China will bag a 91% share in gross revenues from Gwadar port, in Pakistan’s Balochistan province, and 85% from the surrounding “free zone,” under a 40-year deal finalized by Pakistani authorities with the China Overseas Port Holding Company.
The numbers were revealed by Pakistan’s federal minister for ports and shipping, Mir Hasil Bizenjo, in the Pakistan Senate last Friday. He also disclosed that Pakistan will pay back US$16 billion in loans obtained from Chinese banks for the development of Gwadar port, the free-trade zone and all communications infrastructure, at rates of over 13%, inclusive of 7% insurance charges.
The project forms part of the US$56 billion China-Pakistan Economic Corridor (CPEC). Business figures say China will recoup its entire CPEC expenditure in the first four years out of earnings from Gwadar port –which was inaugurated a year ago – and the free zone.
Bizenjo added that the Chinese port holding company will operate the port over the next 40 years through a BOT (build-operate-transfer) arrangement. Pakistan will take over the port’s operation, along with responsibility for infrastructure maintenance, after the expiry date.
The minister’s disclosure comes on the heels of persistent demands from lawmakers for details of the long-term agreements inked with the Chinese authorities to be revealed, amid accusations that the federal government had attempted to sweep them under the carpet.
“Such deals need input from the private sector and the government should have involved the trade organizations before signing deals of national significance”
Most senators are of the belief that the long-term agreements are heavily tilted toward China. Raza Rabbani, who is chairman of the Pakistan parliament’s upper house, bowed to pressure from lawmakers and directed the Senate Standing Committee on CEPC to look into whether Pakistan’s national interests are undermined by financial obligations entered into via the agreement with China.
Pakistan Tehreek-e- Insaaf Senator Mohsin Aziz, who could not be reached for comment by Asia Times, is of the view that the long-term contracts entered into in relation to CPEC most certainly do undermine the national interest. “Such deals need input from the private sector and the government should have involved the trade organizations before signing deals of national significance,” he told the Senate, adding that the private sector would have been able to negotiate better deals for Pakistan than its bureaucrats.
Business leaders are indeed skeptical of the agreement’s 40-year term, stressing, in particular, that the infrastructure, roads, machinery and plant is unlikely to remain in workable condition in four decades. By the time Pakistan takes over responsibility for its maintenance, they say, it will need significant upgrading.
Muhammad Ishaq, a leading importer and one-time director of the Khyber Pakhtunkhwa Board of Investment & Trade (KPBOIT) told Asia
Times: “The hefty share in the revenue of port and free economic zone is not the only issue which will deal a severe blow to economy. The government also allowed contractors and sub-contractors associated with China Overseas Port Holding Company an exemption from income and sales taxes, and federal excise duties, for a period of 20 years, besides a 40-year tax holiday granted for imports of equipment, material, plant, appliances and accessories for port and special economic zone.”
He added that major shares of the earnings from the port and free zone would go to Chinese companies, while Pakistan will struggle to service costly loans obtained from Chinese banks. The 2,282-acre free zone, he said, will include factories, logistics hubs, warehousing facilities and display centers that will all be exempt both from customs duties and from provincial and federal taxes.
Pakisatn will make 9% of salses even if the port lose money. They will gain industrals, employment and taxes. The auther is an Indian puppet.
even if China build a free port, u will have some bad things to say…????
good thing is no one can stop this good thing happening. The country boom will be self explained like UK built a HongKong free trade port for China for the past 100years.
It is easy to CRITICIZE.
Mindless criticism is even easier.
Think of Gwadar Port as something inside a box.
Now, lets THINK OUTSIDE THIS BOX – the bigger picture.
Yes. The Chinese may benefit from this ONE PROJECT more than Pakistanis would. By the way, this project wouldn’t not exist without CHINESE interests and TRADE that will flow through it. But this one contract is not the END for Pakistan. It is likely to be just a beginning.
Will infrastructure not boost Pakistan economy?
Will there not be a single new job?
Will new private sector investment not flow into the country?
Will this one project not increase shipping options for Pakistan importers and exporters?
At micro level, just think about how many new petrol pumps will open along the CPEC routes. Tea stalls, truck repairs required, restaurants along the new highways, banking business and local employment at these levels. Pakistani transporters will certainly have a share in new transport business – and the number of new trucks and drivers required will be tremendous.
On the bigger picture, shipping cost will drop due to economies of scale, Investors (and not just the Chinese one) will certainly not fail identify the Local Pakistani
COMPETITIVE ADVANTAGE where it exists. And with 200m population, Pakistan will have plenty of opportunities. Finally, do not forget the MULTIPLIER effect, the GDP growth and tax collection overall.
So overall, things may not be all gloomy for Pakistan.
Personally, I am excited.
Never mind…. This clown is just a stooge, along with Khuldune Shahid…. Another joker.
Subodh Bhat but trade deficit with china.
THATS CALLED A ROYAL F-&* UP BY IGNORANT GOV,T PEOPLE OR SOME GREAT KICKBACKS AS PART OF THE DEALS.-CHINESE ARE SMART FOLKS DUDES,LOOK ALONE AT THE AMOUNT OF PEOPLE THEY HAVE TO CHOOSE BRAINY FOLKS FROM AND THEN THEY STUDY HARD TO BOOT.
This corredor is of strategic importance for China to bypass strait of Malaca. Beijing fully expect to lose money building infrastructure necessary. This corredor is still Pakistan ‘s chance of a lifetime for development. Shakil picked and chose one item to come to a conclusion, intended to deceive.
Sam Ontoor
Please do not lie and insult Pakistan engineers as morons.
My residential electricity rate is 12 cents per unit with all the discounts added in. The average price people in the U.S. pay for electricity is about 12 cents per kilowatt-hour.
The average price of 9,2 cents per unit is possible because the chinese thermal power stations use supercritical boilers with high thermal efficiencies.
Sam Ontoor The core problem with Pakistan’s electricity supply, is the US will not allow Pakistan to buy cheap available Iranian gas. The US has stopped all efforts by Pakistan to raise finance to build the gas pipeline.
China is the only nation willing to disobey the USA, and finance the pipeline.
Who else will invest in Pakistan?
The US won’t even allow them to have regular electricity supplies.
The US wants Pakistan to buy American gas, if and when the US is victorious in Afghanistan. Iran has been willing to supply gas and or electricity to Pakistan for 20 years, but the US won’t allow it.
Only 2 countries in the world will disobey the US, and only one of those countries has the money to finance such a project, China.
So the Chinese deal is the only deal that they can get, at least they might get some lighting and refrigeration.
Pakistan often get the short end of the stick. Why they have allowed foreign telecom companies operate phone companies and important national communication infrastructure puzzles many. Hefty management fees and dividends goes out of Pakistan, but most importantly it is a national security risk.
By the way India had tarde surplus with US. This is for your info!
>> The U$16 billion loan is also for power stations, telecommunications, highways etc..
The negotiated cost of CPEC power projects averages at 9.2 cents per unit and ranges between 8 cents per unit to 12 cents per unit as per data from NEPRA. In the same south Asian region, Chinese companies have deployed solar power projects between 2.4 to 3.5 cents per unit. Clearly Pakistan is paying 3 times the price for CPEC power — all supported by federal gurantees and assurance of 17% returns on dollar investments.
When the core problem of Pakistan electric supply is "circular debt", CPEC doesn’t solve that problem. In fact, when these projects come to fruition in 2 years, it would amplify it 10 times.
Yes, security is an issue in Pakistan. But if Pakistan could resolve that there was no reason why Pakistan could attract the same 3-4 cents/unit bids for solar projects. In fact, a much more practical solution was to establish a power grid with India’s western states and reduce the costs by more than half.
Spheres of Influence, anyone remember?
While India hugs the US and Israel….
I believe the point that Pakistanis are seeing now is that even there IRON brother is sucking blood, just like Americans did to them! "It’s a unfair world and a great conspiracy" is the crying.
But recently QATAR pumped some cash ,,,anyway it was dead project for decades so what ever cash Pakistan can got they dont mind after all Pakistan have not much experience in running Huge ports ..
No one except tthe Chinese will touch the Terrorist ridden country even with a long pole.
Why lump the 7% insurance together with the 6% loan interest? If any western insurance company offers insurance service at the same 7% or at a more competitive rate, Pakistan should take up the offer!
It is the nett revenue that is profits. It costs money to run a port and even Singapore lost money and gave up the port management.
At any rate there will be thousands of jobs created in the port and hundreds of thousands in the economic zone.
The U$16 billion loan is also for power stations, telecommunications, highways etc. Electricity blackouts and rationing are becoming less frequent and will be eliminated altogether by 2018.
A 40 year lease is common for BOOT projects. There is an obligation to keep the facility well maintained and in good condition before handover. China is not going to abandon the port after establishing is as a hub, keep using the port and maintain its facilities.
It is a great deal for Pakistan considering the enormous financial risks involved.
The imbecile Pakistanis had it.. China is going to bleed them to death! They will be slaves of China for 100 years!