CHINESE INVESTMENT IN PAKISTAN

Pakistan has received more aid and offers of financial assistance from China

From SHAMIM AHMED RIZVI, Islamabad
May 26 - June 01, 2003

China has again come to the rescue of Pakistan by its timely offer of $1 billion through a mix of equality and credit to construct Rs.87 billion 960 MW power project to enable Pakistan to maintain its legal rights over the waters of river Jhelum.

Islamabad has been discussing with Beijing the possibility of latter financing the project, but early last year China expressed its inability to fund any new project because of its commitments for economic assistance to other Asian and African countries. The new leadership of China has reversed its earlier decision because of the urgency and strategic importance of the project for Pakistan. If the Neelum project was not started during 2003, Pakistan would be obliged under the 1960 Indus Water Treaty to allow India to divert Jhelum waters for its power generation.

A top-level delegation of China Machine Tool Company (CMT) is meeting a WAPDA team led by Chairman Zulfiqar Ali Khan on May 22 in Lahore to discuss technical details and financing options of the project. The Chinese state-owned power construction company had approached the federal government and expressed its willingness to finance the through equity and also make available credit from the Chinese banks on very competitive terms.

The federal government, said these officials, authorized WAPDA Chief Zulfiqar Ali Khan to discuss technical aspects of the project with the company and sign a Memorandum of Understanding (MoU) to develop the project on a fast-track basis.

Early this year, WAPDA had offered to make available Rs.15 billion out of its own resource and wanted the federal government to arrange a similar amount to start the project on a war-footing within the current fiscal year. It has been decided to undertake this project on top priority to be started immediately and completed as early as possible.

The latest Chinese offer has thrown a spanner in the works of India's plan to explore the provisions of the Indus waters treaty for her benefit. Beijing's offer to fund most of the cost of the Rs.87 billion Neelum-Jhelum hydropower project comes at a crucial time for Pakistan, because the time-frame allowed to Pakistan by the 1960 Indus Waters Treaty to build a hydropower project on the Jhelum is running out and unless work on the project is started immediately, Pakistan would be obliged, under the provisions of the treaty, to allow India to divert Jhelum waters for a power generation project.

Thus, the Chinese offer has come as a lifesaver for Pakistan and demonstrates yet again that this country has no greater friend than China. We on our part, too, have been a very good friend to China. Over the years, we have consistently supported Beijing on a wide range of issues of concern to it, whether it is the Taiwan question, the Macmohan Line dispute with India, or any other issue. Indeed, the ties between the two countries have always been a model of good neighbourly relations.

If anything, this friendship is now strong than ever before, as demonstrated, for example, by the fact that in the last 18 months, Pakistan has received more aid and offers of financial assistance from China than has any other country in the world. There can be no better proof of the high regard in which China holds Pakistan a feeling reciprocated in full measure by the Pakistani people.

Besides Gwadar Port, coastal highway, Saindak and Thar coal, China is assisting in other areas. The Pakistan Prime Minister was the first foreign dignitary to make an official visit to China immediately after the swearing in of the new government in that country. This fact is also significant in the long sustained friendly relations between the two countries. What is to be noted with great satisfaction in Pakistan is that the new government in China showed the traditional measure of cordiality and friendship to Pakistan's Prime Minister and his delegation.

Of the newly-signed MoUs, the most important is the one relating to the second nuclear power plant of 300 megawatt which is planned to be established at Chashma adjacent to the existing plant of similar capacity which was recently completed with financial and technical assistance from China. The new plant will be in fact the third of its type in Pakistan including the oldest one of Karachi Nuclear Power Plant (KANUPP). The cost of the second nuclear plant at Chashma is yet to be worked out while the modalities of assistance from China for this project, according to reports, would be finalized in negotiations between the two sides.

The MoU for this project was signed by Dr. Pervez Butt, Chairman, Atomic Energy Commission of Pakistan, while the head of the Chinese nuclear authority signed the agreement on behalf of his government. The project which is likely to take six years to complete, undoubtedly represents a bold leap forward by the Pakistan government in pursuing the policy of expansion in nuclear-based power generation that is universally recognised as the cheapest source of energy. It may be pointed out here that the present energy policy of the government envisages large scale use of indigenous coal deposit of Thar in Sindh, in which Chinese companies are associated with the plans not only to develop the mines but also to establish two or three power generating unit of 300mw each. Additionally, hydro-electricity projects are also being promoted in NWFP on a wider scale. With these schemes in hand, Pakistan is likely to emerge as more than self-sufficient in energy generation over the next ten years.

Most of the other MoUs signed by Pakistan with China included the development projects of Pakistan Railways. It may be recalled here that the improvements achieved by Pakistan Railways. It may be recalled here that improvements achieved by Pakistan Railways during the past three years both in terms of efficiency in its working and in financial viability due to reduction in losses were owed to Chinese assistance in various products of Pakistan Railways. The new MoUs would largely provide for extended flow of technical and financial assistance from Chinese companies in addition to government guarantees. The project include substantial increase in passenger coaches, freight coaches and locomotives to be partly purchased from China against deferred credit facility and partly manufactured or assembled at Pakistan Railways workshop. At the same time, Chinese companies have also shown keen interest in the proposals for the revival and profitable operations of Karachi Circular Railways. The Sindh government is also looking forward to the participation of Chinese companies in this project.