CHINESE HELP TO RESOLVE ENERGY CRISIS

KANWAL SALEEM
(feedback@pgeconomist.com)
Jan 17 - 23, 20
11

China is extending cooperation to Pakistan in more than a dozen ongoing projects in energy sector. With Chinese assistance, a number of water and power development projects have already been completed. However, much more is to be done to get Chinese assistance to overcome power crises in the country.

Important projects, which have been completed with Chinese assistance, include construction of large number of hydropower stations, fertilizer plants, Heavy Mechanical Complex, Heavy Electrical Complex, KKH, Gwadar port, Ghazi Barotha Power Station and auto manufacturing while quite a few are likely to be added.

Pakistan with the cooperation of China has already successfully completed ventures including the 1450 MW Ghazi Barotha power Project and 184 MW Chashma Hydropower Project. China is also assisting Pakistan in Mangla Dam Raising Project by 30ft and on completion the project will have additional storage of 2.88 million acres ft besides generating additional 644 GWh.

Gomal Zam Dam is another mega project in South Waziristan Agency which will have live storage of 0.892 million acres ft and generation capacity of 90.9 GWh annually. Satpara Dam, being built with cooperation of China, will have live storage of 52980 acres ft and 17.3 MW power generation capacity.

Kachhi Canal Project is another mega project located in Punjab and Balochistan, which involves construction of 500 km long canal, out of which 300km lined channel is in Punjab and 200km unlined channel is in Balochistan.

Pakistan will construct Darawat Dam with Chinese cooperation which on completion will have live storage of 87,264 acres ft and will generate 0.45 MW of electricity. Likewise, the Chinese government is also assisting Pakistan in Khan Khwar, Duber Khwar, Allai Khwar, Jinnah, Neelum-Jhelum hydropower projects having total power generating capacity of 1,388 MW.

A memorandum of understanding (MoU) was also signed between Economic Affairs Division, Government of Pakistan and China EXIM Bank to provide a credit line of US$700 million to WAPDA for building small and medium water reservoirs/dams in Pakistan. Size of Buyer's Credit may be enhanced from US$700 million to US$850 million to cope with 70 per cent financing of estimated capital cost of these projects.

In addition to the Small/Medium Dam projects, China Exim Bank has also agreed to provide US$448 million for Neelum-Jhelum Hydroelectric Project which is being constructed by China Ghezuba Group Company (CGGC).

The recent visit of Chinese Prime Minister Wen Jiabao to Pakistan targeted to set the trade volume between the two friendly countries at US$15 billion by 2012.

Experts believe that there is a great scope for enhancing trade between the two friendly countries, saying that the current business summit would definitely pave way for increasing it. As many as 150 counterpart companies of different sectors of the two countries have been engaged in consultations in the forum, exploring opportunities and possibilities for future investments and exports, they added.

According to them, Pakistani export companies would be involved in marketing in various cities of China to enhance exports to China. Pakistan and China are enjoying friendly political relations, which have led to developing trade and economic relations.

Under the 5-year Development Programme launched in 2006 for strengthening of economic relations, the bilateral trade is to be enhanced to $15 billion by 2012. More than 62 different projects have been identified under this programme for investment in various economic fields and are at different stages of completion. In the last few years, investment of more than $1.3 billion was made by China in Pakistan. Over 120 Chinese companies have invested in oil, gas, IT and telecom, power generation, engineering, automobiles, infrastructure and mining sectors of Pakistan. The companies included ZTE, Huawei Technologies Co Ltd, China National Machinery Imp/Exp Corporation, Metallurgical Construction Corporation of China, China International Water and Electric Corporation, China Mobile, China Petroleum, Sino hydro, TBEA, Dong Fang, China Roads and Bridge Corporation, China Harbor Engineering and Haier etc.

China being the second biggest economy of the world finds immense business opportunities in Pakistan as bilateral trade between the two countries has crossed the figure of US$7 billion. Sino-Pak mutual experience of growth in trade is positive due to convenient trade flows and openness measures. Trade and investment policies are liberal and generally WTO compliant.

China has become one of the top five import sources of Pakistan. Major imports from China are machinery, chemicals, garments and other textile products, stationery, construction materials like tiles, sanitary and crockery, etc.

Machinery and electrical appliances are the major parts of overall exports while Pakistan exports are dominated by fisheries, minerals, stones, textile products and cotton yarn etc.

Pakistan has huge export potential to China due to advantages in agriculture, mineral, chemical, textile, fisheries, and leather products. Besides, Pakistan has comparative advantage in oil seeds, fruits, base metals, plastic goods, and perfumery etc. China has static advantage over Pakistan in machinery, transport equipments, chemical products, precious instruments, stone and plastic articles, home appliances, pearls, precious/semi-precious stones etc. Manmade filaments, space crafts and aircrafts provide dynamic comparative advantage to China.

Chinese enterprises are availing the liberal 'Going Abroad' policy and Pakistan could be one of the attractive destinations for various reasons for investment out of dedicated funds for adjoining markets.

ICBC, the world largest Chinese Bank by capitalization, has reportedly started the ground work for opening the branches in Pakistan. A few most ambitious projects for the future are: the establishment of a railway link, development of a energy corridor, establishment of transit/trade corridor by using KKH as alternate trade route and collaboration in major infra structure projects like development/processing of coal on a large-scale and construction of big dams etc.

China and Pakistan have signed many bilateral agreements, like Free Trade Agreement, Bilateral Investment Treaty, Double Taxation Agreements, Customs related agreements/procedures, establishment of Pak-China Joint Investment Company, bilateral contracts, 5-Year Framework, MOUs in various fields & between various Ministries/Divisions of two countries and the Agreement on Trade in Services. The trade and investment volume is going to increase after the implementation of this agreement, particularly in financial and technical services.