Pakistan

$46-billion CPEC: Govt attempts to clear transparency concerns

Finance minister comes down hard on critics raising alarm over growing public debt

Our Correspondent/APP December 30, 2015

Pakistan-China Economic Corridor PHOTO: FILE

ISLAMABAD:

The government on Wednesday moved to address transparency concerns over $46 billion deals under the China-Pakistan Economic Corridor (CPEC), coming down hard on critics who have been raising concerns over growing public debt.

Finance Minister Ishaq Dar chose a government-funded forum on transparency in the public sector to address apprehensions over transparency in various government deals including CPEC and privatisation transactions. He also rejected allegations that the government was influencing the auditor general of Pakistan (AGP) to give a favourable report on Rs480 billion circular debt payments made in June 2013.

Pakistan should be more transparent on $46 billion China deal: SBP

“The government is taking all necessary measures to make sure CPEC remains transparent,” Dar said. He vowed there would not be the slightest compromise on the principles of economy, efficiency and effectiveness at any stage of the project.

The government has not yet made public the framework agreement of CPEC signed between China and Pakistan. Dar supported the proposal to make the framework agreement public.

In recent days, the government upward revised the cost of road construction projects of CPEC in a haste, which deepened transparency concerns.

Dar emphasised that the $46 billion deals would not increase public debt by the same amount, as $34 billion worth projects were in the private sector. He said ‘pseudo-intellectuals’ were misguiding the people over the exact volume of public debt.

Development efforts: ‘Transparency essential for good governance’

“During the two-and-a-half-year tenure of the PML-N government, public debt increased only by Rs3.8 trillion,” the finance minister said. According to data released by the State Bank, total public debt stood at Rs18.5 trillion by end of September.

Dar said the government was aware that the country cannot be permanently run on borrowings. “Only economic sovereignty will make Pakistan a real nuclear power.”

He claimed that economic decisions were made in a transparent manner, adding that the government was streamlining the existing policy making mechanism. He also recognised the need for an independent and autonomous State Bank, although his ministry is fully controlling the operations of the central bank.

Dar also said the government did not discourage the former AGP Akhtar Buland Rana, who spent two years trying to prove that theRs480 billion circular debt payment was mala fide. He said the audit report of the payment has been finalised and is with the Public Accounts Committee (PAC). “The government will accept and implement the verdict of PAC in letter and spirit,” he added.

Potential: CPEC to meet needs of people

The minister highlighted the role of Public Procurement Regulatory Authority (PPRA) in ensuring transparency. He said the government has given full autonomy to PPRA.

However, Dar, in his speech, did not mention negotiations with Qatar for LNG import, one of the most secret deals of the present government. Speaking at the forum, Information Minister Pervaiz Rashid said the PML-N government firmly believed in transparency and good governance.

“The fact that no mega-corruption scandal, unlike the past, had been reported and unearthed either by the vigilant media or the transparency monitoring agencies is proof of commitment of the PML-N government to do things in right direction and in transparent manner,” he told participants.

The minister added that the seminar on transparency itself testified to this fact.

Rashid said the ‘ambience of gloom’ in the country has been replaced by ‘vibrant optimism’ as a result of the PML-N government’s initiatives. “Economy is on an upward curve signifying the commencement of an era of sustained economic growth,” he said, adding that foreign exchange reserves had increased and inflation had been brought down to a ten-year low.

Potential: CPEC to meet needs of people

He added that energy shortages had been overcome to a large extent and the load-shedding had been reduced to a bare minimum.

Meanwhile, Water and Power Secretary Younas Dagha said the ministry is in process of removing flaws and improving efficiency in the power sector.

“There was an increase of around Rs15 billion in circular debt every year when the government took over in 2013,” Dagha said at the forum. “The debt was not only cleared but also curtailed, which is evident from the fact that 100 per cent payment has been made to IPPs in the fiscal year 2014-15,” he added.

The secretary said all details with regard to payments to IPPs have been placed on the official website of the ministry to uphold the principle of fair play. “With the government’s policy of transparency and good governance, Rs12 billion are being saved annually and so far over Rs75 billion have been added to the national exchequer.”

Published in The Express Tribune, December 31^st, 2015.

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COMMENTS (18)

Raj - USA | 8 years ago | Reply @NDVB: Roads and connectivity is not the problem. The only issue is Pakistan handing over Gwadar port to China which will become China's naval port. When the full facts of CPEC investments come out, you will see that most of the investments are for building China's naval port in Gwadar. Just about about 25% of it will be for building roads and another 25% may be for power projects. The bulk of it will be for China's Gwadar naval port. As both Pakistan's army and political establishments are involved, they have not yet disclosed the projects and allocation for each under CPEC. Pakistanis themselves do not know it. I have said in my comments earlier that CPEC without handing over Gwadar to China is very good not only for Pakistan but for all others also. I am all for it and would praise it enthusiastically. I have also said in my earlier comments that China will not invest a penny in CPEC if Gwadar port is not handed over to them. Also, China will not allow any Pakistanis, Pakistan's army and navy also to enter the port. Gwadar will be fully in China's control. If anyone thinks that US will allow it, they are wrong. India cannot do anything on its own without active support from US.

NDVB | 8 years ago | Reply Raj - USA Raj Bahi, CPEC is Pak -China Lead & owned project. It does provide for connectivity to Pakistan and China like never before. When completed, and added on, it will usher in a different era. India is out of the game & race for a foothold in the West & Central Asia. It was our mean-mindedness and short sightedness that we rejected Pakistan as a cohabitant of South Asia. So, it has created a niche for itself in the West and Central Asia. Let us not burn late night oil and waste what ever little good will is left in Pak for us Indians. Let us contend with B'desh, Nepal. Maldives, Bhutan, and be good to them before they also leave our tribe. Iam being realistic.

VIEW MORE COMMENTS

shah | 8 years ago | Reply @Raj - USA: It Is So Entertaining As To How CPEC Has Robbed You Of A Good Nights Sleep LOL

curious2 | 8 years ago | Reply If things are so transparent then why doesn't anybody know simple things like what projects are considered part of CPEC? I have yet to read an article outlining the various CPEC projects and we still have no clue on the status of Gwadar which was the nexus of CPEC.

B | 8 years ago | Reply Half year has passed by yet nobody knows the true details of CPEC. Net outflows of funds is at a all time high. No foreign investor believes in CEPC. In the end, Pakistan will pay a very heavy price for believing in Iron-clad brother.

Raj - USA | 8 years ago | Reply Total amount Pakistan will be repaying China for this $46 billion investment is $429 billion (return of $46 billion investment + interest charges or minimum return of $383 billion over 45 years). After considering the bids being awarded to China at much higher than than what was planned, the total amount that Pakistan will be repaying will be in the range of 1/2 trillion US Dollars to three 3/4 trillion US Dollars.

Np | 8 years ago | Reply @Saad: It is NOT a gift from China. A 18% rate of return has been agreed with China.

cautious | 8 years ago | Reply How about Thar Coal? Private deal between Engro and the Chinese - but Pakistan ends up having to guarantee all the debt. Dar would say that doesn't increase public debt but it sure takes a chunk out of debt capacity and places Pakistani taxpayers at risk with zero return. . If transparency is the goal they why not provide a list of the projects and their expected cost? Roads, railways, pipelines, power plants, ports, airports, coal mines etc tend to be expensive and I would be surprised if the $46 Billion is enough to cover all the proposed projects.

Raj - USA | 8 years ago | Reply Dar is not telling the truth and is trying to deceive. 34 billion of the CPEC investments may be from the private sector. CPEC may not add $36 billion of private investments to the debt burden of Pakistan but it adds $8.51 billion as debt servicing costs to Pakistan, every year for the next 45 years. These are actually investments made by Chinese companies in CPEC. China's government has given loans to these Chinese companies at very low rates of interest, say 2-3% annual interest rate. These Chinese companies are investing in CPEC and Pakistan has provided sovereign guarantee to China that these Chinese companies will earn a minimum of 18.5% returns annually for the next 45 years. Under it agreement with China, Pakistan has committed to awarding all CPEC project bids only to Chinese companies designated by Chinese government and not to invite open bids from anyone else. The guaranteed annual returns of 18.5% to China will add to the Pakistan's debt servicing costs to the tune of $8.51 billion annually for the next 45 years, or a total of $383 billion in debt servicing costs alone So, for the $46 billion investments from China, Pakistan will be repaying $429 billion ($383 billion as debt servicing costs + $46 billion being the investments). Nothing has been said on the tariff rates China will be paying and even if China has guaranteed that CPEC will generate minimum traffic. Even if China does not use it and no one else uses it, Pakistan still has to pay back China a total of $429 billion.

S.R.H. Hashmi | 8 years ago | Reply Information Minister Pervaiz Rashid claimed that the PML-N government firmly believed in transparency and good governance, but failed to mention the future date from which the government’s belief would be put into practice. The government’s record so far has nothing to show as to show that Nawaz Sharif and his team, which comprises businessmen in politicians’ disguise, could believe in outdated and imprudent concepts like transparency and good-governance which shut all doors to himself, his family, friends and associates enriching themselves at the cost of the poor country and its even poorer citizens. After all, it is not without agood reason that, as pointed out in the report, Ishaq Dar failed to utter even a word about the LNG deal with Qatar where the pricing formula was disclosed only in December this year as against arrival of the first consignment nine months earlier in March. Also, the $ 16 billion deal (at today’s price) is for 15 years, with first price revision and cancellation of contract possible only after ten years. Thus the government is bound to buy fixed quantities of LNG for the first ten years. The pricing formula links LNG prices with those of Brent – in a situation where the present oil prices are at the lowest, from which level they will perhaps only rise in future, taking the LNG prices higher - in a situation where due to fresh discoveries of gas locally and abroad, and with gas supplies increasing with the completion of Turkmenistan-Afghan-Pakistan-India (TAPI) and Iran-Pakistan gas pipeline, the prices are expected to fall in future. Karachi

Raj - USA | 8 years ago | Reply Dar is not telling the truth. $36 billion of CPEC projects may be in the private sector, but Pakistan has provided sovereign guarantees for 18.5% minimum annual returns for 45 years on these investments. In fact, the private sector investments are investments by Chinese companies without any bid and only Chinese companies are allowed to participate in this. Chinese government is providing loans to these Chinese companies at a very low rate of interest, say, between 2% and 5% and those Chinese companies are investing in these projects and shall earn 18.5% interest from Pakistan for 45 years. Pakistan has provided sovereign guarantees for this minimum returns of 18.5% annually to those Chinese companies. So, while the $34 billion investments from the Chinese companies may not add to the debt burden of Pakistan, it will add to the debt servicing by way of guaranteed minimum returns of 18.5% annually that Pakistan is bound to pay. Pakistan's government, Ishaq Dar or Chinese government will not talk about the tariff rates or toll charges that the users have to pay for using the roads. As for the power projects, Pakistani consumers will be paying a high charges. There is nothing that says that China has guaranteed that these projects will generate a minimum rate of return in excess of 18.5% annually for 45 years which is the minimum that Pakistan must earn to pay the guaranteed minimum returns to China/Chinese companies. Even if China guarantees that the CPEC road corridor will generate 18.5% returns through goods traffic to and from China, it will not benefit Pakistan because China will pay tariffs and tolls sufficient to generate this amount which will go back to China in the form of guaranteed minimum returns. In effect, Pakistan will be subsidizing China's exports and imports by paying for the transportation costs.

NHA | 8 years ago | Reply Transparency is public good and Govt. owes this to people. But if vested interests are only wanting to throw spanners in the works , on someones behest, then better be careful . Adversaries do gather information via various public sources for not so good reasons. CPEC is Geo-Strategic project. It will alter Geo-Politics for all time to come. Pakistan should consider declaring date of on which CPEC was signed in Islamabad as "Prosperity Day" or some thing like this. Whole nation should rally around it and protect it . Just disregard minor irritants -once it is up and running, all will thank for it .

ishrat salim | 8 years ago | Reply Even Governor of SBP in their last report has expressed CPEC to be more transparent with more details like loan amount & Pakistani component in Rupee share in this $ 46 billion. Is this too much if the public also shows their reservation ? first, satisfy the SBP, oh! forgot Mr Dar has SBP is his pocket & talks of making it an autonomous entity ? keep fooling the people of this country due to lack of understanding & education of the general public & the literate class. That is why PML N get re-elected at every stage.

GKA | 8 years ago | Reply 34 billion is private sector. Private sector needs to service capital which means high user tarriffs. Indirectly they still come back to the public. And this is China, all weather lord and master, so you cannot renegotiate rates

Saad | 8 years ago | Reply The $46B is a gift from China !! This is not a loan.

Raghu | 8 years ago | Reply First answer about Nandipur. 113 Billion Rupess declared as excess used or misused.

Jameel ur Rasheed | 8 years ago | Reply For a start, can we have a complete list of projects falling under CPEC and making up US$ 46B? Is it too much to ask for transparency?

Adnoon Siddiqui | 8 years ago | Reply Mr Dar, You have the right to be angry on whoever asks question about the rising public debt because the public is only exists to serve you and your debts.

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