Pakistan asked China on Monday to expedite the implementation of the first phase of the $10 billion Mainline-1 (ML-1) — the 1,872km railway track and associated facilities from Karachi to Peshawar — and the $2 billion Karachi Circular Railway (KCR), as agreed between the two nations’ leaders in November.
According to a statement issued by the Ministry of Planning and Development following a bilateral meeting on the China-Pakistan Economic Corridor, Pakistan “requested strong support of the National Development and Reforms Commission (NDRC) and other relevant Chinese government institutions to advance implementation of important projects like ML-1, KCR, and key energy projects in line with the leadership consensus.” (CPEC).
Aside from ML-1 and KCR, two hydropower projects, including the 1,124MW Kohala Hydropower Project, had been put on hold for a variety of reasons, including budgetary constraints and insurance issues.
During Prime Minister Shehbaz Sharif’s November 1, 2022 visit to Beijing, the Chinese political leadership agreed to expedite ML-1 processing by promptly activating their respective teams. It was decided at the time that bidding for the project would begin in December, and that negotiations for financing terms and conditions would begin after the bidder was selected.
However, despite the establishment of a revolving fund to meet at least the standards of financial institutions, the agreed-upon progress was not met.
Following Mr. Sharif’s return, Finance Minister Ishaq Dar stated that KCR was also discussed at those discussions and that the project would shortly begin implementation.
However, Pakistan’s problems with the IMF began soon after, as payables to Chinese Independent Power Producers surpassed Rs350 billion.
ML-1 was also unable to secure financing commitments from Chinese institutions, resulting in delays in obtaining parallel funding offers from the Asian Development Bank, which had earlier expressed interest in providing loans for the megaproject but had been turned down due to Chinese demand.
In January, Planning and Development Secretary Zafar Ali Shah announced that a $2.7 billion loan request had been submitted to China for the upgrade of the first section of the ML-1, which runs largely through Sindh and partially through Punjab, where the track was damaged by last year’s extreme floods. The track’s ground level must be raised as part of the redesign.
Mr. Shah later told reporters that ADB had offered to finance the ML-1 again, despite the fact that the government was pursuing a portion of the project with China.
Earlier, Planning Minister Ahsan Iqbal acknowledged that the country had turned the ADB’s offer because China intended to pay for the project entirely on its own. “China strongly argued that two-sourced financing would cause problems and harm the project,” Mr. Iqbal remarked at a press conference in 2017.
During Mr. Iqbal’s visit to China last week, Pakistan raised the issue once more with Li Chunlin, Vice Chairman of China’s NDRC.
The two sides addressed significant CPEC projects and the minutes of the 11th JCC meeting at a follow-up progress review meeting on Monday.
Nadeem Javaid, Chief Economist, and CPEC Project Director, and his Chinese counterpart Pan Jiang, Director General of the National Cooperation Department of the NDRC, co-chaired the meeting, which was attended by representatives from the ministries of planning, energy, industry, communication, agriculture, interior, science and technology, information technology and telecom, and investment.
The two parties acknowledged their satisfaction with the seamless implementation of major CPEC projects and agreed that all outstanding concerns would be resolved peacefully in the spirit of traditional collaboration, mutual understanding, complete confidence, and brotherhood.
“Both sides expressed satisfaction with progress made in the four priority special economic zones (SEZs), namely Rashakai, Allama Iqbal Industrial City, Dhabeji, and Bostan SEZs, and agreed to accelerate progress in order to attract the relocation of high-quality industries,” according to the statement.
The meeting applauded the signing of the Framework Agreement for Industrial Cooperation, and both parties agreed to hold bi-annual meetings to examine the framework’s execution.
It may be noted that 2023 marks the decade of CPEC and the strong partnership between Pakistan and China.
