Pak-China bilateral energy cooperation

By Mehmood-Ul-Hassan Khan

Recently, many high officials and big business groups from China visited Pakistan and by discussing with the authorities they explored different workable projects in the fields of energy, infrastructure and railways. Details are given below as:

China Three Gorges Corp (CTGPC) China’s largest hydropower developer is ready to invest $15 billion in Pakistan’s energy sector, an investment that could hopefully add 10,000 megawatts to Pakistan’s main grid over the next 10 years. The corporation also offered to develop multi purpose hydro electric projects through direct financing model based on 3Ps i.e. public private partnership. CTGPC, a wholly state-owned enterprise, is a huge clean energy group with owns and operates the world’s largest hydropower station in China.

(a) The Chinese companies showed their keenness to invest $10 to $15 billion for the development of power sector in Pakistan which has around 175 billion tonnes of coal deposits in Thar. China has the expertise in coal energy which must be utilized for the tapping of Thar coal reservoirs.
(b) The projects of hydropower i.e. Kohala Hydro Power (1100 MW), Bhunji (7100 MW), Bhasha, Dashu in Upper Indus Valley, and other Hydro Power projects in lower Indus valley were thoroughly discussed most recently with the Chinese representatives of public-private sector. China Three Gorges Project Corporation (CTGPC) signed an agreement with a private Pakistani firm, Associate Technologies (Private) Limited to invest $1.2 billion in 720 MW Karot Hydropower Project. The Karot project would be completed in four years and help Pakistan to overcome load-shedding problem.
(c) China has also offered to start construction of 50 MW wind power project in Jhampir (Sindh) and which will be completed in 2012. Furthermore it has also planned to install 2000 MW wind power.
(d) China has also planned to invest in the 300 MW solar power projects in Pakistan.
(e) Some Chinese companies have already shown interest in infrastructure development in Pakistan including construction of Karakorum Motorway and the Railways.

Rigorous follow-up

On its part the government of Pakistan has issued letter of interest for the Karot Hydero electric project with 720 MW generation capacity. Its feasibility has already been approved and the project is currently at tariff petition stage. MOU for the Taunsa hydro eclectic project with 120 MW generation capacity has been signed and the joint development agreement of the project will be signed very soon. The Kohala hydro power project with generation capacity 1100 MW electricity is ready for tariff negotiations as the letter of interest of the project has been issued and the updated feasibility study already approved. Bunji hydro electric project another mega energy project being undertaken by the Three Gorges Project Corporation with 7100 MW generation capacity is ready for site survey as the MOU for the project was signed in august 2009.

The extended bilateral energy cooperation also consists of ongoing wind projects namely Karachi first wind farm, Karachi second wind farm and Punjab wind and solar projects are also at its advanced stages. The government of Pakistan also shows its intention to build a run of the river hydro project at Sukkur Barrage with China Three Gorges Project Corporation. Moreover, Joint Development agreement was due to be signed this month for the 120 Megawatt Taunsa Hydro electric project where the discharge is 10,000 cusecs is ready for joint development agreement.

The government of Pakistan also offered Chinese companies to invest in the Basha dam as well as large scale manufacturing of solar panels and wind energy turbines in the country, as the corporation has specializing in renewable energy development and operation and the country has a great potential of solar and wind energy.

Export-Import Bank of China’s generous loaning

According government’s officials the Export-Import Bank of China will loan Pakistan $1.7 billion to develop a city-wide train system in the eastern city of Lahore. The 15-year loan will be disbursed in the next five years, and negotiations with Eximbank are under way to finalise other details.

Most recently, the Punjab government recently agreed to award the 27 km (16.7 mile) train line contract project to the Chinese company China North Industries Corp (Norinco). The project is likely to begin by the end of 2011. It is hoped that completion of this project will substantially decrease road traffic.

Suggestions/Recommendations

(a) It is strongly suggested that Beijing should relax non-tariff barriers and technical barriers and procedures need to be simplified for Pakistan. Chinese private sector and enterprises should continuously conduct exchange and cooperation with Pakistan in different sectors of the economy especially energy sector. Deliberations should also be carried out in joint ventures, technology transfer, tourism and transportation sectors.
(b) Public-private sector of Pakistan should pay more attention to the preparation work of investment projects, strengthen communication and exchange with chambers of commerce and industry and enterprises of relevant provinces of China. Pakistan must continuously improve the people, business and investment friendly environment and give Chinese enterprises an equal treatment practically to protect the legal rights of Chinese enterprises and Chinese citizen.
(c) There is an urgent need to strengthen the bilateral trade volumes between the two countries. Pakistan exported different commodities to China of worth $228.63 million, $244.59 million, $288.259 million, $354.092 million, $463.967 million and $575.903 million in 2001-2006. Whereas, Pakistan imports from China was $ 5 75.37 million, $839.00 million, $1,153.514 million and $1,842.270$ which clearly indicated balance of trade in favour of China.
(d) Effective implementation of free trade agreement (FTA) must be monitored.

Conclusion

Pakistan and China must initiate massive energy cooperation for the benefits of both the countries. Both the countries should also enhance defence cooperation and meaningful security pacts.