This is a review of CPEC and CPEC-related news and analysis for the week of May 7-13, 2018.
Economy and Trade
- Pakistan’s commerce secretary: emulate Vietnam to improve balance of trade with China. As talks over the second phase of the Pakistan-China FTA stall, Younus Dagha, the top bureaucrat in Pakistan’s commerce ministry, argues in DAWN that Pakistan should leverage Chinese investment in the CPEC special economic zones to boost exports and reduce its trade deficit with China. Dagha writes that instead of reflexive protectionism, Pakistan should integerate itself into global value chains, much like Vietnam has.
- Alibaba Group purchases Pakistani online retailer Daraz. Financial details of the deal were not released, but an anonymous source tells DAWN that the company was purchased at a price of around $450-500 million. Backed by venture capital firm Rocket Internet, Daraz also operates elsewhere in South Asia, including Bangladesh and Sri Lanka. Earlier this year, Alibaba purchased a 45 percent stake in Telenor Microfinance Bank, targeting Pakistan’s growing digital banking and payment space.
Bank of China launches clearing and settlement mechanism of Chinese yuan in Pakistan. In November, the bank established its first branch in Pakistan. Two months later, the State Bank of Pakistan approved use of the yuan for denominating foreign currency transactions.
- Pakistan to secure another $2 billion from China to support depleting foreign exchange reserves, reports Pakistan Today. The forex infusion will reportedly consist of a short-term loan of $1 billion and a renminbi-denominated Panda bond of $1 billion — Pakistan’s first-ever. In April, the Bank of China and China Development Bank provided a combined $1.2 billion loan to support Pakistan’s forex reserves. Pakistan also received at least $1.2 billion in loans from China in 2016-17 to shore up its reserves.
- Pakistani exports rise by 19 percent on a year-on-year basis as import growth slows, but current account deficit continues to widen. The total trade deficit for FY 2017-18 is nearing $30 billion.
- Pakistan’s PM says Gwadar and Chabahar can complement one another. Addressing a maritime conference, Prime Minister Shahid Khaqan Abbasi said, “We are working hard on strategizing measures to ensure complementing role of Chabahar and Gwadar ports as sister ports so as to diversify and manage the huge potential of China Pakistan Economic Corridor (CPEC) and Belt and Road Initiative (BRI).” Abbasi also emphasized the need for Pakistan to exploit its expanded exclusive economic zone.
- Chinese company to provide clean drinking water in Gwadar, reports Pakistan’s The News. China Overseas Ports Holding Company, the port operator in Gwadar, will provide 300,000 gallons a day of drinking water to locals in Gwadar at a cost of PKR 0.80/gallon (roughly USD 0.0069/gallon).
Judicial body tells courts not to issue ex parte stay orders on CPEC projects, reports DAWN. Pakistan’s top judicial policymaking body, led by the Supreme Court chief justice, asked the country’s courts not to impede on the progress of CPEC projects. While Chief Justice Saqib Nisar appears to be in favor of the use of alternate dispute resolution mechanisms to expedite CPEC-related cases, Justice Mushir Alam called for “the need for uniformity” in the legal process. Another justice recommended the creation of special courts akin to the Dubai International Finance Center’s court system.
- Afghanistan and Pakistan hold talks to boost bilateral trade. Pakistan has agreed to make a series of concessions to Afghan traders, including the reduction of tariffs on Afghan produce and permitting the import of Afghan cotton. Recently, Pakistan reopened the third-largest official border crossing between it and Afghanistan, located in North Waziristan’s Ghulam Khan area. The crossing point had been closed for four years due to Pakistani military operations. USAID has spent over $100 million on road networks in Afghanistan and Pakistan connecting to Ghulam Khan (the Gardez-Khost National Highway and the Bannu-Miran Shah-Ghulam Khan road).
- TAPI construction in Afghanistan could be delayed, reports TOLO News. An environmental feasibility study has not been conducted for the pipeline. And land acquisition has also not been completed.
- India and Maldives hold joint exercises patrolling Maldives exclusive economic zone, reports the Times of India. The exercises are taking place after Pakistan Army Chief Gen. Qamar Javed Bajwa visited Male in April and reportedly proposed joint patrolling of the Maldives EEZ.
Updates on the China-Pakistan Economic Corridor and Belt and Road Initiative.