A rare warning about dangers of investing in many B&R countries

on 08/06/2018

Countries involved with ‘Belt and Road’ initiative have high debts, low credit ratings: Ex-chief: China EximBank

The former head of one of China’s main lenders for projects related to the “Belt and Road” initiative issued a rare warning about the dangers of investing in many countries involved in the program.

Li Ruogu, ex-chairman and president of the Export-Import Bank of China (China EximBank), one of the country’s three policy lenders, said that although many countries along the Belt and Road route need huge amounts of capital for their development, they have high debts and low credit ratings, making it difficult for them to raise funds.

“There are few countries with credit ratings above the ‘BB’ level and the investment risks are relatively large,” Li told a forum in Beijing, referring to a ranking that denotes a country’s debt is considered below investment grade. “Raising enough funds for the development of these countries is arduous.”

The Belt and Road was unveiled in 2013 by President Xi Jinping. Its aim is to strengthen trade ties with countries in Asia, Africa and Europe, primarily through infrastructure investment and construction. Chinese officials have also said they want to boost the use of the yuan in nations involved in the initiative, part of the government’s ambitious plans to enhance the global influence of the Chinese currency.

The initiative currently includes 72 countries, according to the Chinese government-run website: yidaiyilu.gov.cn. Li, a former deputy governor of China’s central bank, was head of EximBank for 10 years before retiring in 2015. He is currently an academic with the People’s Bank of China’s graduate school.Although Chinese think tanks have given similar warnings about the Belt and Road, it is unusual for individuals holding public office or retired officials to openly express caution about the initiative.

Li pointed out that many Belt and Road countries hold “limited” attraction for foreign investors and they should formulate preferential policies that would be conducive to luring more money, including in areas such as foreign exchange, tax and labor, and standardize laws and regulations on issues such as market access, driver’s licenses and visas to enable capital and people to flow more easily.

Zhou Xiaochuan, former governor of the People’s Bank of China, at the same forum called for the projects to have a single currency for settlement and for Belt and Road countries to build more developed equity and bond markets and other financial tools to provide stable sources of funding.

The shortfall in infrastructure investment in all Belt and Road countries was estimated to be more than $600 billion a year, Zhou said, around 4% of their total gross domestic product in 2016, according to World Bank data.

China’s banking watchdog in November issued regulations specifically for the three policy banks, which also include China Development Bank and  Agricultural Development Bank of China, to strengthen capital adequacy requirements and enhance oversight of their risk controls. A banking executive, who declined to be named, told Caixin at the time that the policy lenders’ involvement in the Belt and Road was one of the reasons that regulators had become more concerned about the strength of their capital buffers and ability to manage risks.

By the end of 2017, China EximBank had outstanding loans of more than 700 billion yuan ($111.3 billion) to nearly 1,500 projects in more than 50 countries that are taking part in the Belt and Road, mainly in sectors such as transportation, power, telecommunications, high-tech and energy, Chen Bin, head of the lender’s branch in the southern province of Guangdong, was cited by the Nanfang Daily newspaper as saying in January.

Zhou told the conference that Chinese banks have granted more than $200 billion for Belt and Road projects. – Courtesy CAIXIN

 

Siemens Gamesa wins biggest order to date in India

on 08/06/2018

Along with the turbines, Siemens Gamesa will also provide operating and maintenance services for the planned farm, to be located in Gujarat.

Siemens Gamesa, which overtook Vestas as the world’s largest wind turbine maker last year, said it won its biggest order to date in India, where a temporary downturn had previously hit the group’s profits.

The company, formed by the merger of Siemens’ wind power unit with Spain’s Gamesa, said it had agreed with Sembcorp Energy India, the Indian energy arm of Singapore’s Sembcorp Industries, to build a 300 megawatt wind park.

Along with the turbines, Siemens Gamesa will also provide operating and maintenance services for the planned farm, to be located in Gujarat, which is planned to be commissioned in April 2019.

“This contract marks a landmark in Siemens Gamesa’s strategy in India on account of both the size of the project and the technology selected,” said Ramesh Kymal, who heads Siemens Gamesa’s Indian onshore division.“Moreover, it sends a very positive signal regarding the market’s momentum and shores up our confidence in its full recovery.”Similar to other markets, India, the world fifth-largest wind power market, has undergone a shift away from subsidies and towards more competitive auctions, which led to a decline in volumes and also hurt Siemens Gamesa’s business last year.

 

Chinese should connect with local companies: FIATA chief

on 08/06/2018

Badat demands a separate ministry for logistics and transport sector in Pakistan.

President, International Federation of Freight Forwarders Associations (FIATA) Babar Badat has demanded a separate ministry for the logistics and transport sector for ensuring quick solutions and rapid growth of the industry.

Badat who presided over the ‘Logistics’ session of CPEC Summit and Expo organized in Karachi said at present the logistics industry had to run from one ministry to another to get the issues resolved. If a separate ministry for logistics and transport is formed, the issues would be resolved and thus accelerate the growth.

He was of the view that a recent bill presented in the National Assembly on logistics does not meet the present day challenges. It should be reviewed in consultation with the stakeholders, he stressed.

Pakistan is among the few countries of the world where there is no separate ministry for logistics and transport, he noted. The sector is an important link in the entire supply chain in the region after the launch of the CPEC and a separate ministry will become a focal point for the industry, he added.

Badat said the Chinese companies should connect with local companies or enter into joint venture to handle transshipment or transit cargoes through Gwadar Port.

International Chamber of Commerce Chairman Tariq Rangoonwala also stressed on the need for joint ventures between local and Chinese companies to enhance Pakistan`s industrial base and productivity. He hoped Pakistan will become a hub for transshipment trade once CPEC is fully on ground. Being a signatory to the TIR Convention, the customs connection on the international transport of goods under the cover of TIR Convention is an important link, he noted.

National Water Policy Approved

on 07/06/2018

Centre and the provinces agree to select water reservoirs with consensus in line with the 1991 water apportionment accord; thorough examination of impact on sea intrusion, environmental protection and provincial water rights compulsory

After more than a decade, all four provinces and the center have agreed to a water policy targeting to construct a new dam which will add up over 6 MAF to the total water resources in Pakistan.

The Council of Common Interests (CCI) formally approved on April 24, 2018 the policy called as  National Water Policy (NWP) with all chief ministers in attendance in the moot presided over the prime minister.

Implementation of the NWP would be undertaken through a National Water Council (NWC)—a new national level body headed by the prime minister and comprising the federal ministers for water resources, finance, power and planning, development and reforms and all provincial chief ministers.

Achieving consensus was, no doubt, Commendable for which background efforts were made to hunt down reservations of the provinces. Thus, the signing of the document by the chief ministers went swift.

Resolving one of the major issues, Wapda, Punjab and Khyber Pakhtunkhwa will work out net hydel profit arrears for the two provinces in accordance with the A.G.N. Kazi formula.

The Centre and the provinces agreed under the policy that selection of water reservoirs would be made with consensus in line with the 1991 water apportionment accord and after thorough examination of their impact on sea intrusion, environmental protection and provincial water rights to secure surplus water in the system.

The policy acknowledges the need to adopt the NWP with an initial target of increasing storage capacity from existing 14 million acre feet (MAF) by immediately starting the construction of 6.4 MAF Diamer Bhasha dam which had already been cleared by the CCI back in 2009.

The policy empowers the provinces to develop their master plans within a national framework for sustainable development and management of water resources keeping in view the depleting water resources in the country.

The policy covers all water-related issues, including water uses and allocation of priorities, integrated planning for development and use of water resources, environmental integrity of the basin, impact of climate change, transboundary water sharing, irrigated and rain-fed agriculture, drinking water and sanitation, hydropower, industry, ground water, water rights and obligations, sustainable water infrastructure, water-related hazards, quality management, awareness and research, conservation measures, legal framework and capacity building of water sector institutions.

The policy recognizes the need to provide at least 10 per cent of the federal Public Sector Development Program to the water sector, gradually increasing it to 20pcby 2030.The provinces will also increase expenditure on the water sector as total allocation of Rs145 billion, 7pc of the combined federal and provincial development budget for 2017-18, was inadequate to address the challenges.

Under the policy, water losses currently estimated at 46 MAF a year have to be cut by 33pc by 2030 through canal and watercourse lining. Water efficiency will also be increased by 30pc by 2030 through improved technologies like drip and sprinkler irrigation and more realistic water pricing policy.

 

Federal Budget 2018-19 inflicts cut at Development 

on 07/06/2018

Salient features Budget  outlay Rs5,932.5bn from Rs5,103.88bn last year ─ a 10.6% increase
The budget hikes current expenditures and cuts development
Bank borrowing estimated at Rs1,015.3bn, roughly 2.6 times higher than last year
Defence budget experienced a 19.5pc increase from last year

The PML-N government’s newly appointed Finance Minister Miftah Ismail presented a sixth full-term budget in the National Assembly on April 27 saying the government cannot interrupt the 5.8 per cent GDP growth.

The total budgeted outlay for the year 2018-19 was set at Rs5,932.5bn from Rs5,103.88bn last year ─ a 10.6pc increase over revised figure, and a 16.2pc increase over last year’s budgeted figure.

The revised outlay for 17-18 came to Rs5,361bn.The target GDP growth rate for the upcoming fiscal year has been set at 6.2pc against FY17-18’s target of 6pc.The total tax target is Rs4,888.6bn, of which the FBR taxes comprise Rs4,435bn.

“This target will be achieved through improved tax steps and improved tax administration. The tax base is being expanded and the per cent of tax is being reduced,” the finance minister said.

The non-tax revenue target has been set at Rs1,246bn, according to a copy of the budget 18-19.The provincial share in tax revenue will be increased from Rs2,316bn to Rs2,590bn, Ismail added.

As expected, the budget hikes current expenditures and cuts development. This is the first PML-N budget to do so. The hike in current expenditures is roughly 20pc, while development expenditure has been cut 20pc.

The share of current and development expenditure respectively in the total budgetary outlay is 80.6pc and 19.4pc. Current expenditure has been estimated at Rs4,780.4bn, while development expenditure is set at Rs1,152.1bn.

Development expenditure outside the PSDP has been estimated at Rs180.2bn for FY18-19, which is 18.4pc higher than FY17-18 estimates.

Under the PSDP, Rs47bn has been allocated to the HEC, Rs37bn for basic health and Rs10bn for the PM’s Youth Programme.

The defence budget has been set at Rs1,100bn from a revised budget estimate of Rs999bn in the previous year ─ 18.5pc of the total budgeted outlay, while the PSDP has been slashed to Rs800bn for FY18-19.

Karachi package.Government announced a Rs25bn special package for development in Karachi.A large-scale desalination plant will be set up in Karachi to end the city’s water woes, Ismail said.Rs5bn will be allocated for the construction of roads, fire brigades and bridges in the coming fiscal year. Rs8bn will be set aside for expansion of the Expo Centre, he added.