This is a review of news and analysis pertaining to the China-Pakistan Economic Corridor and related regional connectivity and security issues, covering the period of September 14 – November 14, 2018.
Imran Khan’s China Visit
- Prime Minister Imran Khan made an official visit to Chinafrom November 1 – 5. Khan met with senior Chinese officials, including President Xi Jinping, and attended the China International Import Expo in Shanghai as a “guest of honor.” He also addressed the elite Party School of the Communist Party of China.
- The prime minister appeared to have returned home empty-handed, but Finance Minister Asad Umar subsequently alluded to Chinese support to avert an imminent balance of payments crisis. He told reporters in Islamabad, “We had a gap of $12 billion and in that $12 billion, six billion came from Saudi Arabia and the rest came from China.”Umar said that the balance of payments crisis is over, at least for now.
- All About Exports: In China, Umar also made clear that Pakistan has an overall debt problem that is not China-specific. Umar said: “The reason why debt sustainability is a problem in Pakistan is that we don’t have enough exports; we are not generating enough foreign currency inflows to be able to service the debt, and that’s the fundamental problem.”
- Aid and Trade: The finance minister said that Pakistan aimed to boost exports to China. He told reporters that the two countries had discussions not only on aid but also on investment. Umar: “We want to change the relationship from taking loans and aid to emphasizing on trade, industry and agriculture.”
- Trade adviser Haroon Sharif on Chinese aid: “It is expected to be a good package [from China]. I am unable to share the figures, but I think it would more or less be similar to the one Saudi Arabia has announced [for Pakistan].”
- During Khan’s visit, Pakistan and China signed 15 MOUs, including agreements to upgrade strategic dialogue to the ministerial level and advance cooperation on agriculture and poverty alleviation. Pakistan and China also agreed to increase their trade in yuan.
CPEC and CPEC-Related Projects
Top Sino-Pak CPEC coordinating committee to meet on December 9 in Beijing. This will be the JCC’s first session since the start of the PTI administration.
First Thar lignite power plant will become operational by January 2019. The power plant project is running five months ahead of schedule, accordingto Sindh Engro Coal Mining Company CEO Shams Shaikh.
The Multan-Sukkur section of the Karachi-Lahore Motorway will be completed by next August. This is a six-lane, high-speed, controlled-access highway connecting Pakistan’s two largest cities.
Habib Bank, Pakistan’s largest bank, leads the country’s financial services integration with China.It has signed a partnership deal with China International Capital Corporation Limited, China’s largest investment bank. Habib Bank CEO said in an interview with Bloomberg TV that more Pakistani projects should be settled in yuan. The bank is also urging Pakistan to raise more yuan-denominated bonds, stating that bond issuances of around $1.5 billion to $2 billion are possible. Habib Bank recently obtained an RMB license from Beijing.
Chinese diplomat says Pakistani mango exports to China will be doubled next year.
ANALYSIS: CPEC moves into agriculture (DAWN)
China’s King Long Automotive to set up bus assembly plant in Lahore.
Elders from Pakistan’s tribal areas visit China.
Saudi delegation visits Gwadar to explore investment opportunities, including a potential $6 billion oil refinery.
Balochistan chief minister Jam Kamal meets Chinese ambassador. They discussed the status of three main CPEC projects in Gwadar, security for Chinese workers, and Beijing’s support for a waste management system in Gwadar.
- MORE: Chief Minister Kamal also ordered Gwadar schools to teach Chinese. Three dozen students from Gwadar recently departed for Beijing to attend a one-year Chinese language course at Beijing Polytechnic University. They will join 14 students who left for the program in March.
Parliamentarians from 26 Asian countries attend three-day conference in Gwadar. Attendees included legislators from Iran and Saudi Arabia.
Maritime affairs committee senators urge employment of locals in Gwadar projects.
A 750-acre shipyard is planned for Gwadar. If completed, it will be Pakistan’s largest shipyard.
Economy and Trade
As bailout talks with the IMF begin, the Fund forecasts Pakistan’s GDP growth rate to slow to 4 percent in 2019 and 3 percent in the medium term.
And Moody’s warns: “Pakistan is likely to face high refinancing cost for its international bonds maturing over the next two years that would increase the country’s debt burden.”
Commerce advisor Dawood says Pakistan needs to generate 4 million jobs annually for youth entering the workforce. He also hopes to push exports to $25 billion by next year.
Pakistani government will hold bidding for 20 new oil and gas exploration blocks.The last bidding took place in 2013 during the tenure of the Pakistan Peoples Party-led coalition government.
Pakistan’s Khyber Pakhtunkhwa province plans on listing up to 25% of shares in the provincial oil and gas company (KPOGCL) at the Pakistan Stock Exchange. KPOGCL forecasts oil and gas production in the province to double by 2025, reaching 200,000 BPD (oil) and 2 BCFD (gas).
How an Egyptian company is building a new $2 billion Islamabad suburb (Pakistan Today)
Nike Sock Supplier Plans Biggest Pakistan Private Sector IPO (Bloomberg)
E-commerce sales in Pakistan double to $300 million. Digitization boosted services sector from 52 to 60 percent of GDP.
Human Capital Index: Bangladesh outshines India, Pakistan (The Daily Star)
Turkish firm to lay 750 km power line in Afghanistan along the Turkmenistan-Afghanistan-Pakistan-India gas pipeline route.
Pakistan pledges to construct rail line to Iran via Gwadar and Quetta.
The Belt and Road
Chinese SOEs have undertaken 3116 projects under BRI, reports the state-run China Daily. Chinese state-owned enterprises are sponsors of around 50 percent of the Belt and Road projects that have been proposed or initiated.
Xi and Abe hold summit, agree to collaborate on infrastructure development abroad. The two countries agreed to a $30 billion currency swap. A high-speed railway line in Thailand could be their first joint project.
- MORE: Japan’s trade engagement with China – is Myanmar a case study? (JOC) Andrew Wheeler writes, “Japan has played the game well by taking a bet each way.”
Italy could be the first G7 country to join the Belt and Road. Chinese state-owned companies might invest in Italy’s Trieste port, leveraging its location and rail connectivity and positioning it as its main hub in Europe.
Thailand Prime Minister Chan-o-cha orders feasibility study for the Kra Canal, a $30 billion project that would allow Chinese vessels to circumvent the Strait of Malacca and direct access to the Andaman Sea and Indian Ocean region.
China and Myanmar sign framework agreement on construction of Kyaukphyu deep sea port, located in the Rakhine state.
Xinhua reports that one-year purchase agreements totaling $57.83 billion were reached at the China International Import Expo (CIIE) in Shanghai. The bulk of orders appear to be for automobiles and advanced technologies. Less than 10 percent (or $4.72 billion) were ordered from Belt and Road countries.
Rude awakening for new Maldives leader. The Los Angeles Timesreports that Maldives President-elect Ibrahim Mohamed Solih learned from the Chinese ambassador after the September elections that his country owes Beijing $3 billion in debt, not the widely estimated $1.5 billion.
The port of Colombo could be an attractive transshipment option for Bangladesh and an alternative to the port of Singapore. Bangladesh is a major garment exporter, but lacks a deep water port. Read more at JOC.
Nepal restores US$2.5 billion hydropower plant contract to Chinese firm, reports the South China Morning Post. Beijing has also pledged around $20 million in aid to the Nepalese Army to boost its humanity and disaster relief capabilities.
ANALYSIS: Belt and Road is globalization with Chinese characteristics (Financial Times)
The Counter Belt and Road
Vice President Pence takes on the Belt and Road. On October 4, U.S. Vice President Mike Pence addressed the neoconservative Hudson Institute. The headline in the following day’sNew York Times read: “Pence’s China Speech Seen as Portent of ‘New Cold War.'” The full text of the speech is available here. Its wide-ranging accusations and complaints toward China is reminiscent of George Kenan’s “Long Telegram.” This week, en route to Asia, Pence told the Washington Post that the onus is on China to avoid a cold war.
U.S. Congress passes the BUILD Act to boost alternatives to China-backed infrastructure lending. The law consolidates the Overseas Private Investment Corp and other U.S. government development bodies into a new development finance institution, the U.S. International Development Corporation or USIDFC, which will be able to acquire equity in projects rather than simply lend. It will also roughly doubles the U.S. overseas developing financing cap to $60 billion.
Chabahar port receives Iran sanctions waiver. A rail project connecting Chabahar to the border with Afghanistan is also exempt from U.S. sanctions. And so are Afghan imports of Iranian oil. Ahead of the decision, Afghanistan, India, and Iran held their first trilateral meeting on implementing the Chabahar agreement. An Iranian official recommended that the three countries establish a transport and transit union to streamline implementation of the pact. Afghanistan’s ministry of transportation said that it will establish a maritime shipping line. India and Japan agreed to jointly train Afghan customs staff. Iran’s Chabahar port will be linked with Oman’s Sohar port as “sister ports” according to a Sistan-Baluchestan provincial official. $111 million in logistics contracts signed for Chabahar port since March, according to a regional Iranian official.
India’s Modi and Japan’s Abe agree to $75 billion currency swap and push forward talks over sharing of intelligence and logistics. The two leaders also identified a series of joint overseas projects, including development of an LNG-handling infrastructure in Sri Lanka and road and bridge construction in Bangladesh.
REPORT: Container Port Strategy (International Transport Forum) This report examines how ports can accommodate changes in maritime transport (such as the arrival of mega-ships) while adapting to developments in the hinterland (notably in their host cities). It presents considerations and recommendations for policy-makers to help find a mutually beneficial balance between port and city.
Regional and Strategic
‘A Game of Chicken’: U.S. and China Are Risking a Clash at Sea (The New York Times)
The US wants India to step up its multilateral military engagement in the “Indo-Pacific” region, reports the Times of India.
Growing ties with Islamabad are not at the cost of Moscow’s “strategic, long-term” ties with New Delhi, says Russia’s ambassador to India.
Sri Lankan Supreme Court overturns dissolution of parliament by President Sirisena. An aide to deposed Prime MinisterWickremesinghe accused China accused of funding former President Rajapaksa’s attempts to buy defectors to gain a parliamentary majority for a vote of confidence.
China to provide $50 million for fiber optic connectivity with Afghanistan via the Wahkhan corridor, according to the Afghanistan Ministry of Telecommunications and Information Technology.
Afghanistan’s network of “air corridors” expands to China. Twenty tons of pine nuts were dispatched to Shanghai by air.