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Low FDI despite CPEC investment worries govt

Low FDI despite CPEC investment worries govt

Fawad Yousafzai

April 13, 2018

ISLAMABAD - The federal cabinet has showed concern that despite huge Chinese investment through CPEC project in Pakistan, the foreign direct investment (FDI) has remained low, which has led to balance of payment problems.

The federal cabinet, in its meeting held last week, also pointed out that the amount of money, whether in the form of loan or grant, coming through China Pakistan Economic Corridor (CPEC) was not known.

According the minutes of the meeting available with The Nation, the issue of Chinese investment in Pakistan was also discussed by the cabinet. The official of the planning ministry, in its briefing, informed that official figure for the Chinese FDI in Pakistan during the last two and half a years (2015-December 2017) was about $ 2 billion. The cabinet emphasised the need to appropriately reflect the Chinese FDI in the books of accounts being maintained by the State Bank of Pakistan.

In response to cabinet member question that no investment had been planned under CPEC in the agriculture sector, it was pointed out that since Pakistan’s economy was facing serious bottlenecks in the energy and infrastructure sectors, the short-term focus of CPEC was in Eeergy and infrastructure. However in LTP agriculture features prominently and there is emphasis on improving productivity and water conservation in the agriculture sector.

The cabinet was informed that the Chinese investment through CPEC had mostly come in energy and infrastructure projects. The energy projects were mostly in private sector and they, not the government of Pakistan, were responsible for the corporate debt they had incurred. However, the government entity, Central Power Purchase Agency (CPPA), had signed agreement with IPPs for the purchase of electricity on the tariff rates determined by NEPRA prior to the incumbent government came to power. The role of government would come if CPPA was unable to recover the amount from the consumers and pay the IPPs.

The cabinet was also briefed about 19 energy projects which include 15 prioritised projects with a generation capacity of 11111 MW, 4 actively promoted projects with the capacity of 2544 MW and balance capacity is 3415 MW.

The cabinet was also updated about the projects being undertaken in Gwadar with the cost of $796.6 million.

The cabinet was also briefed about the Special Economic Zones (SEZs) under CPEC and was informed about different exemptions and facilities being extended to developers and investors in the SEZs. It was briefed that CPEC was a new driving force for economic growth which would lead to a 2 to 3% increase in GDP and would improve the energy and infrastructure sectors.

The cabinet was apprised that the average interest rate for loans being provided to the government was 2.4% and this didn’t include the commercial loads being procured by the private sector. However, if grant (for Gwadar Airport) and interest free loan (for Gwadar Eastbay Expressway) were excluded, the net e


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