August 22, 2017

CPEC projects: Time for Pakistani companies to start getting business from CPEC Projects

ISLAMABAD – For CPEC projects, Chinese companies are procuring major part of the machinery, equipment, and material, which is being imported from China at concessional rates.

According to the Ministry of Planning, Development and Reform data, material for civil work – sand, cement, steel – and consumable items like diesel, paints, a major chunk of chemicals, gas required for power plants are procured locally. The major part of the material, equipment, and machinery is being imported. The reason for procuring the materials and machinery through import is due to non-availability of required items locally on such a large-scale.

Mechanical, electrical equipment, cranes hydraulic turbines, boilers, generators, governors system, main Transformers and GIS system are not available locally in large quantity so these all items are being imported from China. Under the CPEC, jobs have been offered to Pakistani unskilled and skilled labor for civil works, including engineers and technicians. Likewise, Pakistani engineers, technicians and office staff have been hired for the operation of the projects in some proportion. Local companies are also getting business and jobs in transportation and security of the projects.

According to the Ministry of Finance data, the government has provided tax exemption to CPEC related projects executed by the Chinese companies. China State Construction Engineering Corporation Limited has been granted tax exemption for the construction of Sukkur-Multan Section of Karachi-Peshawar Motorway and to China Communication Construction Company for construction of Thakot-Havelian Section of Karakorum Highway.

Exemption from customs duty and sales tax has been provided on import of machinery, apparatus, and materials by China Railway Corporation for Lahore Orange Line Metro Train Project. Following additional concessions have been provided to Concession Holder of Gwadar Port Authority, its operating companies, contractors, and subcontractors:

Income derived by China Overseas Ports Holding Company Limited and its four operating companies namely China Overseas Ports Holding Company Pakistan (Private) Limited, Gwadar International Terminal Limited, Gwadar Marine Services Limited and Gwadar Free Zone Company Limited from Gwadar Port operations has been granted exemption from income tax for a period of 23 years, with effect from February 6, 2007.

Interest income earned by a foreign lender or any local bank (having more than 75pc shareholding of the government or the SBP) is exempt from income tax for a period of 23 years with effect from the July 1, 2016. Income derived by contractors and sub-contractors of China Overseas Ports Holding Company Limited and its four operating companies from Gwadar Port operations has been granted exemption from income tax for a period of 23 years, since July 1, 2016.

Dividends received by China Overseas Ports Holding Company from its four operating companies have been granted income tax exemption for a period of 23 years with effect from 2016. Moreover, dividends received by China Overseas Ports Holding Company Pakistan (Private) Limited from other three operating companies have been granted similar exemption.

Exemption from Sales Tax, Federal Excise Duty and Customs Duty has been granted on materials, equipment and vehicles for construction and operation of Gwadar Port and Gwadar Free Zone. Exemption from sales tax and FED for a period of 23 years has also been provided to supplies to be made by businesses established in Gwadar Free Zone.

Beijing To The World: Don’t Call The Belt And Road Initiative OBOR

To remedy a rather confusing situation where nomenclature and reality did not run together, the Chinese government decided to change the name of its epic initiative to wrap up the Eurasian supercontinent and Africa with an array of trade corridors like the laces running around the contour of a baseball.

Perhaps realizing that “One Belt One Road” was not really the best foreign language name for something that is distinctly plural — there are three overland routes and one maritime which extend between China and Europe — Beijing decided to swallow its pride and come up with a term that would be more palatable for the international populous, one that would be seen as a “win–win”. After putting their heads together and consulting such renowned organizations, such as the Central Compilation and Translation Bureau of the Peoples’ Republic of China and the Chinese Academy of Social Sciences, they came up with a replacement for One Belt One Road:

The “Belt and Road Initiative.” Apparently, this was seen as an improvement.

As put by Una Aleksandra Bērziņa-Čerenkova of the Latvian Institute of International Affairs:

As explained by the Chinese side, the first English translation, namely, “One Belt One Road”, has brought about numerous misinterpretations, as the partners tend to focus too much on the word “one”, assuming that there is to be only one maritime route and a single land belt, whereas, in reality, “The Belt and Road Initiative aims to connect Asia, Europe and Africa along five routes.” Supposedly, the perception of a single road as a limited offer can drive the regional partners into competition mode, therefore, the stressing of the numeral “one” is to be avoided. Also, the word “initiative” has been admitted into the official acronym in order to stress the openness of the strategy, and to avoid criticisms over “China-centered institution building”, that have been gaining momentum as the project progresses.

I first became aware that the Chinese government was requesting this name change in the autumn of 2015, and since then began using the term Belt and Road Initiative — often in conjunction with the Beijing-approved acronym, BRI — expecting that within a matter of months most news and academic sources would follow suit. But nearly two years later this simply hasn’t happened. The name One Belt One Road has stuck, and it’s still being used by major media sources, academia, and, especially, security-oriented think tanks who seem to really like the dystopian twang of “OBOR” as it rolls off their lips. Clearly, “Bah-ree” does not have the same ring to it.

As the below Google Trends comparison shows, OBOR and One Belt One Road are still more commonly used than Belt and Road.

Google Trends

Prevalence of term usage according to Google Trends. OBOR and One Belt One Road are still the most used terms.

However, while OBOR is no longer the name of the initiative, it is still the same top-down plan to build new ports, roads, railways, power plants, and special economic zones across Asia and Africa in an attempt to integrate the entire region into a massive market spanning 60 countries and a third of the world’s GDP.

‘CPEC changing country’s destiny’

LAHORE: The China-Pakistan Economic Corridor (CPEC) started changing the destiny of Pakistan.

This was said by Adviser to Chief Minister Muhammad Arshad in a statement on Sunday. He said that the world had acknowledged the importance of CPEC and every country wanted to join this project. “Even the enemies of Pakistan have acknowledged the importance of this mega project but they do not want to see the completion of this project,” he said.

The adviser said Pakistan had become a fast developing country in recent years and it would become one of the strong economies of the world in the next few years. He said the elected representatives, including the local bodies, were providing best services to the masses.

Moreover, infrastructure investments for the China-Pakistan Economic Corridor (CPEC) have given a helping hand to Pakistan’s hospitality industry as new hotels and guest houses are emerging in different parts of the country, said Jovago Asia Chief Executive Officer Nadine Malik.

“Pakistan’s middle class is growing and with higher disposable incomes, people are shelling out more money for leisure activities,” she said in an interview with The Express Tribune. “This is expected to further grow in coming months.”

Pakistan has achieved 5.3% gross domestic product (GDP) growth – the highest in a decade – in the outgoing fiscal year 2016-17. Gradual improvement in macroeconomic indicators and security situation since 2013 has helped all important sectors in the country.

Published in The Express Tribune, August 21^st, 2017.