Chinese, Pakistani businesses build ties as Beijing splurges on 'Silk Road'

[Syed1]

Chinese companies are in talks to snap up more businesses and land in Pakistan after sealing two major deals in recent months, a sign of deepening ties after Beijing vowed to plough $57 billion into a new trade route across the South Asian nation.

A dozen executives from some of Pakistan's biggest firms told Reuters that Chinese companies were looking mainly at the cement, steel, energy and textile sectors, the backbone of Pakistan's $270b economy.

Analysts say the interest shows Chinese firms are using Beijing's "One Belt, One Road" project ─ a global trade network of which Pakistan is a key part ─ to help expand abroad at a time when growth has slowed at home.

A Chinese-led consortium recently took a strategic stake in the Pakistan Stock Exchange, and Shanghai Electric Power acquired one of Pakistan's biggest energy producers, K-Electric, for $1.8b.

Read more: Abraaj reaches agreement to sell $1.77bn K-Electric stake to China's Shanghai Electric

"The Chinese have got deep pockets and they are looking for major investment in Pakistan," said Muhammad Ali Tabba, chief executive of two companies in the Yunus Brothers Group cement-to-chemicals conglomerate.

Tabba said Yunus Brothers, partnering with a Chinese company, lost out in the battle for K-Electric, but the group is eyeing up other joint ventures as part of a $2b expansion plan over the coming years.

Sindh Governor Mohammad Zubair, who until recently was the privatization minister, told Reuters China's steel giant Baosteel Group is in talks over a 30-year lease for state-run Pakistan Steel Mills. Baosteel did not respond to a request for comment.

The negotiations come as Pakistani business sentiment turns, with companies betting that Beijing's splurge on road, rail and energy infrastructure under the China-Pakistan Economic Corridor (CPEC) will boost the economy.

The Chinese charge is in contrast to Western investors, who have largely avoided Pakistan in recent years despite fewer militant attacks and economic growth near 5 per cent.

It is welcomed by many in Pakistan: foreign direct investment was $1.9b in 2015/2016, far below the 2007/2008 peak of $5.4b.

At the stock exchange signing ceremony, Sun Weidong, China's ambassador to Pakistan, said the deal "embodies the ongoing financial integration" between Chinese and Pakistani markets.

"This will facilitate more financial support for our enterprises," Sun said.

Reservations
CPEC will connect China's Western region with Pakistan's Arabian Sea port of Gwadar through a network of rail, road and pipeline projects.

That will be funded by loans from China, and much of the business will go to Chinese enterprises.

The scale of Chinese corporate interest beyond that is difficult to gauge, but in Karachi, Pakistan's financial center, sharply-dressed Chinese appear to outnumber Westerners in hotels, restaurants and the city's airport.

Read more: CPEC: lessons from history

Rising skyscrapers testify to a construction boom in the city, businesses are printing Chinese-language brochures and salaries demanded by Pakistanis who speak Chinese have shot up.

Miftah Ismail, chairman of Pakistan's Board of Investment, said Chinese companies were interested in investing in the telecoms and auto sectors, with FAW Group and Foton Motor Group planning to enter Pakistan.

FAW said the Pakistan "project is going through internal approvals", but did not offer more details. Foton declined to comment.

But not everyone is excited by China's growing role in the Pakistan economy, including trade unions, who said Chinese companies' alleged mistreatment of local workers in Africa in the past had alarmed them.

"We have concern and reservations that the Chinese might use the same methods in Pakistan," said Nasir Mansoor, deputy general secretary of National Trade Union Federation, Pakistan, the national trade union body.

The Chinese government and Chinese companies have dismissed such accusations in the past.

And doing business may not be easy for newcomers. Security remains a concern despite a drop in Islamist militant violence, and in the World Bank's ease of doing business index, Pakistan ranks 144 out of 190 countries.

Next phase
The Chinese interest comes as Islamabad and Beijing discuss the next phase of CPEC: how to build Pakistan's industry with the help of Chinese state-owned industrial giants.

Pakistani officials are drafting plans for special economic zones which would offer tax breaks and other benefits to Chinese businesses.

But even before zones are established, Chinese investors are scoping out land deals.

"A lot of companies ... don't care about CPEC. They just want 500 acres of land to set up shop," said Naheed Memon, head of the Sindh province's Board of Investment.

Faisal Aftab, manager of private investment firm Oxon Partners, said Oxon was in talks with two state-run Chinese companies and a wealthy Chinese businessman to purchase and develop land for high-end residential and commercial properties.

"They are seeking land in prime markets such as Lahore, Karachi, and Islamabad," Aftab said.

Yunus Brothers' Tabba urged Western investors to overcome their "phobia" of Pakistan.

"If they came here, they would see the momentum, the buzz of growth."

http://www.dawn.com/news/1312472/chinese-pakistani-businesses-build-ties-as-beijing-splurges-on-silk-road

 

[Syed1]

If you go this Dawn article and read the comments you will find that Pakistan's best well-wisher is enemy India LOL.


So many Indians concerned about China being the new East India Company for Pakistan.



You know you are doing something right if your worst enemy sits up and starts thinking about your 'betterment'

 

[troodon]

If you go this Dawn article and read the comments you will find that Pakistan's best well-wisher is enemy India LOL.


So many Indians concerned about China being the new East India Company for Pakistan.



You know you are doing something right if your worst enemy sits up and starts thinking about your 'betterment'

All is good until China starts claiming Pakistan lands.

According to Chinese, everything belongs to them if they stay in that region for a few decades.

 

[Syed1]

All is good until China starts claiming Pakistan lands.

According to Chinese, everything belongs to them if they stay in that region for a few decades.

We are very much capable of defending ourselves. Thank you for your concern.

China is not dumb to make an enemy out of a country of 200 million that possesses nuclear weapons and is right at it's door step.

 

[troodon]

We are very much capable of defending ourselves. Thank you for your concern.

China is not dumb to make an enemy out of a country of 200 million that possesses nuclear weapons and is right at it's door step.

Accha!!

China claims territories from all its neighboring countries and bullies them.

Even India and Japan do not stand a chance. You think Pak can?

 

[Gabbar Singh]

China-Pak economic ties seem to be going through the roof under the visionary leadership of Nawaz 'the Sher' Sharif.

India should welcome this - a rich, prosperous and stable Pakistan is good for the whole region.

 

[Zak_Fan]

If you go this Dawn article and read the comments you will find that Pakistan's best well-wisher is enemy India LOL.


So many Indians concerned about China being the new East India Company for Pakistan.



You know you are doing something right if your worst enemy sits up and starts thinking about your 'betterment'

All those comments aren't because of Pakistan doing well, a Pakistani economic project is hardly something Indians would care about. Real reason is the insecurity that comes with Chinese presence. It is very similar to the kind of insecurity Pakistanis have about Indian presence in Afganistan.

 

[enkidu_]

All is good until China starts claiming Pakistan lands.

According to Chinese, everything belongs to them if they stay in that region for a few decades.

Lame propaganda.

All those comments aren't because of Pakistan doing well, a Pakistani economic project is hardly something Indians would care about. Real reason is the insecurity that comes with Chinese presence. It is very similar to the kind of insecurity Pakistanis have about Indian presence in Afganistan.

It can be both : many Indians don't like Pak doing well, something they express quite frequently under login on social networks. China's growing influence is just the icing on the cake.

 

[Zak_Fan]

It can be both : many Indians don't like Pak doing well, something they express quite frequently under login on social networks. China's growing influence is just the icing on the cake.

Quite the opposite. An average Indian has little understanding of what CPEC really is, or what it could be in the future. Forget Indians, even for Pakistanis, latter is subject to speculation. A similar Pakistani project with another country would never have caused so much interest. Truth is, China is scary, and it's presence across the Western border has Indians worried.

 

[DW44]

So this strengthening of business ties is mostly Chinese companies buying up Pakistani ones which is not necessarily a good thing. China's own industrialization followed a model that welcomed foreign capital but not foreign companies. This will provide a short term boost but almost certainly cause more harm than good in the long run.

 

[Syed1]

Typical arm chair experts comments in this thread. Why does a foreign company acquiring a local company spell such doom and gloom? This is a strategy employed by a lot of companies who do not want to take the risk of undertaking completely greenfield projects in a country like Pakistan where the next political upheaval is just round the corner at all times.

Any FDI is better than no FDI.

 

[JaDed]

Arrey light lo na matter if it end up being good then good progressive Pakistan is good for region ,if its bad then India can claim we told you so,hypocrisy is high in my blood today.

 

[gani999]

So has there been any tangible benefit for the average Pakistani from all this yet?

More jobs, better roads, improving infrastructure?

 

[Yossarian]

All those comments aren't because of Pakistan doing well, a Pakistani economic project is hardly something Indians would care about. Real reason is the insecurity that comes with Chinese presence. It is very similar to the kind of insecurity Pakistanis have about Indian presence in Afganistan.

One slight difference. Pakistan has a land border with China. No such option for India vis-a-vis Afghanistan. India doesn't even have a direct sea route to Afghanistan, it has to rely upon the goodwill of Iran for letting Indian-Afghan trade traverse Iran.

India's primary motive for investing in Afghanistan is so as to create an ally against Pakistan. Whereas China's motive, first and foremost, is the economic benefits of a land route to the Indian Ocean / Persian Gulf.

 

[Nostalgic]

There's a nice, albeit likely inadvertent, pun in the headline...

"Chinese, Pakistani businesses build ties as Beijing splurges on Silk Road"

When life gives you silk, make ties.

 

[Yossarian]

So has there been any tangible benefit for the average Pakistani from all this yet?

More jobs, better roads, improving infrastructure?

What do you think CPEC is all about if not better rail and road infrastructure? And once built, do you thinks it will only be Chinese trains and trucks using these new roadways and rail lines?

 

[Syed1]

There's a nice, albeit likely inadvertent, pun in the headline...

"Chinese, Pakistani businesses build ties as Beijing splurges on Silk Road"

When life gives you silk, make ties.

Only someone like Nostalgic can come up with that gem

 

[Syed1]

So has there been any tangible benefit for the average Pakistani from all this yet?

More jobs, better roads, improving infrastructure?

Sir it is a 30 year program and it is in the first 2 years of its inception. The benefit to average Pakistan will arrive soon. It is too early to except rivers of honey to flow.

 

[DW44]

Typical arm chair experts comments in this thread. Why does a foreign company acquiring a local company spell such doom and gloom? This is a strategy employed by a lot of companies who do not want to take the risk of undertaking completely greenfield projects in a country like Pakistan where the next political upheaval is just round the corner at all times.

Any FDI is better than no FDI.

This is basic development economics, you really should make sure you at least know what you're talking about before throwing around random insults. For starters, any FDI is not necessarily better than no FDI, especially in a developing country. Here, we're working under the assumption that the end goal is to become a developed country at some point, because if that's not the end goal then the whole discussion is moot. FDI of a certain kind, that is investment without ownership, or at most a minority stake, is all well and good but there's a reason there is not a single developed nation that got there by accepting FDI without discrimination. The US, the most notorious peddler of neoliberal economics, had capital controls and FDI restrictions in place during it's growth phase that make even China's capital controls seem liberal by comparison. Korea, a country that underwent that phase more recently was also notoriously closed to foreign companies but open to foreign capital while Thailand and the Phillipines, who welcomed all FDI without discrimination got stuck in the middle income trap.

The transition from developing to developed economy requires a significant amount of capital accumulation and for that you need homegrown companies. Premature opening of markets to disloyal foreign capital and allowing foreign firms to hold majority ownership of local ones is a good way to permanently close that avenue.

At this point the idea of a quick fix might seem appealing because the alternative requires a government that actually knows what it's doing which seems an impossible prospect but this kind of leeway to a country like China means that even if such a government does come up in the future, their hands would be tied and we'd be stuck somewhere at the lower end of the mother of all middle income traps and that's if the whole CPEC business pans out exactly as planned.

 

[PakLFC]

Pak at the moment needs China to invest and keep an eye on India as well. Don't worry about what will happen in the next few decades as the dynamics of the world are forever changing. For now let China develop Pakistan. After next years elections insha Allah a new and fresh faced Pakistani government will come up with innovative idea's as to the way forward. Nawaz doesn't know much about such things to worried about him being exposed in front of the world. Let him enjoy his nihari for now! India being annoyed over Chinese investment and CPEC is a good thing for Pakistan.

 

[R0H1T]

This is basic development economics, you really should make sure you at least know what you're talking about before throwing around random insults. For starters, any FDI is not necessarily better than no FDI, especially in a developing country. Here, we're working under the assumption that the end goal is to become a developed country at some point, because if that's not the end goal then the whole discussion is moot. FDI of a certain kind, that is investment without ownership, or at most a minority stake, is all well and good but there's a reason there is not a single developed nation that got there by accepting FDI without discrimination. The US, the most notorious peddler of neoliberal economics, had capital controls and FDI restrictions in place during it's growth phase that make even China's capital controls seem liberal by comparison. Korea, a country that underwent that phase more recently was also notoriously closed to foreign companies but open to foreign capital while Thailand and the Phillipines, who welcomed all FDI without discrimination got stuck in the middle income trap.

The transition from developing to developed economy requires a significant amount of capital accumulation and for that you need homegrown companies. Premature opening of markets to disloyal foreign capital and allowing foreign firms to hold majority ownership of local ones is a good way to permanently close that avenue.

At this point the idea of a quick fix might seem appealing because the alternative requires a government that actually knows what it's doing which seems an impossible prospect but this kind of leeway to a country like China means that even if such a government does come up in the future, their hands would be tied and we'd be stuck somewhere at the lower end of the mother of all middle income traps and that's if the whole CPEC business pans out exactly as planned.

Yeah just look at the UK, how they sold their sovereignty over the years & today they're left with no industries & no power to back their words up, especially wrt the brexit.

I wish the Indian government would've been more prudent with FDI as well, we've given up too many of our sectors & given away too many sops in important sectors like telecom & autos. The Chinese are here, in India & Pak, just to make money. It'd be much better if they were restricted to 49% JV & eventually tech transfer, just as they've done in China, for long term growth of the nation, again be it Pak or India.

There's no reason to believe they'll be doing more good for the Pak economy than domestic players, ergo the JV route. If there's one thing you can bet on it's that China does what's good for China, Pak & CPEC or OSOR is just bait for them to expand their influence manifold in this region.

As for the non arm chair experts on this board, maybe you can lookup the pitfalls of globalization this past 30 years or something. See where the US is today & why China occupies the spot it does. The enemy of India isn't automatically your friend, even when they're giving you tons of (loaded) money.

 

[ahmedwaqas92]

Why is everyone other than Pakistanis so concerned about what we do with China ?? I mean we are after all neighbors since the inception of both Pakistan and China respectively.

 

[HussainRx8]

This is basic development economics, you really should make sure you at least know what you're talking about before throwing around random insults. For starters, any FDI is not necessarily better than no FDI, especially in a developing country. Here, we're working under the assumption that the end goal is to become a developed country at some point, because if that's not the end goal then the whole discussion is moot. FDI of a certain kind, that is investment without ownership, or at most a minority stake, is all well and good but there's a reason there is not a single developed nation that got there by accepting FDI without discrimination. The US, the most notorious peddler of neoliberal economics, had capital controls and FDI restrictions in place during it's growth phase that make even China's capital controls seem liberal by comparison. Korea, a country that underwent that phase more recently was also notoriously closed to foreign companies but open to foreign capital while Thailand and the Phillipines, who welcomed all FDI without discrimination got stuck in the middle income trap.

The transition from developing to developed economy requires a significant amount of capital accumulation and for that you need homegrown companies. Premature opening of markets to disloyal foreign capital and allowing foreign firms to hold majority ownership of local ones is a good way to permanently close that avenue.

At this point the idea of a quick fix might seem appealing because the alternative requires a government that actually knows what it's doing which seems an impossible prospect but this kind of leeway to a country like China means that even if such a government does come up in the future, their hands would be tied and we'd be stuck somewhere at the lower end of the mother of all middle income traps and that's if the whole CPEC business pans out exactly as planned.

As someone who has a published paper on FDI, I would love to come back and comment on this. There is no basic development economics! Development economics is fraught with challenges and paradoxes. Your understanding of Thailand, Phillipines, and the Asian tigers is also very superficial. I also find it curious that you criticize neo-liberal economics but embrace the Solow growth model.

 

[Nikhil_cric]

As someone who has a published paper on FDI, I would love to come back and comment on this. There is no basic development economics! Development economics is fraught with challenges and paradoxes. Your understanding of Thailand, Phillipines, and the Asian tigers is also very superficial. I also find it curious that you criticize neo-liberal economics but embrace the Solow growth model.

I'm no economist and certainly have not published any paper on it. But Im fairly convinced that neo liberal economics is what keeps Third World underdeveloped and is unfavourable to the developing world in general. Can you please explain how it does not ?

 

[DW44]

As someone who has a published paper on FDI, I would love to come back and comment on this. There is no basic development economics! Development economics is fraught with challenges and paradoxes. Your understanding of Thailand, Phillipines, and the Asian tigers is also very superficial. I also find it curious that you criticize neo-liberal economics but embrace the Solow growth model.

Economics being an inexact science, off course there's no universally accepted "basic" but there are certain fundamental elements of every model so it comes down to which one you subscribe to. Whatever little I know on the subject is self taught since my formal education is in a completely unrelated field but the views expressed here are based on extensively studying the work of well respected development economists. The Thailand/Phillippines example was deliberately oversimplified since a more detailed analysis is beyond the scope of this thread and would take up several posts.

I'm not a fan of neo liberal economics because it's based on a series of fairly inaccurate assumptions about human behavior and, more importantly, that of economic actors i.e. governments and corporations. Furthermore, as a believer in the scientific method, what I look for is empirical evidence and there isn't much in the way of that when it comes to neoliberal theories. The Solow-Swan model doesn't have that limitation though I should add that it is not without it's flaws.

 

[Black Zero]

So this strengthening of business ties is mostly Chinese companies buying up Pakistani ones which is not necessarily a good thing. China's own industrialization followed a model that welcomed foreign capital but not foreign companies. This will provide a short term boost but almost certainly cause more harm than good in the long run.

If long run means couple of generations, then most likely it's good for the people of that region.

 

[Slog]

Indians are such concerned neighbors

 

[Nostalgic]

Indians are such concerned neighbors

Every time I make the mistake of sitting down for lunch at the company cafetaria instead of driving home to eat, some Indian coworker invariably shows up to take the seat opposite mine. The topic is always the same: CPEC. Its CPEC this, and CPEC that, how the Chinese are untrustworthy, how Chahbahar has certain advantages Gwadar doesn't, and on and on and on.

Call me jaded or skeptical, but this CPEC business sounds too good to be true, and as they say, if it sounds too good to be true, it probably is. Nothing ever pans out as planned in Pakistan, and with governments as incompetent as the ones we end up being saddled with, I'm forced to say I'll believe it all when I actually see it.

That said, I find it amusing how big an issue it is for the Indians. Each and every one of them at the office, and there are quite a few, seems to have an in-depth knowledge of it, can quote stats and figures, and is imbued with a freshly discovered concern for Pakistan hurtling headfirst into this Chinese trap.

 

[gkb101277867]

Why has China been investing in Pakistan? What is the benefit of this to China?

 

[cricketjoshila]

Why has China been investing in Pakistan? What is the benefit of this to China?

A new market for chinese goods.China is having issues with most major economies in the world,US,Japan,India even the NATO countries so they are looking for new markets.

 

[gani999]

Sir it is a 30 year program and it is in the first 2 years of its inception. The benefit to average Pakistan will arrive soon. It is too early to except rivers of honey to flow.

I know. What I asked was whether there were any immediate benefits coming through as yet, as is usually the case with big investments. Examples are new jobs opportunities and more contracts for Pakistani contractors.

 

[gkb101277867]

A new market for chinese goods.China is having issues with most major economies in the world,US,Japan,India even the NATO countries so they are looking for new markets.

So for example this metro line that is being built in Lahore. I think that's being built by China too? How does China benefit from that? China takes a percentage of the profit?

 

[Yossarian]

I know. What I asked was whether there were any immediate benefits coming through as yet, as is usually the case with big investments. Examples are new jobs opportunities and more contracts for Pakistani contractors.

Well someone has to be doing the actual hard labour of digging up in preparation for constructing the thousands of miles of new roads, railway lines, bridges and all the other support infrastructure of CPEC. They won't all be Chinese labourers imported from China. Similarly, the steel and cement to build it all is not all going to be shipped over from China. Even those Chinese workers and engineers that are already in Pakistan still need to be housed, fed, transported, meaning all the support services required in addition to those directly involved with the project will be from local suppliers.

 

[Yossarian]

So for example this metro line that is being built in Lahore. I think that's being built by China too? How does China benefit from that? China takes a percentage of the profit?

Same with any private rail and road transport infrastructure. The owner/investor, whether local or foreign, does not get involved out of a sense of charity, but to make profit.

 

[cricketjoshila]

So for example this metro line that is being built in Lahore. I think that's being built by China too? How does China benefit from that? China takes a percentage of the profit?

They will run the metro system.

 

[Syed1]

Every time I make the mistake of sitting down for lunch at the company cafetaria instead of driving home to eat, some Indian coworker invariably shows up to take the seat opposite mine. The topic is always the same: CPEC. Its CPEC this, and CPEC that, how the Chinese are untrustworthy, how Chahbahar has certain advantages Gwadar doesn't, and on and on and on.

Call me jaded or skeptical, but this CPEC business sounds too good to be true, and as they say, if it sounds too good to be true, it probably is. Nothing ever pans out as planned in Pakistan, and with governments as incompetent as the ones we end up being saddled with, I'm forced to say I'll believe it all when I actually see it.

That said, I find it amusing how big an issue it is for the Indians. Each and every one of them at the office, and there are quite a few, seems to have an in-depth knowledge of it, can quote stats and figures, and is imbued with a freshly discovered concern for Pakistan hurtling headfirst into this Chinese trap.

CPEC may or may not be successful, but it has successfully managed to have the Indians 'concerned' for the well-being of Pakistan.

 

[JaDed]

Every time I make the mistake of sitting down for lunch at the company cafetaria instead of driving home to eat, some Indian coworker invariably shows up to take the seat opposite mine. The topic is always the same: CPEC. Its CPEC this, and CPEC that, how the Chinese are untrustworthy, how Chahbahar has certain advantages Gwadar doesn't, and on and on and on.

Call me jaded or skeptical, but this CPEC business sounds too good to be true, and as they say, if it sounds too good to be true, it probably is. Nothing ever pans out as planned in Pakistan, and with governments as incompetent as the ones we end up being saddled with, I'm forced to say I'll believe it all when I actually see it.

That said, I find it amusing how big an issue it is for the Indians. Each and every one of them at the office, and there are quite a few, seems to have an in-depth knowledge of it, can quote stats and figures, and is imbued with a freshly discovered concern for Pakistan hurtling headfirst into this Chinese trap.

Man if a patient person like you is irritated then it must be bad ,I hope they atleast share their curry with you.

 

[Nostalgic]

CPEC may or may not be successful, but it has successfully managed to have the Indians 'concerned' for the well-being of Pakistan.

If it achieves nothing else, this is a success already.

 

[Nostalgic]

Man if a patient person like you is irritated then it must be bad ,I hope they atleast share their curry with you.

Well, the most frequent uninvited lunch partner brings his lunch in a stacked three-layer metal dabba, complete with handle. It invariably contains daal chaawal with an assortment of chutneys, which he proceeds to mix together and eat with his hands. Since I follow a ketogenic diet, it is forbidden to me. Not that he offers to share or anything.