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In CPEC talks, Chinese drive a hard bargain with Pakistan

ISLAMABAD: Pakistan appea­red to have been pushed hard by the Chinese side to give in more than it secured in return during the recently held 7th joint cooperation committee (JCC) meeting of the China-Pakistan Economic Corridor (CPEC).

Upgrading the main line rail link from Karachi to Peshawar is the single largest project in CPEC. Known as the ML1 project, it is estimated to cost up to $8.2bn.
Upgrading the main line rail link from Karachi to Peshawar is the single largest project in CPEC. Known as the ML1 project, it is estimated to cost up to $8.2bn.

This is evident from the minutes of the 7th meeting on a series of issues including revision in the completion deadlines of the energy projects, the Main Line-1 project and early activation of revolving fund in 30 days for payments to Chinese sponsors.

The JCC agreed that Pakistan’s agencies in power sector and Chinese project sponsors should sign the supplemental agreements at the earliest and decided that “Pakistani side will address timely payment of electricity charge in power projects under CPEC as soon as possible”.

Minutes of last JCC meeting suggest Chinese at limits of their flexibility

In accordance with the governmental agreement on energy cooperation between the two sides, a revolving bank account should be created within 30 days after commercial operation date of the CPEC energy projects.

Editorial: CPEC is not going as well as govt would have us believe

The two sides noted that some energy projects under CPEC had very tight construction schedules and agreed to urge the financial close and construction of relevant projects as soon as possible. It was also agreed to “make reasonable arrangement of the extension in financial close and construction through friendly negotiations” within the Power Generation Policy 2015 framework.

The joint working group on energy was asked to carry out joint studies on the current power status, future load forecast as well as the potential power market in Pakistan.

The Pakistani side also recognized the importance for assurance of water supply for SSRL Thar Coal Block-I Mine Mouth Power Plant during its construction and operation period by Government of Sindh (GOS).

China also demanded Pakistan not to adopt differential electricity charge policies towards CPEC power projects designed and constructed to Chinese standards, technologies and equipment. Pakistan will respond later.

On the railway side, the speed on the ML-1 has now been reduced to 160 kilomtres per hours from originally conceived speed of 260km per hour. It was reported that both sides have reached agreements on making fast track arrangements for completing all related task for ML-I implementation in a timely manner. The Chinese side did not immediately accept Pakistan’s demand for easing financial terms for the ML-1 project.

Given the strategic importance of ML-I project, both sides jointly decided that financing arrangement would be made proactively and work on ground could be started early. “Pakistan side proposed that financing arrangement for the project may have favorable terms and condition which Chinese side agreed to consider in financial negotiations”. It was agreed that work on Phase-I of ML1 Project would be started early 2018, and all requisite arrangement including preliminary design review, signing commercial contract, etc. would be completed through proactive approach in a timely manner.

Pakistan also proposed extension of ML-1 to Torkhum and the Chinese agreed to discuss the extension to at technical level after completion of the feasibility study being carried out.

JCC expressed satisfaction with the progress of the “Two Big Projects” and Chinese appreciated efforts for making safety and security arrangement of Chinese working on these project. Pakistan assured that the issues relating to tax on machinery/equipment and construction material as per commercial contract will be resolved by the end of 2017.

The JCC agreed to accelerate the preparatory work including technical and commercial feasibility study of the projects like EastBay Expressway Phase-II; Gwadar Port Breakwater and Gwadar Port Dredging.

The 7th JCC approved Mirpur-Muzaffarabad-Mansehra (MMM of 200km) for implementation and deferred for next joint working group meeting the projects including Gilgit-Shandoor-Chitral (359km), Nokundi-Mashkel-Panj­gur Road (290km) and Keti Bandar Sea Port Development Project

On the Gwadar port side, China Overseas Ports Holding Company (COPHC) has submitted the Feasibility Report of Gwadar Port (Phase II) Expansion and the Feasibility Report of Gwadar Free Zone (Phase II) to Gwadar Port Authority (GPA), and both sides supported to carry out relevant construction work as soon as possible.

The JCC expressed satisfaction on the progress of 300mw coal fired project at Gwadar. The Chinese proposed to replace its company for the coal power project and Pakistan agreed to make amendments but demanded that Chinese should deposit funds for the land acquisition while promising to ensure seamless security arrangements.

Pakistan side proposed to build fruit and vegetable base at command area around Mirani Dam, to build Gwadar Fish harbor & fishermen boat making industry on Gwadar West Bay, to build Beltway Municipal roads, and Solid Waste Treatment Plant for the Gwadar city. Both sides agreed to have an overall study on three new projects according to the actual conditions in the future development of Gwadar.

The Chinese conveyed that Dhabeji Industrial park at Thatta, Hattar Industrial Estate II of Khyber Pakhtunkhwa and M-3 Faislabad, Punjab currently have more advantages than other proposed sites for provincial SEZs. However, Pakistan side expressed that Rashakai SEZ was its preference in Khyber Pakhtunkhwa, and an additional SEZ (M-2 / Quaid-a-Azam Park-Sheikhupura) in Punjab. The Chinese Expert Group noted that Khyber Pakhtunkhwa paid high attention to the development of SEZs especially has done abundant work in Rashakai SEZ. Therefore, it “suggested to make full use of the positivity of Khyber Pakhtunkhwa to promote the construction of Rashakai SEZ at the earliest”.

Published in Dawn, December 13th, 2017

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