unfair deal for common Pakistanis?






    This will be my first visit to Pakistan, but I feel as if I am going to visit the home of my own brother”. With these words the Chinese President, Xi Jinping, described his first state visit to Islamabad on the eve of formalizing the historic agreement of the multibillion-dollar project, designated as the China Pakistan Economic Corridor (CPEC), in April 2015. Under this grand strategy, China began to finance numerous energy, transport and infrastructural development projects, advertised as being essential to improving Pakistan’s economic progress, social growth and regional connectivity.

    Now, after more than three years since the CPEC has officially commenced, it is high time for an assessment on how Pakistan and China have managed so far to advance this colossal, fifteen-year project, valued currently at $62 billion. This article will analyse whether Beijing indeed treats its ‘all-weather friend’ as a brother or more like a subordinate. It will evaluate the progress of the ongoing projects and compare the profits and losses of the two ‘shareholders’. This article will also discuss the benefits derived, or lack thereof, from this venture, using the perspective of the common people, emphasizing the fact that undoubtedly the CPEC will bring money to Pakistan, yet it is unclear whether it will actually positively impact the standard of life of the local population. Despite being fully aware of the legal issues surrounding the building of this corridor with regard to the disputed territories of Gilgit-Baltistan and Pakistan Administered Jammu & Kashmir, ongoing terrorism in the Federally Administered Tribal Areas (FATA) and an insurgency in Balochistan, this article will specifically focus only on the economic implications of the CPEC in order to explain in financial terms how it will influence the lives of common Pakistani people.

    In order to achieve that, the article will thoroughly examine the actual job distribution and control over the CPEC projects, the levels of consensus between the two parties, and the interest rates imposed on Pakistan, by using few of the current energy projects as case studies. The Chinese cultural invasion will be further reviewed and forecasts related to its long-term impact will be generated. The article will conclude with calling for greater transparency and public awareness in regard to the implementation of the projects, invoking the greater involvement of the population into the decision-making process and effective accomplishment of the action plan.



    CPEC in numbers
    In 2014, China initiated a massive economic development project called One Belt One Road (OBOR). This initiative involves China spending between $4-8 trillion during the next several decades on various projects in nearly 70 countries. The ultimate objective is to recreate the old Silk Road, which connected China with the Middle East, Africa, and Europe through Central and South Asia. When completed, this new Silk Road initiative will link China to Europe and Africa using roads, railways, airports, pipelines, telecommunication networks, fibre-optic connections, seaports and other types of utility grids. According to China, the Belt and Road Initiative (BRI) tackles an infrastructural gap and therefore aims to accelerate the economic growth of various countries around the world, by simultaneously developing major industrial, agriculture, and energy centres in the participating countries, yet all linked to Chinese institutions.

    By the time of its estimated completion in 2050, OBOR will stretch from the edge of East Asia all the way to East Africa and Central Europe, and it will impact 62% of the world’s population and 40% of its economic output. Its ultimate strategy is of becoming the guardian of a new platform for social and cultural connectivity, international trade, financial cooperation and political dominion.

    One of the most important countries in this initiative is Pakistan, since currently the crown jewel of Beijing’s ‘One Belt, One Road’ is the China Pakistan Economic Corridor. CPEC is a 3,218 km-long route (2000 miles), to be built over the next several years, consisting of highways, railways and pipelines, which span from Gwadar port in Pakistan to Kashgar in the Xinjiang Uygur Autonomous Region of China. The agreement was signed on 20 April 2015; the actual estimated cost of the project is expected to be $75 billion, out of which $45 billion shall be spent to support a vision to make the corridor operational by 2030 and the remaining funds shall be invested on energy generation and infrastructural development. Projects have been categorised under four phases: ‘Early Harvest’ (priority) - to be completed by 2018; short-term projects, or actively promoted projects - to be completed by 2020–2023; medium-term ones by 2025; and long-term projects to be completed by 2030.

    With regard to infrastructure, according to the project’s action plan, a 1,100 kilometre long motorway will be constructed between the cities of Karachi and Peshawar, while the Karakoram Highway between Rawalpindi and the Chinese border will be further reconstructed. The Karachi-Lahore-Peshawar main railway line (1,872 km) will also be entirely overhauled. Numerous roads will be established in the province of Khyber Pakhtunkhwa (KPK), which will eventually connect it with Balochistan. A network of pipelines to transport liquefied natural gas and oil will also be laid as part of the project, including a $2.5 billion pipeline between Gwadar and Nawabshah to eventually transport gas from Iran. In addition, Pakistan's railway network will be extended to connect it with China's Southern Xinjiang province. According to the Government of Pakistan’s official website, all of these projects will be financed through Chinese Government Concessional Loan (GCL) and among the sponsoring companies will be China State Construction Engineering Corporation and China Communications Construction Company Ltd, while the rest of the work will be awarded through open bidding of Engineering, Procurement and Construction contracts.

    In relation to energy projects, around $30 billion worth of energy infrastructure will be constructed by private consortia and up to 15,000 MW of energy generating capacity will be brought in order to help alleviate Pakistan's chronic energy shortages, which regularly amount to over 4,500 MW. While demand during the peak summer months is around 24,000 MW, power generation is less than 1,600 MW, with some regions suffering from 20–22 hours of power cuts every day. Electricity from these projects will primarily be generated from fossil fuels, though hydroelectric and wind-power projects are also included, as well is the construction of one solar farm. Since most of the energy project contracts were ‘won’ by Chinese companies that have taken over the engineering, procurement and construction of them, the necessary power equipment will be imported from China, for which Pakistan will have to pay duly. According to the Pakistani Bureau of Statistics, “…in the first five months of this fiscal year, the import of power generation machinery stood at US$1.4 billion”.

    CPEC also includes a number of initiatives in Pakistan that are not only economic in nature, but also have cultural and civic implications. For instance, the Safe Cities Project is such an initiative, which is related to the security and surveillance of Pakistani cities. The objective is to train police, military personnel, city administration and other related departments to manage the city effectively, especially with regard to the threat of terrorism. Nevertheless, what is important to mention is that the initiative was primarily designed to safeguard Chinese workers from Pakistani terrorists, hence exposing the one-sidedness and dissymmetry of the initiative.

    Therefore, on paper, it might be explicitly and profoundly explained how the CPEC is being constructed in order to fulfil the needs and wishes of the Pakistani population, yet the following section will portray how the reality greatly differs from what is being said or written. As time will show, Pakistan is at risk of carrying the CPEC on its shoulders as the burden of Atlas - bearing the heavy weight of this shrewd Chinese masterplan, while Beijing devours the lush fruits of its venture.

    [​IMG]

    Credits: Based on Planning Commission of Pakistan. Redrawn by Robert Cronan/Lucidity Information Design, LLC for USIP
    Financial Implications

    Electric power projects constitute the largest share of the CPEC portfolio in terms of cost, since the country experiences its greatest deficiencies in this sector. However, Pakistan’s desperate pursuit of electricity exhibits the collective irrationality and precipitance of its Pakistani contractors, since its electric power shortfall might diminish in the upcoming years, yet it will be much more expensive compared to regional competitors. For example, the acknowledged tariff of the 1320 MW Port Qasim Coal Power Project ($0.0836/kWh) is higher than similar projects in Bangladesh involving Chinese sponsors, such as the 1224 MW Banshkahli Coal Power Project ($0.08259/kWh) and the 1320 MW Payra Coal Power Project ($0.083089/kWh). CPEC security surcharges added to the electricity bills of Pakistani consumers will make the new electric power even more expensive. Furthermore, there are major disparities considering the financing of those energy projects. First, many of them are funded by loans from China and are not actual investments, which could obstruct Pakistan’s ability to pay back. For example, until January 2017, the proportion of foreign direct investments (FDI) from China was only $750 million and the remaining $2.2 billion was in the form of loans. Additionally, the interest rates charged by the China Development Bank and the China EXIM Bank reveal that with an estimated debt-equity ratio of 80%-20%, and investments guaranteeing a 17% to 20% rate of return on their equity, China could recover its investment in less than 3 years, while ripping off Pakistan for at least the upcoming quarter of a century. Not only that, such hugely expensive electricity could paralyze Pakistan’s already fragile economy.

    The current scenario draws quite striking parallels with China’s involvement in Sri Lanka. In December 2017, Sri Lanka had to formally hand over its southern sea port of Hambantota to China on a 99-year lease, after being unable to repay its debt. Hence, the debt trap Sri Lanka has found itself should provide some useful lessons for Pakistan. First, CPEC might come at the expense of national sovereignty and independence if Islamabad does not carefully review the financial agreements it abides to; and second, the imposition of China’s terms and conditions could be hardly interpreted as a ‘win-win’ situation. The Gwadar Port deal vividly illustrates those claims, since the profits will be 91% in favour of China in the following 40 years.

    Given the above picture, it is possible to forecast the astronomical burden on Pakistan’s payment capacity in the coming years. The impact this debt-financed project will have on Pakistan has been discussed by various international and supranational bodies. In its recently concluded review of the project, the International Monetary Fund (IMF) has also warned Pakistan of the ‘looming CPEC bill’ that Islamabad will have to defray in the end. The IMF has expressed its concerns about the adverse implications of repayments of loans and profit repatriations to China, which could place the Pakistani economy in a lot of trouble than actually encouraging its development.

    In the initial year, the impact of the CPEC-related outflow was estimated at only 0.1% of GDP per annum by Pakistani authorities. Yet, according to the IMF, those repayments will peak after seven years, reaching between $3.5 billion and $4.5 billion in a single year. The IMF assessed that the CPEC-related outflow would reach 1.6% of GDP per annum by 2024. In addition, Pakistan had an external debt of $75.747 billion in the first quarter of 2017, which is expected to grow to $110 billion in the next four years according to Pakistani economists. All of that, coupled with the fact that Pakistan’s repayment capacity remains weak, due to lack of any vast increases in terms of exports and due to the volatility of the Pakistani Rupee against the US dollar, appears as an issue of great concern.



    Job Opportunities
    In such a heavily congested and poor country like Pakistan, the CPEC will certainly be evaluated in regards to any employment opportunities it could provide. Currently, the population of Pakistan is more than 200 million, with people in their 20-30s as a majority, which means a large working age populace. Therefore, for many of those young people, the CPEC might have appeared as a favourable possibility of finding a job.

    Both Pakistani and Chinese officials and media news outlets constantly give employment figures for different projects, yet hardly any of those numbers are substantiated by a formal governmental document. For example, Pakistani newspapers reported that the Suki-Kinari hydropower project in Khyber Pakhtunkhwa is expected to create more than 4,000 jobs, while the Sahiwal power plant, southwest of Lahore in Punjab province ‘hired 3,000 locals’. Port Qasim Coal Power project is reported to have created job opportunities for 5,000 Pakistanis, whereas the Sahiwal Coal Power Plant Project and Zonergy Solar Power Project - 3,000 jobs each. The KKH Phase II Havelian has been said to provide jobs to 2071 locals, while the Orange Line Metro Lahore - 956 people and Fiber Optic project - 580.

    Chinese Deputy Head of Mission Zhao Lijian, who was recently named as the focal person on CPEC power projects, said that around 60,000 Pakistanis are working on different Chinese projects in Pakistan. Similarly, Fawad Khalid Khan, a senior engineer working with the China National Electric Engineering Company as a deputy commercial manager in Pakistan, believes that at least 100,000 jobs will be created over the next few years under the power and infrastructure projects of CPEC alone. Additionally, Pakistani mainstream media stated that the construction of the 392km highway from Multan in Punjab to Sukkur in Sindh is expected to create some 9,800 local jobs.

    Nevertheless, none of these claims have been put on paper. Even ostensibly detailed reports of the CPEC actually provide no specific data on actual job figures, which is highly alarming considering the ongoing public resentment and suspicion regarding who is the de facto benefactor of the CPEC.

    Yet, the informational eclipse does not end here. There is scarcity of information on the types of jobs that will be created, what skills will be required, what their duration will be, which projects will be included and what will be the amount of the salaries. Currently, the rates of unemployment in Pakistan stand at 5,9%, which accounts for more than 3 and half million of the population. Therefore, even if those job prospects are taken at face value, they are still nowhere near to satisfy the overall demand.

    Considering the fear expressed by many Chinese citizens in regard to security, earlier highlighted by the Safe Cities Project, one could speculate that a big proportion of these jobs, in fact, will be in the security domain. Currently, the figures cited for Pakistani individuals employed in this sector range from 15,000 to 18,000 personnel, all hired to protect Chinese investments and citizens. The December 2017 disappearance of the Chinese engineer Pingzhi Liu, who was located at the Karot Hydropower Plant, justified the fears of Chinese officials for the necessity of more stringent surveillance and security. Shortly after the incidence, the Chinese Embassy warned all “Chinese-invested organisations and Chinese citizens to increase security awareness, strengthen internal precautions, reduce trips outside as much as possible, and avoid crowded public spaces”.

    What also must not be forgotten is that resulting from the China Pakistan Free Trade Agreement (FTA), many jobs have been moved from Pakistan to China, which further poses the question whether Beijing will replace those lost jobs. There are similar fears about the CPEC that it might lead to a loss of jobs because of the influx of cheaper Chinese goods that would drive Pakistani products out of the market. China is now the largest source of Pakistan’s imports, which stands at almost 30%. Many industry leaders have complained that the FTA has left them in a disadvantaged position against their Chinese competitors. Between 2012 and 2017, Pakistan’s trade deficit with China tripled, going from $4 billion to $12.7 billion. Various Pakistani business groups have complained that products in which Pakistan enjoys a competitive advantage are not covered by the Chinese side, which enjoys far wider access to Pakistan’s markets.



    Appropriation of Land
    Using the Suki Kinari Hydropower Project as a case study, another alarming issue surfaces. The Hydropower Station is being established in the region of Khyber Pakhtunkhwa and has an estimated cost of more than $1,800 million, which will finance the formation of a 3.1 kilometre long reservoir with a capacity of 9 million cubic meters of water, where turbines will generate approximately 870 MW of electricity. For the purposes of the project, the divisional administration has promised to ensure the acquisition of 4,418 kanals of land (1 kanal = 505.857 m²), including 1,200 kanals of reserved forest and 30 kanals of State land. Pakistan’s SK Hydro group and China’s Gezhouba Group developed the dam, and in April 2015, the developers and the Exim Bank of China and Industrial and Commercial Bank of China signed an agreement for 75% of financing costs. Subsequently, the Government of Pakistan agreed to purchase electricity from SK Hydro at a cost of $8.8415 cents per kilowatt-hour for the upcoming 30 years. Yet, despite that the aforementioned stakeholders appear to have achieved a consensus on the price and tariffs, one of the major stakeholders – the Pakistani people – have been unceremoniously neglected. In March 2018, the landowners, whose land was acquired for the implementation of this project, forcibly stopped the construction works on the dam in the Rajwal area of the Kaghan valley. As Mian Ashraf, the Chairman of Tahaffuz-i-Haqooq Balakot committee argued:

    "We want market price for our land acquired for the dam. The government signed agreements with us but now it does not honour commitments".

    He claimed that Tahaffuz-i-Haqooq Balakot Committee had decided to obstruct the district administration to acquire land anywhere in the entire tehsil, as it was not fixing appropriate prices of their lands. According to the landowners, the government had set a price of Pakistani Rupees (PKR) 800,000 per kanal, yet the actual per square metre value of the property was not more than PKR 8,000, while there are over 505 square metres in each kanal of land. As a result, the owners have been offered a five times lower price than the actual commercial value of the property. Considering that those people were having very few other sources of livelihood due to the rough terrain, the unjust appropriation of their land has come as a direct violation of their human rights.

    The same situation is visible in other areas, which are part of the project. For example, in the disputed territory of Gilgit Baltistan (part of Jammu & Kashmir), the local residents are concerned about the land grabbing, demographic shift and environmental pollution, which the CPEC inflicts to the region. Although the Pakistani government claims that the multibillion megaproject will bring economic prosperity to the area, the indigenous people remain sceptic since they further perceive the endeavour as a threat to their unique culture, as the majority of them are Shia Muslims, unlike the majority of Pakistanis, who are Sunni Muslims.



    Cultural Invasion
    Apart from the Chinese financial invasion, which constitutes securing jobs for its workers at the expense of locals, and flooding the market with cheap goods, which suffocates the domestic business, the adverse dimensions of the cultural exchange between the two countries should also be considered; In July-August 2015, a group of Pakistani teachers were part of a 15-day Chinese language training programme. The fact that these teachers have been trained to teach Chinese to Pakistani students implies that many jobs offered will involve dealing with Chinese staff in Pakistan. Currently, the abundance of Chinese language courses across Pakistan suggests that with the advent of the CPEC there will be sufficiently large numbers of Chinese citizens present in Pakistan, which in the long run might trigger cultural friction.

    Such cultural frictions and language controversies have exercised far-reaching effects on the history of Pakistan in the past. Behind the separation of East Pakistan from West Pakistan and the establishment of Bangladesh was exactly the imposition of Urdu as a State language, neglecting the Bengali language, despite the fact that the number of Bengali speakers (56%) was higher than the number of Urdu speakers (7%). Language has been closely connected to power and ideology in Pakistan, since Urdu was considered the language of the elite. Currently Punjabi is the most widely spoken (48%), yet it still does not have an official status in law. Pakistan submitting to the socio-cultural impact of the introduction of the Chinese language, at the expense of its local languages, could appear as evidence how the country slowly is becoming a satellite State of China.

    The rising numbers of Pakistani students going to China for higher education is another aspect of contemporary Sino-Pak relations. In fact, Pakistani students are now being sponsored for studies in China not just by the Chinese government but also by Chinese companies. In 2017, around 2,500 Pakistani students were enrolled in different Chinese universities, bringing the total number of Pakistani students in China to 22,000. With such a large number of students from Pakistan studying in Chinese universities, China has now become the largest destination for Pakistani students seeking overseas studies. According to statistics from 2016 released by the Chinese Ministry of Education, more than 200,000 students from 64 countries along the Belt and Road Initiative were studying in China. The number of students studying in China from countries along the Silk Road project has increased greatly under a series of preferential policies and scholarships.

    In general, enrolling in a foreign university - building a wider network and facing a greater diversity in terms of experience - enhances one’s knowledge and position on a global scale; yet, for Pakistan it could also mean confronting a ‘brain drain’where its biggest and brightest talents flood out of the country, and as a result the economy experiences even more severe downfall.



    Conclusion
    The current analysis portrays the mechanisms of the CPEC according to which it operates and it discusses the various complexities originating from the lack of agreement and information on what the actual costs and benefits are likely to be. It argues that despite the abundance of Chinese, Pakistani and international reports which lay out figures and statistics, seldom the data matches, highlighting the absence of transparency and clarity.

    The Chinese master plan conceives a picture where the majority of Pakistani socio-economic sectors are deeply penetrated by Chinese companies and Chinese culture; thus, Islamabad puts itself at risk of facing its finances and societal structure experiencing a colossal wreck. The combination of high upfront tariffs, interest rates and surcharges will complicate Pakistan’s efforts to repay its loans, forcing the State to increase its domestic and export prices, making it difficult to compete with neighbouring and other countries which maintain lower prices.

    The borrower is always servant to the lender. The 15-year megaproject illuminates how Pakistan voluntarily is becoming progressively subjugated by China and its terms and conditions. Following Beijing’s history of trade relations with African countries, it is evident that China will be very careful about its investments and thereafter quite rigid in receiving its money back. Islamabad might have signed the CPEC agreement believing it would be advantageous to its country but it actually subscribed to an unfair deal for which common Pakistanis will eventually suffer.

    Although China advertises Pakistan as its brother and ‘all-weather friend’, the truth is that their ‘friendship’ has always had an embedded enduring imbalance; Pakistan is in China’s debt and the debt will only deepen.

    China has exclusively taken advantage of the fact that Pakistan has managed to isolate itself from the world due to wide allegations of sponsoring terrorism and Beijing might currently act as the Godfather assuring Islamabad that it will serve its interests, yet is fully aware that this patronising attitude will only turn Pakistan into a colony which will always require China for its day-to-day survival. As long as Pakistan operates in the shadow of another East India Company and does not realize the importance of protecting its national interests, which in essence are the people of Pakistan, any attempts for national development will transform into national calamity.



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  13. john70

    john70 Regular Member

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    New York Times brings out minute details..... of takeover of HAMBANTOTA port

    My Chinese friends are welcome to Argue your points ... if any

    How China Got Sri Lanka to Cough Up a Port
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    A cargo ship navigating one of the world’s busiest shipping lanes, near Hambantota, Sri Lanka, in May.CreditAdam Dean for The New York Times
    By Maria Abi-Habib
    HAMBANTOTA, Sri Lanka — Every time Sri Lanka’s president, Mahinda Rajapaksa, turned to his Chinese allies for loans and assistance with an ambitious port project, the answer was yes.

    Yes, though feasibility studies said the port wouldn’t work. Yes, though other frequent lenders like India had refused. Yes, though Sri Lanka’s debt was ballooning rapidly under Mr. Rajapaksa.

    Over years of construction and renegotiation with China Harbor Engineering Company, one of Beijing’s largest state-owned enterprises, the Hambantota Port Development Project distinguished itself mostly by failing, as predicted. With tens of thousands of ships passing by along one of the world’s busiest shipping lanes, the port drew only 34 ships in 2012.

    And then the port became China’s.

    Mr. Rajapaksa was voted out of office in 2015, but Sri Lanka’s new government struggled to make payments on the debt he had taken on. Under heavy pressure and after months of negotiations with the Chinese, the government handed over the port and 15,000 acres of land around it for 99 years in December.


    The transfer gave China control of territory just a few hundred miles off the shores of a rival, India, and a strategic foothold along a critical commercial and military waterway.

    The case is one of the most vivid examples of China’s ambitious use of loans and aid to gain influence around the world — and of its willingness to play hardball to collect.


    The debt deal also intensified some of the harshest accusations about President Xi Jinping’s signature Belt and Road Initiative: that the global investment and lending program amounts to a debt trap for vulnerable countries around the world, fueling corruption and autocratic behavior in struggling democracies.

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    Former President Mahinda Rajapaksa of Sri Lanka, center, holding court at a wedding in Colombo in June.CreditAdam Dean for The New York Times
    Months of interviews with Sri Lankan, Indian, Chinese and Western officials and analysis of documents and agreements stemming from the port project present a stark illustration of how China and the companies under its control ensured their interests in a small country hungry for financing.


    • During the 2015 Sri Lankan elections, large payments from the Chinese port construction fund flowed directly to campaign aides and activities for Mr. Rajapaksa, who had agreed to Chinese terms at every turn and was seen as an important ally in China’s efforts to tilt influence away from India in South Asia. The payments were confirmed by documents and cash checks detailed in a government investigation seen by The New York Times.

    • Though Chinese officials and analysts have insisted that China’s interest in the Hambantota port is purely commercial, Sri Lankan officials said that from the start, the intelligence and strategic possibilities of the port’s location were part of the negotiations.

    Initially moderate terms for lending on the port project became more onerous as Sri Lankan officials asked to renegotiate the timeline and add more financing. And as Sri Lankan officials became desperate to get the debt off their books in recent years, the Chinese demands centered on handing over equity in the port rather than allowing any easing of terms.

    • Though the deal erased roughly $1 billion in debt for the port project, Sri Lanka is now in more debt to China than ever, as other loans have continued and rates remain much higher than from other international lenders.

    Mr. Rajapaksa and his aides did not respond to multiple requests for comment, made over several months, for this article. Officials for China Harbor also would not comment.

    Estimates by the Sri Lankan Finance Ministry paint a bleak picture: This year, the government is expected to generate $14.8 billion in revenue, but its scheduled debt repayments, to an array of lenders around the world, come to $12.3 billion.


    John Adams said infamously that a way to subjugate a country is through either the sword or debt. China has chosen the latter,” said Brahma Chellaney, an analyst who often advises the Indian government and is affiliated with the Center for Policy Research, a think tank in New Delhi.

    Indian officials, in particular, fear that Sri Lanka is struggling so much that the Chinese government may be able to dangle debt relief in exchange for its military’s use of assets like the Hambantota port — though the final lease agreement forbids military activity there without Sri Lanka’s invitation.

    “The only way to justify the investment in Hambantota is from a national security standpoint — that they will bring the People’s Liberation Army in,” said Shivshankar Menon, who served as India’s foreign secretary and then its national security adviser as the Hambantota port was being built.

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    The Hambantota Port gets only a small percentage of Sri Lanka’s port business, overshadowed by the main complex in the capital.CreditAdam Dean for The New York Times

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    Sri Lankan workers processing cars being unloaded from a ship at Hambantota Port.CreditAdam Dean for The New York Times
    An Engaged Ally
    The relationship between China and Sri Lanka had long been amicable, with Sri Lanka an early recognizer of Mao’s Communist government after the Chinese Revolution. But it was during a more recent conflict — Sri Lanka’s brutal 26-year civil war with ethnic Tamil separatists — that China became indispensable.

    Mr. Rajapaksa, who was elected in 2005, presided over the last years of the war, when Sri Lanka became increasingly isolated by accusations of human rights abuses. Under him, Sri Lanka relied heavily on China for economic support, military equipment and political cover at the United Nations to block potential sanctions.


    The war ended in 2009, and as the country emerged from the chaos, Mr. Rajapaksa and his family consolidated their hold. At the height of Mr. Rajapaksa’s tenure, the president and his three brothers controlled many government ministries and around 80 percent of total government spending. Governments like China negotiated directly with them.

    So when the president began calling for a vast new port development project at Hambantota, his sleepy home district, the few roadblocks in its way proved ineffective.

    From the start, officials questioned the wisdom of a second major port, in a country a quarter the size of Britain and with a population of 22 million, when the main port in the capital was thriving and had room to expand. Feasibility studies commissioned by the government had starkly concluded that a port at Hambantota was not economically viable.

    “They approached us for the port at the beginning, and Indian companies said no,” said Mr. Menon, the former Indian foreign secretary. “It was an economic dud then, and it’s an economic dud now.”

    But Mr. Rajapaksa greenlighted the project, then boasted in a news release that he had defied all caution — and that China was on board.

    The Sri Lanka Ports Authority began devising what officials believed was a careful, economically sound plan in 2007, according to an official involved in the project. It called for a limited opening for business in 2010, and for revenue to be coming in before any major expansion.

    The first major loan it took on the project came from the Chinese government’s Export-Import Bank, or Exim, for $307 million. But to obtain the loan, Sri Lanka was required to accept Beijing’s preferred company, China Harbor, as the port’s builder, according to a United States Embassy cable from the time, leaked to WikiLeaks.


    That is a typical demand of China for its projects around the world, rather than allowing an open bidding process. Across the region, Beijing’s government is lending out billions of dollars, being repaid at a premium to hire Chinese companies and thousands of Chinese workers, according to officials across the region.

    There were other strings attached to the loan, as well, in a sign that China saw strategic value in the Hambantota port from the beginning.

    Nihal Rodrigo, a former Sri Lankan foreign secretary and ambassador to China, said that discussions with Chinese officials at the time made it clear that intelligence sharing was an integral, if not public, part of the deal. In an interview with The Times, Mr. Rodrigo characterized the Chinese line as, “We expect you to let us know who is coming and stopping here.”

    In later years, Chinese officials and the China Harbor company went to great lengths to keep relations strong with Mr. Rajapaksa, who for years had faithfully acquiesced to such terms.

    In the final months of Sri Lanka’s 2015 election, China’s ambassador broke with diplomatic norms and lobbied voters, even caddies at Colombo’s premier golf course, to support Mr. Rajapaksa over the opposition, which was threatening to tear up economic agreements with the Chinese government.

    As the January election inched closer, large payments started to flow toward the president’s circle.

    At least $7.6 million was dispensed from China Harbor’s account at Standard Chartered Bank to affiliates of Mr. Rajapaksa’s campaign, according to a document, seen by The Times, from an active internal government investigation. The document details China Harbor’s bank account number — ownership of which was verified — and intelligence gleaned from questioning of the people to whom the checks were made out.


    With 10 days to go before polls opened, around $3.7 million was distributed in checks: $678,000 to print campaign T-shirts and other promotional material and $297,000 to buy supporters gifts, including women’s saris. Another $38,000 was paid to a popular Buddhist monk who was supporting Mr. Rajapaksa’s electoral bid, while two checks totaling $1.7 million were delivered by volunteers to Temple Trees, his official residence.

    Most of the payments were from a subaccount controlled by China Harbor, named “HPDP Phase 2,” shorthand for Hambantota Port Development Project.

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    An expressway extension to Hambantota Port. Chinese analysts have not given up the view that the port could become profitable.CreditAdam Dean for The New York Times
    China’s Network
    After nearly five years of helter-skelter expansion for China’s Belt and Road Initiativeacross the globe, Chinese officials are quietly trying to take stock of how many deals have been done and what the country’s financial exposure might be. There is no comprehensive picture of that yet, said one Chinese economic policymaker, who like many other officials would speak about Chinese policy only on the condition of anonymity.

    Some Chinese officials have become concerned that the nearly institutional graft surrounding such projects represents a liability for China, and raises the bar needed for profitability. President Xi acknowledged the worry in a speech last year, saying, “We will also strengthen international cooperation on anticorruption in order to build the Belt and Road Initiative with integrity.”

    In Bangladesh, for example, officials said in January that China Harbor would be banned from future contracts over accusations that the company attempted to bribe an official at the ministry of roads, stuffing $100,000 into a box of tea, government officials said in interviews. And China Harbor’s parent company, China Communications Construction Company, was banned for eight years in 2009 from bidding on World Bank projects because of corrupt practices in the Philippines.

    Since the port seizure in Sri Lanka, Chinese officials have started suggesting that Belt and Road is not an open-ended government commitment to finance development across three continents.

    “If we cannot manage the risk well, the Belt and Road projects cannot go far or well,” said Jin Qi, the chairwoman of the Silk Road Fund, a large state-owned investment fund, during the China Development Forum in late March.

    In Sri Lanka’s case, port officials and Chinese analysts have also not given up the view that the Hambantota port could become profitable, or at least strengthen China’s trade capacity in the region.

    Ray Ren, China Merchant Port’s representative in Sri Lanka and the head of the Hambantota port’s operations, insisted that “the location of Sri Lanka is ideal for international trade.” And he dismissed the negative feasibility studies, saying they were done many years ago when Hambantota was “a small fishing hamlet.”

    Hu Shisheng, the director of South Asia studies at the China Institutes of Contemporary International Relations, said that China clearly recognized the strategic value of the Hambantota port. But he added: “Once China wants to exert its geostrategic value, the strategic value of the port will be gone. Big countries cannot fight in Sri Lanka — it would be wiped out.”


    Although the Hambantota port first opened in a limited way in 2010, before the Belt and Road Initiative was announced, the Chinese government quickly folded the project into the global program.

    Shortly after the handover ceremony in Hambantota, China’s state news agency released a boastful video on Twitter, proclaiming the deal “another milestone along the path of #BeltandRoad.”

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    The Mahinda Rajapaksa International Cricket Stadium in Hambantota. The stadium has more seats than the population of the area’s main town.CreditAdam Dean for The New York Times

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    Pilgrim monks visiting the largely empty Mattala Rajapaksa International Airport, just 150 miles southeast from the country’s main airport.CreditAdam Dean for The New York Times

    A Port to Nowhere
    The seaport is not the only grand project built with Chinese loans in Hambantota, a sparsely populated area on Sri Lanka’s southeastern coast that is still largely overrun by jungle.

    A cricket stadium with more seats than the population of Hambantota’s district capital marks the skyline, as does a large international airport — which in June lost the only daily commercial flight it had left when FlyDubai airline ended the route. A highway that cuts through the district is traversed by elephants and used by farmers to rake out and dry the rice plucked fresh from their paddies.

    Mr. Rajapaksa’s advisers had laid out a methodical approach to how the port might expand after opening, ensuring that some revenue would be coming in before taking on much more debt.

    But in 2009, the president had grown impatient. His 65th birthday was approaching the following year, and to mark the occasion he wanted a grand opening at the Hambantota port — including the beginning of an ambitious expansion 10 years ahead of the Port Authority’s original timeline.


    Chinese laborers began working day and night to get the port ready, officials said. But when workers dredged the land and then flooded it to create the basin of the port, they had not taken into account a large boulder that partly blocked the entrance, preventing the entry of large ships, like oil tankers, that the port’s business model relied on.

    Ports Authority officials, unwilling to cross the president, quickly moved ahead anyway. The Hambantota port opened in an elaborate celebration on Nov. 18, 2010, Mr. Rajapaksa’s birthday. Then it sat waiting for business while the rock blocked it.


    China Harbor blasted the boulder a year later, at a cost of $40 million, an exorbitant price that raised concerns among diplomats and government officials. Some openly speculated about whether the company was simply overcharging or the price tag included kickbacks to Mr. Rajapaksa.

    By 2012, the port was struggling to attract ships — which preferred to berth nearby at the Colombo port — and construction costs were rising as the port began expanding ahead of schedule. The government decreed later that year that ships carrying car imports bound for Colombo port would instead offload their cargo at Hambantota to kick-start business there. Still, only 34 ships berthed at Hambantota in 2012, compared with 3,667 ships at the Colombo port, according to a Finance Ministry annual report.

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    A fish stall in a zone that is due to be turned into a large industrial area surrounding the Hambantota Port.CreditAdam Dean for The New York Times
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    Harvesting rice in a field where the industrial area is due to be built.CreditAdam Dean for The New York Times
    “When I came to the government, I called the minister of national planning and asked for the justification of Hambantota Port,” Harsha de Silva, the state minister for national policies and economic affairs, said in an interview. “She said, ‘We were asked to do it, so we did it.’ ”

    Determined to keep expanding the port, Mr. Rajapaksa went back to the Chinese government in 2012, asking for $757 million.

    The Chinese agreed again. But this time, the terms were much steeper.

    The first loan, at $307 million, had originally come at a variable rate that usually settled above 1 or 2 percent after the global financial crash in 2008. (For comparison, rates on similar Japanese loans for infrastructure projects run below half a percent.)


    But to secure fresh funding, that initial loan was renegotiated to a much higher 6.3 percent fixed rate. Mr. Rajapaksa acquiesced.

    The rising debt and project costs, even as the port was struggling, handed Sri Lanka’s political opposition a powerful issue, and it campaigned heavily on suspicions about China. Mr. Rajapaksa lost the election.

    The incoming government, led by President Maithripala Sirisena, came to office with a mandate to scrutinize Sri Lanka’s financial deals. It also faced a daunting amount of debt: Under Mr. Rajapaksa, the country’s debt had increased threefold, to $44.8 billion when he left office. And for 2015 alone, a $4.68 billion payment was due at year’s end.


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    Chinese construction workers, bottom left, walking home from work in front of Colombo’s changing skyline.CreditAdam Dean for The New York Times
    Signing It Away
    The new government was eager to reorient Sri Lanka toward India, Japan and the West. But officials soon realized that no other country could fill the financial or economic space that China held in Sri Lanka.

    “We inherited a purposefully run-down economy — the revenues were insufficient to pay the interest charges, let alone capital repayment,” said Ravi Karunanayake, who was finance minister during the new government’s first year in office.

    “We did keep taking loans,” he added. “A new government can’t just stop loans. It’s a relay; you need to take them until economic discipline is introduced.”


    The Central Bank estimated that Sri Lanka owed China about $3 billion last year. But Nishan de Mel, an economist at Verité Research, said some of the debts were off government books and instead registered as part of individual projects. He estimated that debt owed to China could be as much as $5 billion and was growing every year. In May, Sri Lanka took a new $1 billion loan from China Development Bank to help make its coming debt payment.

    Government officials began meeting in 2016 with their Chinese counterparts to strike a deal, hoping to get the port off Sri Lanka’s balance sheet and avoid outright default. But the Chinese demanded that a Chinese company take a dominant equity share in the port in return, Sri Lankan officials say — writing down the debt was not an option China would accept.

    When Sri Lanka was given a choice, it was over which state-owned company would take control: either China Harbor or China Merchants Port, according to the final agreement, a copy of which was obtained by The Times, although it was never released publicly in full.

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    China Harbor employees heading to work in Colombo.CreditAdam Dean for The New York Times

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    Chinese workers in their dormitory in Colombo.CreditAdam Dean for The New York Times
    China Merchants got the contract, and it immediately pressed for more: Company officials demanded 15,000 acres of land around the port to build an industrial zone, according to two officials with knowledge of the negotiations. The Chinese company argued that the port itself was not worth the $1.1 billion it would pay for its equity — money that would close out Sri Lanka’s debt on the port.

    Some government officials bitterly opposed the terms, but there was no leeway, according to officials involved in the negotiations. The new agreement was signed in July 2017, and took effect in December.


    The deal left some appearance of Sri Lankan ownership: Among other things, it created a joint company to manage the port’s operations and collect revenue, with 85 percent owned by China Merchants Port and the remaining 15 percent controlled by Sri Lanka’s government.


    But lawyers specializing in port acquisitions said Sri Lanka’s small stake meant little, given the leverage that China Merchants Port retained over board personnel and operating decisions. And the government holds no sovereignty over the port’s land.

    When the agreement was initially negotiated, it left open whether the port and surrounding land could be used by the Chinese military, which Indian officials asked the Sri Lankan government to explicitly forbid. The final agreement bars foreign countries from using the port for military purposes unless granted permission by the government in Colombo.

    That clause is there because Chinese Navy submarines had already come calling to Sri Lanka.

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    The Port of Colombo, Sri Lanka.CreditAdam Dean for The New York Times
    Strategic Concerns
    China had a stake in Sri Lanka’s main port as well: China Harbor was building a new terminal there, known at the time as Colombo Port City. Along with that deal came roughly 50 acres of land, solely held by the Chinese company, that Sri Lanka had no sovereignty on.


    That was dramatically demonstrated toward the end of Mr. Rajapaksa’s term, in 2014. Chinese submarines docked at the harbor the same day that Prime Minister Shinzo Abe of Japan was visiting Colombo, in what was seen across the region as a menacing signal from Beijing.

    When the new Sri Lankan government came to office, it sought assurances that the port would never again welcome Chinese submarines — of particular concern because they are difficult to detect and often used for intelligence gathering. But Sri Lankan officials had little real control.


    Now, the handover of Hambantota to the Chinese has kept alive concerns about possible military use — particularly as China has continued to militarize island holdings around the South China Sea despite earlier pledges not to.

    Sri Lankan officials are quick to point out that the agreement explicitly rules out China’s military use of the site. But others also note that Sri Lanka’s government, still heavily indebted to China, could be pressured to allow it.


    And, as Mr. de Silva, the state minister for national policies and economic affairs, put it, “Governments can change.”

    Now, he and others are watching carefully as Mr. Rajapaksa, China’s preferred partner in Sri Lanka, has been trying to stage a political comeback. The former president’s new opposition party swept municipal elections in February. Presidential elections are coming up next year, and general elections in 2020.

    Although Mr. Rajapaksa is barred from running again because of term limits, his brother, Gotabaya Rajapaksa, the former defense secretary, appears to be readying to take the mantle.

    “It will be Mahinda Rajapaksa’s call. If he says it’s one of the brothers, that person will have a very strong claim,” said Ajith Nivard Cabraal, the central bank governor under Mr. Rajapaksa’s government, who still advises the family. “Even if he’s no longer the president, as the Constitution is structured, Mahinda will be the main power base.”

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    The Colombo Port City development.CreditAdam Dean for The New York Times


    Reporting was contributed by Keith Bradsher and Sui-Lee Wee from Beijing, and Mujib Mashal, Dharisha Bastians and Arthur Wamanan from Sri Lanka.
     
  14. Mikesingh

    Mikesingh Senior Member Senior Member

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    As trade war erupts, China puts brakes on its global domination dream

    China has spent nearly five years steering an ever-growing stream of hundreds of billions of dollars to a bold plan to gain greater global influence by funding big projects across Asia, Eastern Europe and Africa.

    Now, Beijing is starting to tap the brakes.

    The value of the deals that Chinese companies are striking under the country’s big global plan — called the Belt and Road Initiative — is smaller than a year ago, according to new data. Chinese officials themselves are soundi ..

    “Current international conditions are very uncertain, with lots of economic risks and large fluctuations for interest rates in newly emerged markets,” said Hu Xiaolian, the chairwoman of the Export-Import Bank of China, a state-controlled lender that plays a big role in financing the projects, at a forum this month in Shanghai.

    “Our enterprises and Belt and Road Initiative countries will face financing difficulties.”

    American and European officials have long worried that Belt and Road represents a diplomatic and economic power grab by Beijing, fueled by its vast government wealth and helped by the Communist Party’s laserlike focus on achieving long-term goals.

    But even with its financial firepower, China has its limits. Its economy is showing signs of slowing, and it is in the middle of a trade war with the United States. Beijing is struggling to tame domestic debt problems — problems an international lending spree certainly hasn’t helped.

    Too much overseas activity risks creating wasteful white elephants that can drag down Chinese companies and local partners alike. All types of deals are now angling to be associated with the Belt and Road Initiative like a theme park in Indonesia and brewery in the Czech Republic.

    Further, profligate lending can worsen relations with other countries rather than help them. New governments in places like Malaysia and Sri Lanka have questioned why their predecessors borrowed so much from Beijing.

    While Belt and Road activity remains huge, it has certainly become more restrained, according to official data. In the first five months of 2018, Chinese companies signed contracts worth $36.2 billion in business, down nearly 6 percent from the same period a year ago.

    Read more at:
    //economictimes.indiatimes.com/articleshow/64806529.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

    So it seems the Chinese dream of domination through massive investment around the world has come a cropper. And the CPEC is heading for disaster for both Pak and China.
     
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  15. HariPrasad-1

    HariPrasad-1 Senior Member Senior Member

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