Chinese deals

EDITORIAL: After a lot of foot dragging to the consternation of Chinese investors in the CPEC power projects the government has finally abandoned its plan to reopen these deals to seek lowering of agreed tariff in line with what it did with the Independent Power Producers (IPPs). This decision was taken in the 10th meeting of the joint cooperation committee, the apex decision-making forum of the CPEC that met after two years. The Chinese were not happy about a number of things and one of them is stuck-up payments to their firms that invested in IPPs and other projects under the CPEC (China Pakistan Economic Corridor) programme. No company has issued default notices just yet, but the matter had become serious enough for the government to scramble for partial payments initially while negotiations went on. The problem was that Chinese firms that set up power plants under the CPEC were treated to the same tariff structures as other IPPs. Yet, while the government was able to revise those tariffs with other IPPs – by employing, among other things, including MI (Military Intelligence) and ISI (Inter Services Intelligence) in the negotiations - Chinese companies refused to budge. So now, as negotiations were dragging along, and the Chinese were growing increasingly anxious with time, the government has decided to give up and abide by signed contracts with the Chinese companies. The Pakistani side liked to play down the issue, and indeed a few senior officials were (anonymously) quoted as implying just that by the press, but Chinese companies were clearly cross enough to take their concerns straight to Beijing, which seems to have put in an unpleasant phone call to Islamabad. So it would be wrong to test the Chinese habit of calmly sorting out such matters instead of issuing default notices, as is the norm pretty much everywhere in the world wherever financial transactions, especially this large, are concerned. Already there’s some tension because Chinese contractors have refused to resume work at the Dasu Hydropower Project, which is not part of CPEC, even though two months have passed since the terrorist attack that brought the construction work to a halt. Apparently, they want some issues about compensation claims to be sorted out before committing again. The Pakistani government must also not have forgotten that Chinese contractors stopped working on the Mohmand Dam after a similar incident; and only high-level bilateral negotiations got them back after a week or so.

Copyright Business Recorder, 2021