Corridor Calculus

Corridor Calculus : China Pakistan Economic Corridor & China's Comprador Investment Model in Pakistan
Financing the Project
Asides of the projects, structures to implement them and the strategic
imperatives driving the entire CPEC scheme, what has really caught the
imagination of people within Pakistan and without is the quantum of money
— $ 46 billion — that China is ready to sink into Pakistan. Given that there
are serious questions about not just the economic viability of CPEC, but also
the returns that Chinese investors will get from their investment, the
funding of the projects is raising eyebrows. There isn't adequate clarity on
where the funding is coming from. The governor of the State Bank of
Pakistan himself has expressed ignorance about how much of the money is
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debt, how much is equity and how much is in kind. According to one report,
out of the $46 billion that will be pumped into Pakistan under CPEC
programmes until 2025, $34 billion will be private sector investment by
Chinese companies, banks and insurers. Another $11 billion will be
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concessional loans and there will be some grants as well. Already the
Chinese have converted a $230 million loan for the Gwadar International
Airport into a grant and have also converted another $140 million loan for
the East Bay Expressway into an interest-free loan. In addition, interest
payments on Chinese loans have been reduced from 3% to 1.6%, though the
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Pakistanis wanted them to be reduced to 1%.
In November 2014, the Chinese President announced the formation of a
$40 billion Silk Road Fund, the primary purpose of which was to “break the
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connectivity bottleneck” in Asia and beyond. The first project that was
funded by the Silk Road Fund was the Karot hydel project in Pakistan. During
the visit of President Xi Jinping, the joint statement declared that the Silk
Road Fund would be “willing to actively seize opportunities to invest in and
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Katherine Houreld, 'Pakistan should be more transparent on $46 billion China deal, state bank head says', Reuters
04/12/2015, accessed at http://in.reuters.com/article/pakistan-china-idINKBN0TN28920151204
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Khaleeq Kiani, 'Issues in China's offer for investment', Dawn 17/11/2014, accessed at
http://www.dawn.com/news/1144932/issues-in-chinas-offer-for-investment
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Mehtab Haider, 'China converts $230m loan for Gwadar airport into grant', The News International 23/09/2015, accessed at
http://www.thenews.com.pk/Todays-News-13-39840-China-converts-$230m-loan-for-Gwadar-airport-into-grant; Also see
Naveed Butt, 'Economic Corridor: China to extend assistance at 1.6 percent interest rate', Business Recorder 03/09/2015,
accessed at http://www.brecorder.com/top-stories/0:/1223450:economic-corridor-china-to-extend-assistance-at-16-percentinterest-rate/?date=2015-09-03
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Jeremy Page, 'China to Contribute $ 40 billion to Silk Road Fund', Wall Street Journal 08/11/2014, accessed at
http://www.wsj.com/articles/china-to-contribute-40-billion-to-silk-road-fund-1415454995
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