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Economic mess in China, Pakistan puts CPEC in doldrums

China has not agreed to further expand cooperation in areas of energy, water management, and climate change under the China-Pakistan Economic Corridor plan.

As reported by India Narrative on September 16 that China’s interest in the China-Pakistan Economic Corridor projects in Pakistan has dimmed, the Express Tribune, a leading Pakistani daily reported on Tuesday that the CPEC is in doldrums. Owing to deep economic stress in both the countries, China has not agreed to further expand cooperation in areas of energy, water management, and climate change under the CPEC.

Besides, the daily reports, Islamabad has also agreed to give in to many Chinese demands like establishing a coal-fired power plant in Gwadar and a number of other Chinese demands.

Reports from other Pakistani sources indicate that one of the reasons behind CPEC projects getting installed is the acute paucity of dollars with the Pakistani government and thus purchasing fuel and other essentials is becoming almost impossible.

The Tribune report was based on what the 11th Joint Cooperation Committee (JCC) of the CPEC showed. The JCC is a strategic decision-making body of CPEC.

Although the JCC meeting was held in Oct 2022, its minutes were signed on July 31, highlighting the difference of opinions on both sides that led to almost a year’s delay in reaching a consensus.

The details showed that China did not agree to a host of measures that Pakistan had proposed in the areas of energy, water management, climate change and tourism in Giglit-Baltistan (G-B), Khyber-Pakhtunkhwa (K-P), Azad Jammu and Kashmir (AJK) and the coastal areas.

China excluded cooperation in the areas of cross-border tourism in G-B, K-P and AJK and cooperation for promotion of coastal tourism from the final minutes of the 11th JCC, the details showed.

China also did not agree to Pakistan’s proposal for inclusion of Water Resources Management and Climate Change and Urban Infrastructure Development in the CPEC framework. The proposal for setting up a new joint working group on water resources management and climate change was also rejected by China.

Give Up on Gwadar

Pakistan has given significant concessions to China on the issue of setting up the 300MW Gwadar Power Plant.

Islamabad wanted to either shelve the 300MW project or change its location to Thar to use the local coal. But China did not agree to Pakistan’s text about the Gwadar plant, which had mentioned that “both sides recognised that there was a need to examine the requirement, size, location and fuel type for 300MW Gwadar Power Plant in view of escalating international coal prices, which were resulting in exceptionally high prices of electricity, liquidity and foreign exchange issues for Pakistan and environmental concerns”.

Pakistan had also wanted the conversion of the imported fuel-based Gwadar plant to Thar coal to address energy security and liquidity issues to which China did not agree.

The final minutes showed that “both sides agreed to advance the Gwadar Power Plant in accordance with the existing plan”.

Chinese Refusal on Project after Project

China also did not agree to a proposal to the inclusion of a 500kv transmission line from Hub to Gwadar to link the seaport city with the national grid in the CPEC framework.

Similarly, China did not agree to “carry out joint studies for future development of Thar coal blocks, including development of mega power parks and power evacuation infrastructure, with a view to meet Pakistan’s energy needs from indigenous resources, conversion of coal into other products for domestic demand as well as exports.

The reference that the JCC appreciated the decision on the conversion of imported coal-based IPPS to local Thar coal was also dropped.

China also did not agree to the proposal for inclusion of 100MW KIU and 80MW Phander hydel power projects in the CPEC energy cooperation list and implementation through Chinese investors. China did not agree to the proposal of developing a policy framework for coal gasification to fertiliser projects based on Thar coal.

Similarly, there is no mention of the South-North gas pipeline project in the final minutes. The draft minutes had mentioned examination of feasibility study and Chinese cooperation for the purpose.

Pakistan had proposed Chinese participation in a strategic underground gas storage project but there is no mention of this mega project in the final minutes.

Pakistan had also proposed participation of China in the national seismic study for sedimentary areas and sought Chinese equipment. But this idea is also shelved at the bilateral level.