FDI dips by 45% in first five months of FY 2016-17

[Hyde]

Not only it is going to haunt but the dip also tells that almost all the projects in CPEC are loans. Someone from parlimentary committe on CPEC was telling that 2 Billion USD is FDI, rest is loan.

No actually I don't know why our journalists don't understand basic issue and keep reiterating to the same arguments.

The infrastructure projects worth 11 billion dollars are loan. They will be owned by Pakistan and being developed by FWO alongside Chinese assistance. They will have to be paid back in due course of time. Some of the infrastructure projects are also funded by ADB and takes the loan figure beyond 11 billion usd

The energy projects are neither FDI nor loan. They are more like project financing that Chinese will own for number of years. In most cases 30 years and then transfer to the Government of Pakistan. Its a pure business that they might generate electricity for say 5-6 cents per unit and selling for around 8 cents per unit to nepra. That is more expensive than projects initiated in India but far cheaper than projects in Pakistan where we also used to generate electricity for 24 cents per unit.

Some of these projects also have high rate of return and hydropower projects would generate electricity for like 2-3 cents per unit and also selling to nepra for 8 cents. Its a win win situation for both Pakistan and China as Chinese will make huge profit whilst Pakistan will get electricity for acceptable tarrif. The availability of water in hydropower projects is added bonus etc.

I think one key reason the government of Pakistan is more committed is that they are hoping Chinese will be utilising the route and whatever money generated from transit route will be helpful in paying off the cost of the projects under construction so we will be in much better position to pay back the chinese when the time comes... but there are if's n but's in it for sure.

 

[Turingsage]

Year-end alarm bells
Home / Today's Paper / Opinion / Year-end alarm bells
By Farrukh Saleem
January 01, 2017

Capital suggestion



Alarm bell number 1: From July to September, the federal government’s net revenue receipts stood at Rs369 billion. For the same period, the federal government’s debt servicing liability stood at Rs413 billion. Lo and behold, the federal government’s net revenue receipts are not even enough to cover debt servicing. For the record, net revenue receipts have never been so low ever.

The federal government must borrow to cover defence. The federal government must borrow to cover pensions – both civil and military. The federal government must borrow to cover the expenses of running the civil government. The federal government must borrow to cover public order and safety affairs. The federal government must borrow to cover environment protection. The federal government must borrow to cover health affairs. The federal government must borrow to cover the expenses on ‘culture and religion’. The federal government must borrow to cover all allocations for social protection.

Alarm bell number 2: For the first five months of the current fiscal year, the repatriation of foreign exchange in the form of profits and dividends on foreign direct investment stood at $591 million. For the first five months of the current fiscal year, the total foreign direct investment stood at $460 million. Lo and behold, Pakistan paid out $131 million more than what Pakistan received as foreign direct investment.

What this means is that foreigners are taking out more dollars from Pakistan than the dollars being invested into Pakistan by foreigners. This is both scary and unsustainable.

Alarm bell number 3: From July to November, our exports stood at $8.7 billion. For the period between July and November, our imports stood at $17.3 billion. Lo and behold, Pakistan’s goods deficit stood at a colossal $8.6 billion. For the period between July and November, the current account deficit reached $2.6 billion, widening by an alarming 91 percent year-on-year. On a pro-rata basis, an annual current account deficit in excess of $6 billion is both scary and unsustainable.

Alarm bell number 4: Between June 2013 and June 2016, the government took dollar loans. From the World Bank, ADB and Islamic Development bank, it took $9.7 billion. From the IMF, it borrowed $6.2 billion. Bilateral loans amounted to $3.6 billion while bonds issued stood at $3.5 billion. From commercial banks, it took $1.85 billion. That’s a total of $25 billion over three years (over the same period, $11.95 billion was spent in the repayment of previous loans). To be certain, all these new foreign loans would have to be paid back in dollars. Lo and behold, our exports are going down and foreign investors are taking out more dollars than they are bringing into Pakistan. Again, this is scary and unsustainable.

Alarm bell number 5: On October 13, the IMF completed its twelfth and the final review under the $6.2 billion Extended Arrangement. To be sure, the budget for 2016-17, under the direction of the IMF, kept a cap of 3.8 percent of GDP on the budgetary deficit. The IMF plan has come to an end and the election is coming up. Now, prepare for a ballooning budgetary deficit.



The writer is a columnist based in Islamabad.

https://www.thenews.com.pk/print/175908-Year-end-alarm-bells

 

[Arsala.nKhan]

People have literally put their all eggs in one basket! CPEC

 

[mr.robot]

No actually I don't know why our journalists don't understand basic issue and keep reiterating to the same arguments.

The infrastructure projects worth 11 billion dollars are loan. They will be owned by Pakistan and being developed by FWO alongside Chinese assistance. They will have to be paid back in due course of time. Some of the infrastructure projects are also funded by ADB and takes the loan figure beyond 11 billion usd

I think one key reason the government of Pakistan is more committed is that they are hoping Chinese will be utilising the route and whatever money generated from transit route will be helpful in paying off the cost of the projects under construction so we will be in much better position to pay back the chinese when the time comes... but there are if's n but's in it for sure.

As of now, current agreements sugggest that China isn't going to pay any toll tax or anything. Is that going to change?

The energy projects are neither FDI nor loan. They are more like project financing that Chinese will own for number of years. In most cases 30 years and then transfer to the Government of Pakistan. Its a pure business that they might generate electricity for say 5-6 cents per unit and selling for around 8 cents per unit to nepra. That is more expensive than projects initiated in India but far cheaper than projects in Pakistan where we also used to generate electricity for 24 cents per unit.

Some of these projects also have high rate of return and hydropower projects would generate electricity for like 2-3 cents per unit and also selling to nepra for 8 cents. Its a win win situation for both Pakistan and China as Chinese will make huge profit whilst Pakistan will get electricity for acceptable tarrif. The availability of water in hydropower projects is added bonus etc.

Regarding, power projects and their tarrif, we won't know how we are getting treated as NEPRA is now not an autonomous body.

The article below and the program on the whole exposes Government's fiscal policy and.

Year-end alarm bells
Home / Today's Paper / Opinion / Year-end alarm bells
By Farrukh Saleem
January 01, 2017

Capital suggestion



Alarm bell number 1: From July to September, the federal government’s net revenue receipts stood at Rs369 billion. For the same period, the federal government’s debt servicing liability stood at Rs413 billion. Lo and behold, the federal government’s net revenue receipts are not even enough to cover debt servicing. For the record, net revenue receipts have never been so low ever.

The federal government must borrow to cover defence. The federal government must borrow to cover pensions – both civil and military. The federal government must borrow to cover the expenses of running the civil government. The federal government must borrow to cover public order and safety affairs. The federal government must borrow to cover environment protection. The federal government must borrow to cover health affairs. The federal government must borrow to cover the expenses on ‘culture and religion’. The federal government must borrow to cover all allocations for social protection.

Alarm bell number 2: For the first five months of the current fiscal year, the repatriation of foreign exchange in the form of profits and dividends on foreign direct investment stood at $591 million. For the first five months of the current fiscal year, the total foreign direct investment stood at $460 million. Lo and behold, Pakistan paid out $131 million more than what Pakistan received as foreign direct investment.

What this means is that foreigners are taking out more dollars from Pakistan than the dollars being invested into Pakistan by foreigners. This is both scary and unsustainable.

Alarm bell number 3: From July to November, our exports stood at $8.7 billion. For the period between July and November, our imports stood at $17.3 billion. Lo and behold, Pakistan’s goods deficit stood at a colossal $8.6 billion. For the period between July and November, the current account deficit reached $2.6 billion, widening by an alarming 91 percent year-on-year. On a pro-rata basis, an annual current account deficit in excess of $6 billion is both scary and unsustainable.

Alarm bell number 4: Between June 2013 and June 2016, the government took dollar loans. From the World Bank, ADB and Islamic Development bank, it took $9.7 billion. From the IMF, it borrowed $6.2 billion. Bilateral loans amounted to $3.6 billion while bonds issued stood at $3.5 billion. From commercial banks, it took $1.85 billion. That’s a total of $25 billion over three years (over the same period, $11.95 billion was spent in the repayment of previous loans). To be certain, all these new foreign loans would have to be paid back in dollars. Lo and behold, our exports are going down and foreign investors are taking out more dollars than they are bringing into Pakistan. Again, this is scary and unsustainable.

Alarm bell number 5: On October 13, the IMF completed its twelfth and the final review under the $6.2 billion Extended Arrangement. To be sure, the budget for 2016-17, under the direction of the IMF, kept a cap of 3.8 percent of GDP on the budgetary deficit. The IMF plan has come to an end and the election is coming up. Now, prepare for a ballooning budgetary deficit.



The writer is a columnist based in Islamabad.

https://www.thenews.com.pk/print/175908-Year-end-alarm-bells

 

[Hyde]

As of now, current agreements sugggest that China isn't going to pay any toll tax or anything. Is that going to change?

Regarding, power projects and their tarrif, we won't know how we are getting treated as NEPRA is now not an autonomous body.

The article below and the program on the whole exposes Government's fiscal policy and.

Sir the article you mentioned I had read few days ago. I don't take that guy seriously anymore as he doesn't make sense in most of his negative argument as the only thing he does is, make issue out of nothing.

Regarding toll tax, Sir you might be aware that Pakistan provided safe passage to Americans for Afghan transit route and it was literally called tax free route but still Pakistan charged 250 dollar per truck, fixed price regardless of its value.

China currently have bilateral trade of 4000 billion USD each year and likely to increase 3 times by 2030 as is also true for their GDP. So if lets say Chinese have bilateral trade of 10,000 billion USD and only 1% of that trade is utilised by CPEC, that is itself 100 billion dollars of trade and requires thousands of trucks or railways infrastructure to transport such goods. Imagine even if we gave them offer of just 250 dollar token price, its still serious money for transit route to China, double if you calculate only 2% trade of China

 

[mr.robot]

Sir the article you mentioned I had read few days ago. I don't take that guy seriously anymore as he doesn't make sense in most of his negative argument as the only thing he does is, make issue out of nothing.

Regarding toll tax, Sir you might be aware that Pakistan provided safe passage to Americans for Afghan transit route and it was literally called tax free route but still Pakistan charged 250 dollar per truck, fixed price regardless of its value.

China currently have bilateral trade of 4000 billion USD each year and likely to increase 3 times by 2030 as is also true for their GDP. So if lets say Chinese have bilateral trade of 10,000 billion USD and only 1% of that trade is utilised by CPEC, that is itself 100 billion dollars of trade and requires thousands of trucks or railways infrastructure to transport such goods. Imagine even if we gave them offer of just 250 dollar token price, its still serious money for transit route to China, double if you calculate only 2% trade of China

Since you don't take the guy seriously then that debate is over despite whatever the figures say.

So, how much we made from US due to Afghan transit route?

 

[Syed1.]

Surely it is PTI's fault. Tajarbaati team of Nawaz has developed rivers of milk and honey in Punjab.

 

[Hyde]

Since you don't take the guy seriously then that debate is over despite whatever the figures say.

So, how much we made from US due to Afghan transit route?

Usually 400-800 million dollars per year depending on the volume of trucks as the value of trucks was not accounted unlike with other countries that is likely to happen. It was the cheapest deal one could offer obviously...

Dr Farrukh was against the idea of CPEC from day one, he came out with the weirdest logic one could imagine which was never meant to be, I understand it was his lack of understanding on the project but then his negativity never ended so I assumed the figures he mentioned, the purpose of CPEC he had envision were all coming from nowhere so I didn't take him seriously after that (my opinion only as I cannot vouch for his true intentions)

 

[mr.robot]

Usually 400-800 million dollars per year depending on the volume of trucks as the value of trucks was not accounted unlike with other countries that is likely to happen. It was the cheapest deal one could offer obviously...

Dr Farrukh was against the idea of CPEC from day one, he came out with the weirdest logics one could imagine which was never meant to be, I understand it was his lack of understanding on the project but then his negativity never ended as I assumed the figures he mentioned, the purpose of CPEC he had envision were all comung from nowhere so I didn't take him seriously after that

Any official docs regarding turn over of US trade? Also, have you read about China-Srilanka debacle? What is your opinion on that? Shouldn't we be concerned about this as this was also part of OBOR?

http://thediplomat.com/2016/11/china-and-sri-lanka-between-a-dream-and-a-nightmare/

 

[faaiq Sheikh]

FDI investment will increase in coming months Im positive

 

[Hyde]

Any official docs regarding turn over of US trade? Also, have you read about China-Srilanka debacle? What is your opinion on that? Shouldn't we be concerned about this as this was also part of OBOR?

http://thediplomat.com/2016/11/china-and-sri-lanka-between-a-dream-and-a-nightmare/

Sir Chinese are involved everywhere. They are even building Nuclear plants in UK and busy in development projects almost everywhere in the world. Singling out one individual project out of thousands of projects they have committed across the world may not be right. I am not saying Chinese does not have kickbacks from Pakistan, I am sure Pakistan would have built the same infrastructure cheaper than Chinese companies but that is part of the package. What is not to be missed is the economic and strategic advantage Pakistan and China gets from CPEC.

I was giving an example in other post that imagine you pay like 3000 rupees to travel from Gwadar to Quetta and complete journey in 40 hours, you are now able to complete the same journey in 8 or so hours with only fraction of the cost. There are various links of CPEC where the distance reduced from 20 to 8 hours, 8 to 2 hour and in kilometres from 1600 to 1200km and 350 to 280km or so...

The savings that you will get from import of fuel, being more cost effective and linking isolated regions of Balochistsn with mainstream region for the first time in its history is a massive achievement to begin with. Same is true for energy that Pakistan's first priority is electricity and if NEPRA is saying that they signed the deal for near to 8 cents per unit for every project then why not believe it? Our first priority is availability of electricity, that is too reason why hundreds of factories were shut in Punjab and relocated to Bangladesh as they didn't get adequate gas and electricity. The next question is at what cost which is claimed to be cheaper than furnace oil

 

[mr.robot]

Sir Chinese are involved everywhere. They are even building Nuclear plants in UK and busy in development projects almost everywhere in the world. Singling out one individual project out of thousands of projects they have committed across the world may not be right. I am not saying Chinese does not have kickbacks from Pakistan, I am sure Pakistan would have built the same infrastructure cheaper than Chinese companies but that is part of the package. What is not to be missed is the economic and strategic advantage Pakistan and China gets from CPEC.

I was giving an example in other post that imagine you pay like 3000 rupees to travel from Gwadar to Quetta and complete journey in 40 hours, you are now able to complete the same journey in 8 or so hours with only fraction of the cost. There are various links of CPEC where the distance reduced from 20 to 8 hours, 8 to 2 hour and in kilometres from 1600 to 1200km and 350 to 280km or so...

The savings that you will get from import of fuel, being more cost effective and linking isolated regions of Balochistsn with mainstream region for the first time in its history is a massive achievement to begin with.

This is not some project. Here I will post jist of the problem/concern.

For the Chinese, Hambantota and a Colombo port terminal, also built by China Merchants, are among the main attractions of Sri Lanka – which sits bang in middle of the principal east-west sea lines of communication connecting China to the main oil exporters in the Middle East and Africa. That makes Sri Lanka a key component of China’s ‘One Belt, One Road’ strategy of integrating the regional economy through infrastructure development.

Sri Lanka looks to China to buy sinking port
Leasing the port, which alone has been costing US$147 million a year in debt repayment, will help ease the external debt load of US$64.9 billion. Sri Lanka’s foreign debt soared from 36 per cent of GDP in 2010 to 94 per cent last year. Debt repayment is sucking up around 95 per cent of all government revenue, with a third of all earnings estimated to be servicing Chinese debt. As a result, Sri Lanka recently had to resort to a US$1.5 billion IMF bailout.

I have no problem regarding the achievments. I am concerned about the aftermath as to best of my knowledge there is nothing on paper regarding that. All we are presented with is something like dreams of Sheikh Chilli i.e. Multiply this with this and you have this.

 

[Hyde]

This is not some project. Here I will post jist of the problem/concern.




I have no problem regarding the achievments. I am concerned about the aftermath as to best of my knowledge there is nothing on paper regarding that. All we are presented with is something like dreams of Sheikh Chilli i.e. Multiply this with this and you have this.

Sir every business wants to make profit. It is sheer stupidity of the SL government if they did not translate their project into profit. All I can say, in most of the projects around the world, the benefit is mutual and if Sri Lankan's were trapped into debt servicing due to aftermath of this project it only talks about the possible corruption they may have faced or didn't get expected result from the business.

It doesn't apply in the case of Pakistan because Chinese investment in Sri Lanka was purely a business strategy as they do not share any border to begin with. In the case of Pakistan they have strategic importance of CPEC as well as economic importance for both Pakistan and Western China. The interest of both nations is linked with the sea ports of Pakistan as it already provides western china with most cost effective access to Middle East, Africa and sea route across Europe. I believe we are not in position to compare Sri Lankan project with the nature of CPEC as the benefits and expected results are very different to the nature of financial assistance provided to Sri Lanka

 

[mr.robot]

Sir every business wants to make profit. It is sheer stupidity of the SL government if they did not translate their project into profit. All I can say, in most of the projects around the world, the benefit is mutual and if Sri Lankan's were trapped into debt servicing due to aftermath of this project it only talks about the possible corruption they may have faced or didn't get expected result from the business.

It doesn't apply in the case of Pakistan because Chinese investment in Sri Lanka was purely a business strategy as they do not share any border to begin with. In the case of Pakistan they have strategic importance of CPEC as well as economic importance for both Pakistan and Western China. The interest of both nations is linked with the sea ports of Pakistan as it already provides western china with most cost effective access to Middle East, Africa and sea route across Europe. I believe we are not in position to compare Sri Lankan project with the nature of CPEC as the benefits and expected results are very different to the nature of financial assistance provided to Sri Lanka

This makes sense regarding prospects of CPEC being more successful. Can you kindly tell what is the alternative to KKH in CPEC as it remains closed for many months in a year and obviously it can't handle the traffic volume we are expecting?