LAHORE: China’s One Belt, One Road (OBOR) initiative seems to be benefiting Pakistan, as it has been ranked amongst the top three countries receiving investment behind Saudi Arabia and Indonesia for years 2013 to 2015.
China has bet over $60 billion in China-Pakistan Economic Corridor which includes infrastructural and various power projects in Pakistan since 2014.
Economist Intelligence Unit (EIU) says Pakistan is in tricky spot to attract China’s private investments. But EIU ranks Pakistan in positive opportunity bracket but also places it in high risk basket. Lower political and regulatory risks can result in better opportunities.
Recently, Profit reported about an opinion piece published on Bloomberg which raised questions over massive Chinese investment in CPEC and whether could Pakistan be in danger of becoming another Venezuela.
According to the opinion piece, ongoing CPEC development projects worth $6 to $7 billion are predominantly being funded by the Chinese and paltry financing of $470 million is being provided by Pakistani banks.
Venezuela which received billion-dollar loans from the Chinese, last month defaulted on its debts and has been plagued by political strife, uncertainty and hyper-inflation.
In late November, China Development Bank (CDB) led a syndicate with EIBC for funding a $1.5 billion power plant in Hub, Balochistan and jointly being setup by China Power International Holding Ltd (CPIH) which is listed in Hong Kong.
Also, IMF recently raised questions over Pakistan’s ability to repay loans obtained under CPEC from China and projected payments will spike up after seven years to touch $3.5 billion to $4.5 billion a year. IMF estimates CPEC-linked outflows at 1.6 per-cent of GDP a year by 2024.
Although, investments via OBOR maybe a bane for Pakistan, due to CPEC, the country has experienced a significant construction boom thanks to major infrastructure and power projects but major slice of investment pie has been reserved for the Chinese, with minuscule participation from local banks and industries.