China consents to finance the realignment of KKH.

Following Beijing’s refusal to offer concessional loans, Pakistan said Friday that China would finance 85% of the realignment of the Karakoram Highway and has backed Islamabad’s decision to approach multilateral lenders for funding for a strategically significant rail link.

Beijing has long advised Pakistan to think about paying off its current debt and figuring out how to finance new initiatives without adding to the nation’s debt.

However, China agreed to finance 85% of the Karakoram Highway project as a special case to maintain the road link between China and Pakistan in the face of severe weather, despite its worries about Pakistan’s debt status.

Following Beijing’s refusal to grant a concessional $6 billion loan, both parties also agreed that international institutions should now finance the about $7 billion Main Line-I project of the China-Pakistan Economic Corridor.

The 14th Joint Cooperation Committee (JCC) conference, which was held in Beijing, included talks about the history and prospects of CPEC. The meeting was co-chaired by Planning Minister Ahsan Iqbal and National Development and Reform Commission (NDRC) Vice Chairman Zhou Haibing.

After the discussion, Iqbal told The Express Tribune, “We have decided to begin bidding on the Karakoram Highway in phases and the Chinese side confirmed 85% financing for the project.”

After large dams were built, portions of the route became inundated in water, necessitating reconfiguration. The Thakot-Raikot portion of the project, which is 241 kilometers long and costs Rs576 billion, or $2 billion, has been approved by the government.

According to the sources, work on developing a creative funding strategy will continue throughout the first phase, which will also see the implementation of the 82-kilometer realignment project of the flooded portion caused by the Diamer-Basha dam.

The minutes of the JCC meeting are still up for debate because neither party finalized them.

The Chinese authorities recommended that Pakistan take a thorough look at how to deal with its current obligations, according to proposed minutes that Pakistan has not yet approved. Additionally, it suggested that the government look for financing options that don’t increase the national debt and that the lending standards for new projects be reconsidered.

Iqbal claimed that the JCC conference on Friday did not address the subject of Pakistan’s debt.

In the most recent fiscal year, the public debt increased in both absolute terms and the size of the economy, reaching Rs80.5 trillion, or slightly more than 70% of GDP.

According to the sources, China supports developing a workable and realistic funding strategy without raising Pakistan’s sovereign debt further.

In order to coordinate the development of the Diamer-Basha dam and the N35 realignment, Beijing also hoped that Pakistani officials would improve communication. In order to prevent traffic disruptions, it had recommended that Pakistan refrain from storing water in the dam until the realignment project was finished and accessible.

ML-I

According to Iqbal, China and Pakistan decided to move forward with the ML-1 project with multilateral funding from the Asian Infrastructure Investment Bank and the Asian Development Bank. For field surveys, the ADB has already dispatched a team.

In order to ensure safety, Pakistan and China also decided to move on with the Main Line 1 (ML1) upgrade and reconstruction project in phases.

Following several discussions, the parties decided to expedite the study of the financing plan for the test section (Hyderabad to Karachi) and the ensuing consultations. Once the financing plan was agreed upon, the bidding and construction process was started.

“I wish to reemphasize the urgency we have agreed upon for the ML-I project and the realignment, necessitated by major hydropower dams, will preserve uninterrupted connectivity between our nations and the early implementation of both projects will yield far-reaching economic and strategic dividends for the entire region,” Iqbal said at the end of his speech.

According to Iqbal, it has been decided that China will assist Pakistan in creating a plan for climate preparedness and resilience, and the two nations will work together to revitalize Gwadar Port.

In order to improve market access and promote Pakistani exports to China, the Chinese also agreed to start a fresh round of talks on revising the China-Pakistan Free Trade Agreement to include tariffs for Pakistani goods comparable to those of ASEAN nations, according to the Planning Minister.

Iqbal emphasized that the primary engine of economic expansion in the upcoming stage must be exports. He called for Pakistani goods to have the same market access as those of the ASEAN nations, pointing out that China purchases more than $2 trillion a year while Pakistan sells only $3 billion to China.

In order to emphasize industry relocation from China in the areas of textiles, engineering, electronics, pharmaceuticals, and electric vehicles, he urged for the establishment of two government-to-government special economic zones (SEZs) in Karachi and Islamabad as model export-oriented centers.

In order to reduce investor risk and expedite foreign direct investment, the planning minister further suggested creating a Pakistan-China Industrial Relocation Fund.

The minister continued by saying that in order to keep the 14th JCC definitive, decisive, and goal-oriented, the minutes of the conference would be decided upon in light of geopolitics and to combat the negative propaganda of anti-CPEC forces.

LTP

In order to align the CPEC Five Corridors (5Cs)—growth, innovation, green, openness, and livelihood—with Pakistan’s URAAN (5Es) Framework—which includes exports, E-Pakistan & Innovation, energy & infrastructure, environment & climate change, and equity, ethics, and empowerment—both parties also talked about the second phase of the CPEC.

Iqbal stated that in order to give clear strategic guidance, he suggested that an updated CPEC Long-Term Plan be released in 45 days, bringing President Xi’s five CPEC 2.0 corridors into line with Pakistan’s URAAN 5Es framework.

The two parties committed to consistently strengthening the alignment between the URAAN Pakistan Framework based on the 5Es and the CPEC Five Corridors.

The two parties committed to working together to keep the power price policy for CPEC energy projects stable, to settle disagreements amicably through consultation, and to refrain from taking unilateral action to alter the current situation.

In line with the 2014 agreement on energy project cooperation under the China-Pakistan Economic Corridor (CPEC) inked by the governments of the two countries, the Chinese side hoped that the Pakistani side would set up a circular account for electricity bill payment as soon as possible.

Iqbal acknowledged Gilgit-Baltistan’s unique significance as the physical entry point of the China-Pakistan Economic Corridor (CPEC) and suggested a 300 megawatt solar project to stop the region’s 18–20 hour daily blackouts and revitalize its economy.

Additionally, he underlined that CPEC’s future has to shift from government-to-government collaboration to business-to-business alliances.