ISLAMABAD: Last year, Pakistan held informal talks with General Electric, Siemens and Switzerland’s ABB to build the country’s first high-voltage transmission line.
Chinese power giant State Grid committed to building the US$1.7 billion project in half the time of its European counterparts – and clinched the deal.
This is a familiar tale in Pakistan and many other countries.
As China makes its ‘Belt and Road’ initiative – a massive project to connect Asia with Africa and Europe through land and maritime routes – a policy priority for the next decade, Chinese companies are taking the lion’s share of infrastructure projects across the region.
Just last year, Chinese firms won project contracts in Belt and Road countries worth US$126 billion, state media reported.
In Pakistan, whose geographical position makes it central to Beijing’s ‘Silk Road’ plans, contracts have been awarded for projects worth more than US$28 billion – all by Chinese companies working together with local firms.
More than US$20 billion in new investment is likely in the next few years, Pakistan’s Planning Minister Ahsan Iqbal told Reuters this week.
Last month, Pakistan’s government took out full-page newspaper advertisements on the first China-Pakistan project completed under the plan, a 1,300 mw coal plant that it said was constructed in 22 months, a record time for such a facility.
The plant is owned by China’s state-owned Huaneng Shandong and the Shandong Ruyi Science & Technology Group.
China Inc’s main advantage, officials in both countries said, is the ability of Chinese banks – with the blessing of the government – to fast-track loans for projects related to the Silk Road.
That makes a huge difference to projects like Pakistan’s power transmission line, which aims to end regular energy cuts that leave the country’s 190 million population without electricity for several hours every day.
“(Chinese companies have) that advantage because of the support of the Chinese government,” said Mohammad Younus Dagha, a senior government official who was in charge at the Water and Power Ministry until earlier this year.
Dagha, who spoke to Reuters shortly before being transferred to the Commerce Ministry, said Beijing was fast-tracking loan approvals and pushing its banks and insurance firms to speed up due diligence work.
Chinese government officials declined comment on specific loan approvals.
But two officials at two Chinese state-owned banks that direct government funding, China Development Bank (CDB) and Export-Import Bank of China (EXIM), told Reuters that they have been instructed by the government to favour lending to Chinese firms for Silk Road projects.
The officials also said that the two banks prefer that companies working on infrastructure projects across the region import raw materials or purchase equipment from China.
There is some criticism in Pakistan that the awarding of the contracts to Chinese companies – while speeding up projects – is also costing the country more money.
In the transmission line project deal, for example, General Electric estimated it could make one key part of the line – the converter stations – for about 25 per cent less than what State Grid was charging, according to a Pakistani government official and two power sources familiar with GE’s projections.
By awarding the contract to State Grid, Islamabad paid a higher price, they said.
An official at Nepra, Pakistan’s independent energy regulator, said State Grid was also given a tax break not on offer to other investors.
Pakistani government officials declined to comment on tax issues regarding the deal.
China Electric Power Technologies Company Limited (CET), the State Grid subsidiary that will build the line, said the price it asked for was fair.
“It’s a very reasonable cost,” said Fiaz Ahmad Chaudhry, managing director of Pakistan’s National Transmission & Despatch Company (NTDC) referring to the overall State Grid contract.
Chinese Foreign Ministry spokeswoman Hua Chunying said the process for Belt and Road projects in Pakistan was ‘open and transparent’ and would bolster bilateral relations and regional prosperity. — Reuters