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2014-11-09 13:35:00

PAKISTAN & CHINA DEAL: $35 BLN

PAKISTAN & CHINA DEAL: $35 BLN

Pakistan plans to sign deals worth billions of dollars with China for development of infrastructure and energy projects during Prime Minister Nawaz Sharif 's visit to Beijing this weekend, Pakistani officials said.

Mr. Sharif is to meet the Chinese leadership on the sidelines of the Asia-Pacific Economic Cooperation summit, which starts in Beijing this week. Pakistan suffers from a crippling shortage of electricity and it is looking to its close ally China for a solution.

The agreements are part of a bigger aim to establish a Pakistan-China economic corridor that will link south west China, by road and rail, to the Pakistani port of Gwadar, giving China a harbor close to the Middle East, a $35 billion program in total.

"Pakistan and China have strong relations and we've now decided to take this relationship to the next level of strategic economic cooperation," Ahsan Iqbal, Pakistan's Planning Minister, said in an interview.

Mr. Iqbal said the Pakistani side's focus in Beijing will be on energy, with agreements or memorandums to be signed on a series of specific power projects. He said that previously, negotiations had been over the broad framework for the proposed economic corridor.

"The Chinese have agreed to invest at a critical time, when Pakistan is really starved of energy," said Mr. Iqbal.

Mr. Sharif will sign agreements on 14 power plants, that will provide the country with 10,400 Megawatts of new generation, said Musadiq Malik, the spokesman for the prime minister. The Chinese companies will invest in building the power stations as commercial ventures, raising their own financing, as foreign direct investment, so Pakistan won't be taking on any additional debt, Mr. Malik said.

Another official said that two of the power plant projects are sufficiently developed to begin work on the ground within the next 12 months. The plants are mostly coal-fired.

Building power stations on that scale would cost at least $10 billion, experts said. Pakistan will also need to upgrade its electricity transmission network and build facilities to import and transport the huge quantities of coal that would be required.

Pakistan's daily electricity output is generally 13,000 MW to 15,000 MW, leaving it at least 5,000 MW short of demand. That deficit means hours of rolling supply cuts to homes and businesses every day across the country, a situation that economists estimate slashes several percentage points off national income.

Aside from China, Pakistan has struggled to attract other foreign investors to its energy sector. Pakistan's current generation is based on oil-fired stations, which are expensive to run, and gas-power plants that are stymied by a shortage of gas in the country. Pakistan now plans to build plants that use coal, along with limited solar and wind power projects, officials said.

"We have received a signal from the Chinese that these [power] projects are ready to proceed," Mr. Sharif told a cabinet meeting Thursday, in televised remarks. "These power stations will start to be built, but to complete them it will take about 3½ years."

Mr. Sharif won a landslide in elections last year after campaigning on a platform of economic revival and tackling the electricity crisis. However he is under pressure to deliver, especially from ongoing protest led by opposition politician Imran Khan, who has repeatedly criticized the prime minister for raising electricity prices to consumers without improving the electricity outages.

A planned visit of Chinese President Xi Jinping to Pakistan in September, when many of these deals were supposed to be signed, had to be postponed due to the tense standoff in Islamabad caused by Mr. Khan's protest.

China's Assistant Foreign Minister, Liu Jianchao, told visiting Pakistani lawmakers earlier this week that Mr. Sharif's visit would result in deals.

"These agreements would further expand and deepen relations between China and Pakistan," Mr. Liu said, according to the Associated Press of Pakistan, an state-controlled news agency. "However the situation evolves, we will remain committed to maintain strategic partnership with Pakistan."

Separately, Beijing is also to provide Pakistan with five more nuclear power plants .

China wants to use its economic muscle to help stabilize Pakistan and Afghanistan, on its south west flank, particularly as U.S. forces draw down from Afghanistan, fearing the spread of militancy from these countries into China, said Akram Zaki, a former Pakistani ambassador to Beijing and ex-deputy foreign minister.

"In the 20th century, the Pakistan-China relationship was basically security infrastructure and defense production cooperation," said Mr. Zaki. "In the 21st century, the emphasis has shifted to the economic dimension."

wsj.com

Tags: PAKISTAN, CHINA, GAS,