Comment by Riaz Haq on March 11, 2016 at 9:12am

#Pakistan’s #FDI: fuelled by #China - http://FT.com  #CPEC http://www.ft.com/intl/cms/s/3/88e071b8-e6e4-11e5-a09b-1f8b0d268c39.html#axzz42c8MTY7F …

 

Chinese investment in power generation will attract investment to energy-starved economy

©Bloomberg

Pakistan has no shortage of hurdles to overcome in its efforts to attract more foreign direct investment, from systemic corruption to security issues. But one of the biggest impediments to investment, especially in the manufacturing sector, has been the country’s inadequate, unreliable power supply.

China, as it so frequently does, has stepped into the breach.

Large-scale investments by Chinese power companies have given a significant boost to Pakistan’s FDI figures in the past year and will create a virtuous circle for the longer term by improving power supply and therefore making the country more attractive to investors in other sectors.

Last year was a bumper year for investment into Pakistan. The country received 39 greenfield investments totalling an estimated $18.9bn in 2015, according to fDi Markets, an FT data service.

Investment in Pakistan: the China effect

Year	Projects	Capex ($bn*)
2015	39	18.9
2014	28	7.6
2013	25	3.1
2012	17	4.1
2011	31	2.3
2010	18	1.3
2009	34	4.3
2008	28	6.9
2007	28	4.8
2006	27	4
2005	57	8.3
2004	19	2.3
2003	24	2.8
Source: fDi Markets *includes estimates. Data for Jan 2003 to Jan 2016.

This compares with 28 projects for $7.6bn in 2014, and marks a high point for greenfield capital investment into the country since fDi began collecting data in 2003.

The number of projects is the largest since the country attracted 57 greenfield projects back in 2005.

China has emerged as the number one source country for investment into Pakistan, surpassing the second-ranked United Arab Emirates, primarily due to its investments in power.

China-based Shanghai Electric, a power generation and electrical equipment manufacturing company, announced plans last year to establish a 1,320 megawatt coal-based power project in Tharparkar, scheduled to launch in 2017 or 2018. Traditional energy and power projects made up two-thirds of last year’s total greenfield investment into Pakistan at $12.9bn, with alternative energy bringing in a further $1.8bn.

 

Among the more notable projects, UAE-based Metal Investment Holding Corporation announced plans to partner with Power China E & M International to invest $5bn to build three coal-fired plants at Karachi’s Port Qasim. But the transportation sector is also showing promise, with 12 projects totalling $3bn being announced or initiated last year.

Pakistan will be hoping an improved power supply can help it compete more strongly for regional investment flows and that this in turn will unleash economic growth. The country’s economic performance has been respectable — GDP growth increased from 2.7 per cent in 2011 to 4.7 per cent in 2014, according to the World Bank.

The World Bank estimate for 2015 was 5.5 per cent growth, and the forecast for 2016 is the same figure. But this is below the regional average and is a far cry from the rampant growth being experienced in neighbouring India. The World Bank expects growth in South Asia to reach 7.3 per cent in 2016.

If it wants to keep up with faster-growing rivals, Pakistan will need to keep fuelling its economy, and its FDI flows, with raw power.

Comment by Riaz Haq on May 8, 2016 at 8:35am

#Pakistan To Enter #MSCI #EmergingMarkets Index. #CPEC http://seekingalpha.com/article/3972823-pakistan-likely-enter-msci-... … $VWO $EDC $EDZ $SCHE $IEMG $EMF $MSF $EEV $EUM $ADRE $EET

Summary

Pakistan likely to be added in MSCI Emerging Markets Index.

P/E multiple re-ratings on the cards; discount to regional peers likely to narrow down.

Economy moving forward on a positive track. CPEC - the real game changer.

MSCI is considering reclassifying the Pakistani equity market from frontier to emerging market status on June 14th, 2016.

MSCI - a leading provider of research-based indexes and analytics - announced that it will release on June 14, 2016, shortly after 11:00 p.m. Central European Summer Time (CEST), the results of the 2016 Annual Market Classification Review. As a reminder, three MSCI Country Indexes are currently included on the review list of the 2016 Annual Market Classification Review: MSCI China A and MSCI Pakistan Indexes for a potential reclassification to Emerging Markets and MSCI Peru Index for a potential reclassification to Frontier Markets.

It is important to note that MSCI is not the only index provider that classifies markets but is considered the reference benchmark for many markets. MSCI and other index providers base their market classification on a number of quantitative measurable and comparative criteria while aiming to avoid qualitative and/or subjective criteria.

PAKISTAN: ECONOMY IN FOCUS

Pakistan is a country with a population of 190 million people. Pakistan's GDP stands at USD 250 billion (Year 2015). Pakistan's economy continued to pick up in the fiscal year 2015 as economic reform progressed and security improved. Inflation markedly declined, and the current deficit narrowed with favorable prices for oil and other commodities. Despite global headwinds, the outlook is for continued moderate growth as structural and macroeconomic reforms deepen.

Selected economic indicators (%) - Pakistan 2015 2016 Forecast 2017 Forecast
GDP Growth 4.2 4.5 4.8
Inflation 4.5 3.2 4.5
Current Account Balance (share of GDP) -1.0 -1.0 -1.2
Source : Asian Development Bank

CPEC : THE GAME CHANGER FOR PAKISTAN

China Pakistan Economic Corridor (CPEC) is a mega project of USD 46+ billion, taking the bilateral relationship between Pakistan and China to new heights. The project is the beginning of a journey of prosperity for Pakistan and China's Xinjiang. The economic corridor is about 3,000 kilometers long consisting of highways, railways and pipelines that will connect China's Xinjiang province to the rest of the world through Pakistan's Gwador port.

Comment by Riaz Haq on June 20, 2016 at 7:14pm

#Pakistan, #China discuss increased collaboration in #vocational #training & #education #CPEC

http://tribune.com.pk/story/1126642/meeting-pakistan-china-discuss-...

Pakistan and China have agreed to increase collaboration in the field of vocational education and teacher training programmes.

The agreement came during a meeting between a delegation from China’s Tianjin University of Technology and Education (TUTE) and National Vocational and Technical Training Commission (NAVTTC) Executive Director Zulfiqar Ahmad Cheema here on Monday.

Cheema briefed the delegation about the working of NAVTTC and its recent initiatives such as establishment of job placement centres for its graduates.

He said the under-construction China-Pakistan Economic Corridor (CPEC) would open new vistas of prosperity and development and would create employment opportunities in Pakistan.

Cheema said the two countries should enhance their collaboration to reboot the TVET system in Pakistan.

Comment by Riaz Haq on October 6, 2016 at 6:46pm

How #Chinese money will transform #Pakistan | The Third Pole. #China #CPEC

https://www.thethirdpole.net/2016/10/06/how-chinese-money-will-tran...


The development of the China-Pakistan Economic Corridor (CPEC) has spurred debate in all quarters. Some perceive it as a form of neo-colonialism criticising Pakistan’s government for promoting unethical business practices at the cost of ordinary citizens’ livelihoods. Others see the CPEC as an unprecedented opportunity for economic revival with potential for a number of positive spillover effects including stronger local institutions.

See: Interactive map: China Pakistan Economic Corridor

CPEC is a package of infrastructure projects worth USD 46 billion. About two thirds of this funding, USD 33 billion, is committed towards establishing energy and power projects in Pakistan. Ahmed Zulfiqar Siddiqui, a senior executive at China Power, says these projects will help alleviate the country’s chronic energy crisis which cost the nation 7% of its annual GDP last year. “The Chinese have invested in power generation from coal and LNG as well as hydel, wind and solar power. A new transmission line funded by them will carry electricity from new power generation units in Sindh to load centres in Punjab. Shanghai Electric, a sister company of China Power, has also expressed interest in acquiring a major stake in K-Electric, which is the main provider of electric power to over 20 million people in Karachi. The Chinese are therefore covering the entire power sector value chain – from fuel extraction (mining) to end-user distribution.”

If everything goes according to plan

Improved energy supply could enable Pakistan to boost its flagging indigenous industries such as textiles, agriculture and manufacturing, increase exports and ultimately lead to sustained economic growth in the long term.

See: China’s new silk road: What’s in it for Pakistan?

A Deloitte study predicts that if everything goes according to the plan, the combined value of CPEC’s infrastructure projects would be equivalent to 17% of Pakistan’s GDP in 2015. Moreover, the project is expected to create at least 700,000 direct jobs and serve as a springboard for the development of industries such as retail, tourism, hospitality, health and education. The expansion of these industries could potentially lead to synergies among various downstream sectors with benefits accruing to the larger population. But Siddiqui stresses the need for policies to ensure involvement of local unskilled labour and small contractors since the mega-construction projects will predominantly be executed by Chinese labour. He also highlights the need to protect established local industries against price competition from China since local firms may not be able to compete with cheaper Chinese industries.

The CPEC project may also benefit the real-estate industry along the trade route. In Gawadar, property prices have more than doubled in recent months due to demand for housing. Atif Alam, owner of RB Associates, a real estate agency which deals in property across the country, believes that demand for quality housing and recreation facilities will sky-rocket as more Chinese expats move to Pakistan and infrastructure development enables access to previously isolated areas of natural beauty or historic significance.

See: The China-Pakistan Economic Corridor winds through Gilgit-Baltistan

Comment by Riaz Haq on October 6, 2016 at 6:59pm

Excerpts of Deloitte & Touche report on CPEC:

It is estimated that if all the planned projects are implemented, the value of those projects would exceed all
foreign direct investment in Pakistan since 1970 and would be equivalent to 17% of Pakistan's 2015 gross 
domestic product. It is further estimated the CPEC project will create some 700,000 direct jobs during the
period 2015–2030 and add up to 2.5 percentage points to the country's growth rate.

The CPEC will open doors to immense economic opportunities not only to Pakistan but will physically connect
China to its markets in Asia, Europe and beyond. Almost 80% of the China’s oil is currently transported from
Strait of Malacca to Shanghai, (distance is almost 16,000 km and takes 2-3 months), with Gwadar becoming
operational, the distance would reduce to less than 5,000 km. If all goes well and on schedule, of the 21
agreements on energy– including gas, coal and solar energy– 14 will be able to provide up to 10,400
megawatts (MW) of energy by March 2018. According to China Daily, these projects would provide up to
16,400 MW of energy altogether.
As part of infrastructure projects worth approximately $11 billion, and 1,100 kilometer long motorway will be
constructed between the cities of Karachi and Lahore,2 while the Karakoram Highway between Rawalpindi and
the Chinese border will be completely reconstructed and overhauled. The Karachi–Peshawar main railway
line will also be upgraded to allow for train travel at up to 160 kilometers per hour by December 2019.3
Pakistan's railway network will also be extended to eventually connect to China's Southern Xinjiang
Railway in Kashgar.4 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 transport gas from Iran.5
Oil from the Middle East could be offloaded at Gwadar and transported to China through the corridor, cutting
the current 12,000 km journey to 2,395 km. It will act as a bridge for the new Maritime Silk Route that
envisages linking 3 billion people in Asia, Africa and Europe, part of a trans-Eurasian project. When fully
operational, Gwadar will promote the economic development of Pakistan and become a gateway for Central
Asian countries, including Afghanistan, Uzbekistan, linking Sri Lanka, Iran and Xinjiang to undertake marine
transport.6
Over $33 billion worth of energy infrastructure will be constructed by private consortia to help alleviate
Pakistan's chronic energy shortages,7 which regularly amount to over 4,500MW,8 and have shed an estimated
2-2.5% off Pakistan's annual GDP.9With approximately $33 billion expected to be invested in energy sector
projects, power generation assumes an important role in the CPEC project. Over 10,400MW of energy
generating capacity is to be developed between 2018 and 2020 as part of the corridor's fast-tracked "Early
Harvest" projects.10

https://www2.deloitte.com/content/dam/Deloitte/pk/Documents/risk/pa...

Comment by Riaz Haq on January 22, 2017 at 8:58am

#Pakistan to build country’s first Naphtha Cracker Complex. #petrochemicals #manufacturing #materials #CPEC

http://tribune.com.pk/story/1302875/initiative-pakistan-build-count...

In an unprecedented development to boost the economy, Pakistan is set to build the country’s first ever Naphtha Cracker Complex (NCC), a state-of-the-art “grand infrastructure” to change petrochemical raw substances into value-added products ranging from construction, home décor, appliances, furniture, medical care, paints, cleaning stuff and top of the line military gadgets.

The absence of a naphtha cracker complex means Pakistan has to buy all petrochemical feedstock from international market that take heavy toll on import bill and prices of long range of items.

India has nine naphtha cracker complexes providing it tremendous mileage in industrial and economic progress.

The creation of this complex will revolutionise the industrial landscape.

The game-changing development came after an 18-member delegation of Pakistan Chemical Manufacturing Association (PCMA) met recently with Federal Minister for Planning, Development and Reforms in his office, Islamabad where NCC was announced to be built to catalyse the economic progress.

Acknowledging NCC as a strategic need, Minister suggested PCMA to prepare feasibility report and viable business plan in consultation with market experts and technologists to help ministry to make it a reality.

NCC will have an impactful role in all industrial zones to be placed along the route of China-Pakistan Economic Corridor (CPEC), it was said at the meeting.

Comment by Riaz Haq on October 18, 2017 at 10:22am

#Pakistan, #China to fast track #industrial cooperation under #CPEC. #SEZ #economy #Manufacturing

http://nation.com.pk/business/18-Oct-2017/pakistan-china-to-fast-tr...

Pakistan and China have agreed to fast track the industrial cooperation under China Pakistan Economic Corridor (CPEC) to accrue maximum benefits of this important phase and ensure win-win situation for both countries.

This was decided in the first meeting of Joint Expert Working Group (JEWG) on industrial cooperation, held on Tuesday in Islamabad. The Pakistan side was led by Board of Investment (BoI) Secretary Azher Ali Chaudhry and the Chinese delegation was led by China International Engineering Consulting Corporation Director Du Zhenli.

On the occasion, the BoI secretary said that the main gain from the CPEC is the industrial cooperation which will not only provide a win-win situation for both countries but will ensure sustainability of this multi-billion dollar project. He said that the Chinese experience regarding establishment of industrial parks will be instrumental for Pakistan by using it as a tool for economic and social development of the country.

Zhenli, head of the Chinese delegation, mentioned that the entire visit remained highly productive and would go a long way to frame the future plans of industrial development in Pakistan. Both sides had a detailed discussion on relocation of industry from China, incentive package for relocation of industry, opportunities available under export promotion zones, identification of industry to be parked in special economic zones (SEZs), terms of engagements (ToE) for establishment of SEZs and upgradation of human resource development through promotion of technical education.

Both sides agreed to ensure finalisation of feasibilities and other codal formalities of prioritised SEZs before 7th Joint Cooperation Committee (JCC) meeting, expected to be held by the end of this year. The Chinese side expressed their satisfaction over the incentive package announced by Pakistani side and informed that a number of Chinese developers and enterprises are willing to invest in these SEZs.

Both sides agreed that SEZs under CPEC are open for all foreign and local Pakistani investors. Chinese developers and enterprises could enter into joint ventures with local developers and investors to ensure successful cooperation in this important sector of CPEC. Pakistani side shared a proposal to upgrade skill development in Pakistan in line with needs of CPEC which includes transformation of National Training Bureau (NTB) into state-of-the-art institute of technical and vocational training centre in federal capital for producing skilled workforce for CPEC projects, establishment of joint China Pak Training Institutes in the main cities falling under CPEC routes such as Gilgit, Abbottabad, Islamabad, DI Khan and Quetta as well as establishment of Public centres for a vocational training at Islamabad for imparting training to the youth and instructors on the “model of public centre” for vocational training, Tianjin. It was decided that the proposal would be further discussed in detail on the forum of JWG on industry cooperation likely to be held next month.

The Chinese Expert Group is on its eight-day visit to Pakistan to ensure transfer of knowledge and share Chinese experience in development of industrial sector with Pakistani officials, members of academia and business community. Besides conducting three training workshops in Karachi, Lahore and Islamabad, the group visited SEZs sites in Sindh, Punjab and Khyber Pakhtunkhwa.

Comment by Riaz Haq on March 21, 2018 at 7:14am

#Pakistan #FDI surging. Expected to reach $3.7 billion in fiscal year 2017-18 ending in June 2018. #CPEC #China #Investment

https://www.reuters.com/article/us-pakistan-economy-investment/paki...

Pakistan expects net foreign direct investment (FDI) to jump about 60 percent in 2017/2018, the chairman of Pakistan’s Board of Investment said, but some Western investors appear to be put off by China’s growing influence in the South Asian nation.

Chinese companies are building roads, power stations and a deep-water port in Pakistan after Beijing offered more than $50 billion in funding for Pakistani infrastructure as part of China’s vast Belt and Road initiative.

Chinese investment has helped spur Pakistan’s economic growth to more than 5 percent, its highest in a decade, while also increasing Beijing’s clout in Pakistan at a time when Islamabad’s relations with the United States, an historic ally, are fraying over Pakistan’s handling of Islamist militants and the conflict in Afghanistan.

Naeem Zamindar, a state minister responsible for promoting foreign investment in Pakistan, said some Western investors appeared reticent because of an incorrect perception that Chinese companies would get “exclusive advantages” and concessions that would not allow for an even playing field.

“A perception was created that the Chinese are taking over. The fact of the matter is that this is not true,” Zamindar told Reuters in his office in Islamabad.

“Pakistan’s government is very clear about it: we want investors of all hues to come in and participate in building this economy - whether American, English or Japanese.”

Zamindar said some Chinese companies building power stations had obtained soft loans but that was because the money was provided by Beijing, which made such terms a condition of its financing for projects that were part of the China-Pakistan Economic Corridor (CPEC), a key leg of the Belt and Road infrastructure network.

But for the second phase of CPEC, in which a series of Special Economic Zones (SEZs) will be set up to boost Pakistan’s industries, Chinese companies will not receive preferential treatment, Zamindar added.

“That is completely non-discriminatory,” he said, adding that Pakistan’s Special Economic Zones Act stipulates no country or company will get preferential treatment within the SEZs.

“The (SEZ) concessions are published and are on the website, open to all.”

Zamindar said net FDI for the financial year 2017/2018 (July-June) is expect to reach about $3.7 billion, with Chinese companies providing up to 70 percent of the new investment.

Net FDI has been gradually rising since 2014/2015, when it plummeted to less than $1 billion. It rose to $2.3 billion last year, according to central bank data.

Foreign direct investment is separate from the China-Pakistan Economic Corridor investments. More than 20 CPEC projects worth nearly $27 billion are currently being implemented, a senior government official told Reuters, meaning either work has begun on the projects or financing deals have been completed.

Zamindar said militant attacks were sharply down in recent years and security was much improved, but some investors are unaware of this and had an outdated “negative image” of Pakistan.

Yet overall interest in Pakistan had jumped, Zaminder said, and he would tour Britain, the United States, France and Saudi Arabia in coming weeks to promote the opportunities available in the country of 208 million people and a fast-expanding middle class.

“We are open for business.”

Comment by Riaz Haq on July 12, 2019 at 7:33am

#Chinese businesses plan $1 billion #investment in #Pakistan's #automotive, #textile, #agriculture, information #technology and #telecom sectors. #CPEC https://www.thenews.com.pk/print/497017-chinese-businesses-plan-1-b...

Chinese businessmen on Thursday expressed desire to invest around one billion dollars in Pakistan as China’s funded economic corridor projects entered into their second phase with focus on industrial and agriculture cooperation and Gwadar development. The 50-member business delegation apprised Minister for Planning, Development and Reform Khusro Bakhtyar of its investment plan during a meeting. They are keen to invest in various sectors, including automotive, textile, agriculture-related, information technology and telecom industries. Bakhtyar said the ministry of planning would facilitate investment to further the economic cooperation between the two countries.


“The government is focusing on promoting export-led industry and import substitution for sustained economic growth,” an official statement quoted the planning minister as saying. “China can help increase Pakistan’s exports by relocating export-oriented industries and initiating joint ventures in various fields. This will boost industrial cooperation besides strengthening bilateral economic partnership between the two countries.”

China initiated $62 billion worth of infrastructure and energy projects in Pakistan as part of its Belt and Road Initiative.

The minister said the country offers liberal investment policies to attract foreign investment in different areas. “Private sector of both the countries should forge partnerships for mutual economic benefit of the two countries,” he said. “There are investment opportunities in various sectors such as maritime, iron and steel, petrochemical, agro-based industries, tourism, energy, minerals and mines and textiles.”

Bakhtyar further said establishment of industrial zones has the potential to revive the country’s industrial sector. “It will also create job opportunities besides developing local industries.”

Pan Guangfeng, head of the Chinese delegation acknowledged the significance of Pakistan’s strategic location and the immense investment opportunities in the country. Guangfeng said the city of Chongqing is side by side with One-Belt-One-Road and a centre of heavy industrial activity in central China, especially the automotive and electronics industries of the region along with 37 industrial parks. The delegation head said the investors could raise $300 to 500 million for special economic zone (SEZ) infrastructure development with an umbrella investment of $1 billion in several sectors. He hoped that Chinese investment in Pakistan would help to create 500,000 direct jobs for local youths in addition to transfer technology and raise industries’ tech standards in Pakistan.

Members of the visiting delegation, comprising of chief executives and general managers of businesses from the City of Chongqing, have experience in developing economic zones and expressed their intention to facilitate in the development of SEZs. They highlighted the potential role of Belt and Road Initiative in contributing to the economic and social development of Pakistan and further explored the avenues of collaboration in technological innovation and up-gradation, job creation, ecommerce, and development of human resource capabilities through industrial cooperation between China and Pakistan.

Comment by Riaz Haq on August 3, 2019 at 6:08pm

The flaws in CPEC


https://medium.com/@farooqtirmizi/cpec-is-dead-somebody-tell-beijin...


The biggest so-called mystery about CPEC is as follows: if CPEC was supposed to be such a huge bonanza for Pakistan in terms of investment, which is it not showing up in the foreign direct investment (FDI) numbers? Why is Pakistan’s current account balance still negative? In fact, why is Pakistan’s current account balance actually getting worse?
The answer is relatively straightforward: because CPEC is not an investment into Pakistan, it is structured as a resource extraction exercise. Here is how it works: China announces that it has invested in a project in Pakistan worth, let’s say $1 billion. That $1 billion, however, is required to mostly be spent on Chinese equipment, and labour, a significant portion of which is to be imported from China as well, with very little by way of supplies coming from the local economy.
That $1 billion, therefore, never hits Pakistan’s economy as an investment. It is $1 billion that goes from the Chinese government or state-owned company to a state-owned company within China to pay for equipment. Even the Chinese labour gets its salaries deposited into bank accounts within China. The money, in other words, stays completely within China and so never shows up as foreign investment into Pakistan.
Where it does show up is in the trade statistics: that $1 billion of equipment will show up as an import, against which Pakistan will have to arrange foreign currency from somewhere. And it will show up as a liability on the balance sheets of whichever company or government entity is contracting with the Chinese government or state-owned company.
Let us recap what we get and what China gets out of this so-called $1 billion investment.
China gets:
· $1 billion in sales for a Chinese state-owned company
· $1 billion in new loans for a Chinese state-owned bank at very high interest rates
Pakistan gets:
· $0 in investment
· $1 billion in imports and increase in net trade deficit
· $1 billion in liabilities for a Pakistani company or government entity
As is evident from the above, this is an arrangement designed purely to benefit one party and that party is not Pakistan. It could still work out in Pakistan’s favour if the economic value of the asset being built was greater than the $1 billion in liabilities taken on to build it. Unfortunately, more often than not, it is far from clear as to whether that is the case.

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