ISLAMABAD: In a major shift from the investment regime, Pakistan has decided to exempt Chinese investors from about 37 approvals for investment projects, besides completing prior actions like payments of dues to power producers and creating a revolving fund for future interest payments to the existing investors to perk up investments in phase-II of the multi-billion-dollar China-Pakistan Economic Corridor (CPEC).

This was the crux of “the highest-level communication” Prime Minister Imran Khan had with the Chinese political and business leadership during his four-day visit to Beijing on the eve of Winter Olympics 2022, according to Special Assistant to the Prime Minister (SAPM) on CPEC Khalid Mansoor.

SAPM says Beijing has promised to consider request for debt rollover, extension in currency swap, additional financial support

Responding to a question at a news conference about Pakistan’s request for $4 billion debt rollover, extension in currency swap from $4.5bn to $10bn and additional financial support of $5.5bn, he said the Chinese leadership took note of these requests and promised to consider and then communicate their decision accordingly.

The SAPM said he would be unable to quantify the investment commitments for the second phase of CPEC for the fact that it was an initial pitching stage, but it would be safely in multi-billion dollars provided the relevant authorities and the nation as a whole worked together in materialising the future Chinese investment at a later stage.

“We have shared with President Xi Jinping and Prime Minister Li Keqiang a pitch book of competitive advantages for their investments and relocation of industries in comparison with other investment destinations that they would now consider and get back with investment proposals,” he added.

Mr Mansoor said the Chinese president was also invited to Pakistan that he had acknowledged and would respond later. However, the two sides would remain engaged at the foreign ministers’ level to review the progress on about 20 meetings held during the recent visit as well as investment proposals. Some companies have also come up with investment proposals.

“We have taken a historic decision a few days ago to shift their investment proposals to compliance regime”, instead of arrangement that required about 37 federal and provincial approvals, Mr Mansoor said, adding that it would now be responsibility of the Chinese investors to comply with the law of the land. “We have legally empowered them to invest in SEZs (special economic zones) without prior approval”.

The investments so made would be subject to audit and violations of the law would entail penalties and other fallouts, he said, adding that the change in investment regime would be made through amendments to the Special Economic Zone Act.

This was necessitated to provide ‘plug & play’ facility to the investors through a single focal point for which a facilitation centre has already been created at the CPEC Authority where experts have been dedicated for every sector.

On top of this, the prime minister made a personal commitment to the Chinese side that he stood by these arrangements and would himself immediately address any problem that the Chinese investors may come across on top of the institutional arrangements like the CPEC Authority, Cabinet Committee on CPEC and Steering Committee on CPEC.

The SAPM said this was “the most important communication” at a formal session with the National Development and Reform Commission (NDRC) chairman, presided over by Prime Minister Khan.

He said the two most important and outstanding issues concerning the Chinese side were outstanding payments to independent power producers (IPPS) and revolving fund for automatic payments to financial institutions on account of debt and interest payment. “Before going to China, we made Rs50bn payment to nine Chinese IPPs, including coal-based projects like Engro and Port Qasim. Finance Minister Shaukat Tarin has also assured that another Rs50bn would be cleared before the end of the current month.”

The Chinese investors had been demanding creation of a revolving fund under their agreements to cover 22 per cent of their payments to financial institutions for debt servicing. This had long been delayed but with the support of the finance minister and energy minister, this revolving account had been approved which was also shared with the Chinese by the prime minister.

The Chinese “acknowledged this progress and are very happy”, the SAPM said, adding that all these steps were very important for confidence building of the existing investors and convincing them and others on the CPEC’s phase-II.

The CPEC framework agreement envisaged an investment of $53bn in phase-I under which $25bn had already been materialised in the power sector as 5300MW projects were up and running and 3500MW projects would be completed in six-nine months. The remaining $28bn infrastructure projects were under various stages of implementation and financial close, Mr Mansoor said.

Responding to question, he said that based on the resolution of outstanding issues, the prime minister also highlighted that insurance cover for starting key hydropower projects had been held back by China and desired that insurance firm Sinosure underwrite political and commercial risk to cover financing of hydropower projects.

Regarding the main railway line from Karachi to Peshawar (ML-1), the SAPM said it was declared a strategic project at the last meeting of the Joint Coordination Committee (JCC) of CPEC for which the Chinese had come up with an estimated financial cost. The Pakistani side has completed a feasibility study and offered them to go for competitive bidding because of a price difference on the basis of which “we can update PC-1”, he added.

Published in Dawn, February 8th, 2022