Pakistani Economic Stress Watch

[madhu]

I think we need to think of second and third order effects after collapse of pak. POGB can be absorbed to india but rest is too dangerous to touch. Even POJK is too radicalized.

As a first line of defence we need to mine full border heavily.

I think we need to move these discussions to paki page and think through leaving this for economics.

Mods please help.

[chetak]

they will simply swamp us via every route and the paki army will facilitate it via gujarat, nepal, bengal via beediland and TN and KER via SL and outlying islands.

The smarter ones will go to the andamans via myanmar

all these are normal drug, human trafficking, and arms running routes

Nyet, Chetak ji

How can the hordes go to beediland, nepal & sri lanka in the first place. It's not like the national carrier or the PAF will cart them to these locations at great cost to self.

Sea route also highly unlikely. Diesel shortage. Plus the pakis don't have enough boats

It will be land-crossings onlee. Risking the border mines, the rann and all

border mines can be overcome by driving herds of cattle across minefields

IA will not open fire on civilians except in some exceptional cases and tens of gora cameras will accompany these hordes

It may well morph quickly into a BIF led regime change agenda

If the schitt hits the rotating parts, the pakis will find a way through.

Once in, these scum will never leave because the pakis will never accept them back. Demographic changes will follow with the congis/commies/naxals eagerly facilitating Indian identity cards for them

Over the years, many crores of jehadi pakis are convinced that things are much better on our side of the LOC/LAC.

SIMI, ISIS, PFI, ummah NGOs from the gelf and other countries, various jamaats, and all madrasas will welcome them

Disregard nothing and keep up the guard and vigil.

Why underestimate them when we are only ones at risk

[Deans]

We did not have a flood of refugees from Sri Lanka, when they went bust, though they would have been more welcome than Pakistani Muslims.
Nor did we have a lot of refugees from Afghanistan (India was not the first choice for Sikhs in Afghanistan).

We will probably have Hindu and Sikh refugees, Govt should make it clear in every forum, that the opposition to CAA from the usual suspects will make their integration into Indian society difficult.

[vimal]

Remember folks 1 pious = 100k kuffar

[Anujan]

A few points.

Pakistan is now finding out what happens when Massa's gracious protection gets lifted. Their strategic community was all gaga over how they defeated Massa in Afghanistan. Now they are finding out the consequences of their tactical brilliance. Dar's bravado of "I Know how to deal with IMF" was followed by a GUBO session. Perhaps he didn't realize that it was Massa dealing with IMF and not Dar.

Secondly Pakistan might still get a bailout. Remember that these international funding agencies exist for political and social stability. Not for morals. Internationally, it is bad if a country of 300M with the bum cannot feed and clothe their people.

Lastly. When will pakis realize iron brother won't help. Has never helped. Not in 65, not in 71, not during Kargil, not now, not ever. They are paying Pakistan to be the occasional nuisance to India. Pakistan and China have nothing in common except they both hate India. China's trade balance is 20B in favor of china. Pakistan exports nothing to china. Doesn't get favorable treatment for visas or business. All they get is a few military trinkets and the Khakis go "taller than honey, sweeter than ocean"

Here is a poem I've penned

I looked at the mountains
And you said our love is taller
Oh but you ghosted me
When I needed the dollar.

Lastly remember that pakis need money to fight Afghanistan. Their border there is worsening. I've been reading a book about pashtun history and two things stuck me

1) there is no legal, political, historic, social reason justifying the Durand line (I can post in more detail in a different dhaaga if you are interested)

2) Most of the British Indian army was stationed in Waziristan during British rule of India.

Now put two and two together.

[srin]

Lastly. When will pakis realize iron brother won't help. Has never helped. Not in 65, not in 71, not during Kargil, not now, not ever. They are paying Pakistan to be the occasional nuisance to India. Pakistan and China have nothing in common except they both hate India. China's trade balance is 20B in favor of china. Pakistan exports nothing to china. Doesn't get favorable treatment for visas or business. All they get is a few military trinkets and the Khakis go "taller than honey, sweeter than ocean"

Here is a poem I've penned

I looked at the mountains
And you said our love is taller
Oh but you ghosted me
When I needed the dollar.

Blasphemy ! You don't understand geo-economics. I present this as evidence.

Take that you SDRE yindoos !

[chetak]

We did not have a flood of refugees from Sri Lanka, when they went bust, though they would have been more welcome than Pakistani Muslims.
Nor did we have a lot of refugees from Afghanistan (India was not the first choice for Sikhs in Afghanistan).

We will probably have Hindu and Sikh refugees, Govt should make it clear in every forum, that the opposition to CAA from the usual suspects will make their integration into Indian society difficult.

There are many sinhala and tamil families who did not return after the ltte fiasco ended. They are settled in the southern states mainly KAR, but the sinhala are not particularly welcome anywhere in India.

many tens of thousands of families from maldives have also quietly moved in

every paki and beedi jehadi knows what India did for it's people during the pandemic

there is a steady inflow of refugees from SL into TN and from there they disappear into the southern hinterland

If any do come from pukestan, it will mostly be the jehadis from punjab and sindh and the beedis will simple unleash the rohingiyas into India in a worst case scenario

not everything comes in the press, especially when the dravidians want to keep it quiet.

and as usual, the paki jehadis will butcher the paki non jehadi refugees, mostly as a traditional and culturally accepted pastime

[Manish_P]

..

border mines can be overcome by driving herds of cattle across minefields

IA will not open fire on civilians except in some exceptional cases ...

This. Exactly.

Agree with the rest of the points in your post as well.

[V_Raman]

Sudden big breakup/crisis in Pak will be a sure shot way to derail the Indian economic growth story. The west has a potent weapon there.

[drnayar]

Most of the India Pak land borders are electrified fences , and sea routes blocked by coast guard. I dont think they can just walk in !.. They would likely run into China. All those people come with a lot of extremist baggage that will come into open once their basic needs are met. Imagine 10x the problem Europe is facing from "refugees".A huge security issue. I think India will not be open to take in any refugees from Pak.

[chetak]

Most of the India Pak land borders are electrified fences , and sea routes blocked by coast guard. I dont think they can just walk in !.. They would likely run into China. All those people come with a lot of extremist baggage that will come into open once their basic needs are met. Imagine 10x the problem Europe is facing from "refugees".A huge security issue. I think India will not be open to take in any refugees from Pak.

janab,

do we have any choice with the beedis who walk in at will and what's more, they go back home, maybe once or twice a year, and return through the same porous borders

how have the tens of thousands of rohingiyas entered via the NE and beedi borders

[sanjaykumar]

They should be given transit rights en route scandanavian countries Germany Qatar etc.

[NRao]

I think it will be wonderful.

Modi-Shah can declare a State of Emergency. And when that SoE is complete we will have a Navi Bharat and no one the wiser. Peace will decend, like a gentle rain, over the sub continent.

How much foreign reserves does Pak have?

[Deans]

We did not have a flood of refugees from Sri Lanka, when they went bust, though they would have been more welcome than Pakistani Muslims.
Nor did we have a lot of refugees from Afghanistan (India was not the first choice for Sikhs in Afghanistan).

We will probably have Hindu and Sikh refugees, Govt should make it clear in every forum, that the opposition to CAA from the usual suspects will make their integration into Indian society difficult.

There are many sinhala and tamil families who did not return after the ltte fiasco ended. They are settled in the southern states mainly KAR, but the sinhala are not particularly welcome anywhere in India.

Chetakji, I was trying to make the same point. If the Sri Lanka experience was any indication, we won't get a flood of Muslims from Pak, but will
get Hindu and Sikh refugees, who should be welcomed, just as Tamils have been.
B'desh, Saudi and even Pak have more Rohingya refugees than India.

[Najunamar]

Nyet, Chetak ji

How can the hordes go to beediland, nepal & sri lanka in the first place. It's not like the national carrier or the PAF will cart them to these locations at great cost to self.

Sea route also highly unlikely. Diesel shortage. Plus the pakis don't have enough boats

It will be land-crossings onlee. Risking the border mines, the rann and all

border mines can be overcome by driving herds of cattle across minefields

/quote]
No Chetakji, the people who can afford to have cattle will not spare it for the aam junta and those who can have cattle will never leave - at least not via land crossings. Ot is like the Rabert joke liquid Oxygen...

[williams]

Sudden big breakup/crisis in Pak will be a sure shot way to derail the Indian economic growth story. The west has a potent weapon there.

Why use the emergency to unseat the Paki fauj, take back POK, divide the country into 4 and install a weak civilian regime in Pakjab. Poles don't fear things like refugees but use that as an opportunity to break the problem into rational solutions. We should support a nice civil war between the rape class and starving abduls.

[Deans]

Back in 2016, I had made several recommendations as to what GOI should do in such a situation. Since the best time to kick someone is when they are down, this is a good time to implement - if govt has the will. I am going to reiterate these to policy influencers I know. I would urge Rakshaks to do the same if you see merit in them.

1. Over half of Pak exports is Cotton textiles and basmati rice. GOI should announce an export incentive for all incremental exports Indian exporters make over 2022 in these 2 categories. Even a 2% price reduction for incremental Indian exports will kill Pak exports and give us new customers.

2. Have an agreement with GCC countries that India will pay for airfare and recruitment costs for all net increases in jobs in these countries.
Net increase is the difference between arrivals and departures (new joinees vs contract ended) over the previous year. Most of the new jobs
will be at the expense of Pak workers. This will permanently hit remittances. All new jobs can be supplied through ministry of NRI affairs, which
will ensure that new jobs do not go to the places traditionally supplying labor to the Gulf. Govt can say this is to bring`balanced development'

These 2 will lead to a permanent forex crisis in Pak.

3. Govt can announce that it will consider humanitarian aid to Pak, as it did for Afg and SL, once Pak asks for it. (I am not in favor of any aid, but
hear me out). Pak will most likely not ask for aid, in which case we say, we have millions of tonnes of wheat lying in Punjab, which can reduce
Pak inflation, but Pak is too blinded by hatred to consider it. If Pak does call the bluff and ask for aid, we do the following:
- Start long chai-biskoot sessions to discuss modalities for aid.
- Ask that Pak remove the ban on import from India and allow free access of goods to Afghanistan. This has to be ratified by Pak assembly
which is unlikely to meet for several months.
- Stop talks because of terror attacks on India (e.g. cross border firing, confession of PFI suspect etc).
- Aid can be distributed to designated agencies e.g. SGPC in Gurudwaras, RSS volunteers in Hindu localities etc.

4. Golden visa scheme for rich Pakistanis. Invest 2 cr in India and get a resident visa. This is slightly less than what it would cost in the EU.
The cost will be lower for minorities (e.g Hindu and Sikh businessmen) .
If 500,000 people apply and we charge a lower fee than what EU charges (Rs 5 lac per head), we get 25,000 cr on application fees alone
and we don't have to approve more than 5% of applications (3% Minorities, 2% Baluchis, Ahmedis, Pak generals who want to defect).
Visa can be revoked if suspected of Anti India activities.

5. Humanitarian visas for refugees, with a non transparent selection method. Give it to:
- Hindus and Sikhs who are qualified to work in India, or qualify for scholarships (to places like JNU).
- Qualified Baluchi's (nominated by Baluchi resistance movement), Ahmedis, Khojas, who are vetted.
- Hindu/Sikh girls who want to move to India for marriage.

Since Pak has restricted the size of consulates, visa processing time for categories other than above, can be what it is for Indians going to
US now, i.e. 3 years (without guarantee of success). We can then say we have given visas to all religions and challenge EU countries to take
more people than we have.

6. Pak consumers depend on MNCs in certain categories. The largest customer for these companies is a terrorist organisation (i.e. Pak army and
its associates - Fauji foundation, canteens, paramilitary forces, cantonments etc.)
If these companies do not shut operations in Pak and also continue to do business in India, they should be deemed as supporters of terrorism
and a security tax levied on them - either 10% extra GST or 10% more corporate tax. These companies include:
- Unilever, Nestle, P&G, Cadbury's
- KFC & Pizza hut
- Coke and Pepsi
- Siemens
- Samsung, Haier
- Sanofi. Merck (pharma)
- Standard chartered bank, Deutsche bank and Citibank
- Amazon
- Berger Paints, ICI (paint)
- Toyota

All these companies need India more than we need them.
If Rakshaks can write to organisations like RSS calling for these companies to boycott Pak (or pay higher taxes), it will help. I have written to
policy influencers I know, with no luck.
It is appalling that any of the above companies should be allowed to supply our armed forces and Govt, while also supplying the terrorists who want to kill us.

7. Pak-Afghan trade is mostly smuggling and controlled by local warlords. Provide good of dubious quality to them through front companies,
free of charge (they can pay by attacks on Pak security forces). Provide genuine goods for them to retain goodwill among Afghans.

[yensoy]

Sudden big breakup/crisis in Pak will be a sure shot way to derail the Indian economic growth story. The west has a potent weapon there.

Why use the emergency to unseat the Paki fauj, take back POK, divide the country into 4 and install a weak civilian regime in Pakjab. Poles don't fear things like refugees but use that as an opportunity to break the problem into rational solutions.

You have a point. We used refugee crisis very effectively in 1971. Official story of our involvement in Bangladesh per my history books was due to flood of refugees - not due to Paki airstrikes on us nor due to Dhaka genocide. We could do the same today.

[mody]

https://www.msn.com/en-in/news/world/pa ... cfc9b431a7

Pakistan approves additional taxes to raise 170 billion rupees . The abduls are going to get further.

Meanwhile from the article:
"While approving these measures that would further burden the masses with costly electricity and other household items, the ECC approved a technical supplementary grant of Rs 450 million in favour of the Ministry of Defence, showing that the country would continue to spend on defence even when the economy was in dire straits."

"Internationally the Pakistani bonds due for repayment in April 2024 tumbled 4.6 cents on the dollar or roughly nine per cent. Bonds with longer repayment dates fell between two and three cents."

A 9% drop for 4.6 cent reduction means that the bonds are trading at roughly 50% !!!!

[drnayar]

Pakistan approves additional taxes to raise 170 billion rupees . The abduls are going to get further.

Meanwhile from the article:
"While approving these measures that would further burden the masses with costly electricity and other household items, the ECC approved a technical supplementary grant of Rs 450 million in favour of the Ministry of Defence, showing that the country would continue to spend on defence even when the economy was in dire straits."
A 9% drop for 4.6 cent reduction means that the bonds are trading at roughly 50% !!!!

They do want to spend their way to default and bankruptcy, fauji s all the way !..till nothing is left.

[ernest]

Back in 2016, I had made several recommendations as to what GOI should do in such a situation. Since the best time to kick someone is when they are down, this is a good time to implement - if govt has the will. I am going to reiterate these to policy influencers I know. I would urge Rakshaks to do the same if you see merit in them.

These are great suggestions; something on lines of big powers who control the world think like, and India needs to w.r.t Terroristan. Good contrast with dhoti shivering even on collapse of the terrorist state. Hats off to you, sir. Any chance you've worked closely with three letter agencies?

[Neela]

Back in 2016, I had made several recommendations as to what GOI should do in such a situation. Since the best time to kick someone is when they are down, this is a good time to implement - if govt has the will. I am going to reiterate these to policy influencers I know. I would urge Rakshaks to do the same if you see merit in them.

These are great suggestions; something on lines of big powers who control the world think like, and India needs to w.r.t Terroristan. Good contrast with dhoti shivering even on collapse of the terrorist state. Hats off to you, sir. Any chance you've worked closely with three letter agencies?

Big powers arent afraid of genocide and territorial expansion.
Of course, our cultural war codes ingrained in us differentiate us from the rest on the former . Japan, USA, China, France have a genocidal background which helped them propel to where they are today.
Even territorial expansion - we are claiming what is our legally.

[A Deshmukh]

Back in 2016, I had made several recommendations as to what GOI

1. Over half of Pak exports is Cotton textiles and basmati rice. GOI should announce an export incentive for all incremental exports Indian exporters make over 2022 in these 2 categories. Even a 2% price reduction for incremental Indian exports will kill Pak exports and give us new customers.

all great thoughts.
except on (1) TSP Rupee is sliding further. its down 100% or more compared to Indian Rupee. will 2% price reduction on Indian export be any match to the devaluation of TSP Rupee?

[Bart S]

^That may apply to agriculture where they have land and water, but not so much to industrial output since most of their inputs are imported, including extremely expensive electricity.

[S_Madhukar]

Now is not the time to play defence. Now is the time to defang for good and provide our umbrella if needed as guarantees. Too much blood has been sacrificed to reach this stage

[williams]

Now is not the time to play defence. Now is the time to defang for good and provide our umbrella if needed as guarantees. Too much blood has been sacrificed to reach this stage

The issue is Paki Fauj is continuing the tradition of the Brits. That is, they don't care about the local populace or their economic woes as long as they are not touched. So unless India has the plan to unseat the Fauj, These economic stresses and strains will NOT weaken the root of the problem. That is the Paki fauj. It might happen one day but we are not there yet. After all, it is just 4 months back Khan delivered 450$ million worth of assistance. That is publicly known. Who knows what is going on behind the scenes?

[RajaRudra]

Iam regular to the Dawn, one of the news websites in the land of bure. For the past 10 days or so their comments column is put out of service. Reason given is thw comments section is going through some updates. But 10+ days for any update is too much.

Possible reasons could be..
1) order from the gernals to clamp down cricusm.
2) News paper had retrenched all the moderators.

[Deans]

Iam regular to the Dawn, one of the news websites in the land of bure. For the past 10 days or so their comments column is put out of service. Reason given is thw comments section is going through some updates. But 10+ days for any update is too much.

Possible reasons could be..
1) order from the gernals to clamp down cricusm.
2) News paper had retrenched all the moderators.

I am a regular at Dawn too - to know how the enemy thinks. I have noticed the same thing.
Nothing criticizing the Khakis, either from columnists or readers. I guess they are cleaning up the comments section, or they will introduce columns recalling the golden age of Zia/ Mushy/ Bajwa etc. Imran is fair game for criticism - a sign perhaps that he is finished.

[Deans]

Back in 2016, I had made several recommendations as to what GOI

1. Over half of Pak exports is Cotton textiles and basmati rice. GOI should announce an export incentive for all incremental exports Indian exporters make over 2022 in these 2 categories. Even a 2% price reduction for incremental Indian exports will kill Pak exports and give us new customers.

all great thoughts.
except on (1) TSP Rupee is sliding further. its down 100% or more compared to Indian Rupee. will 2% price reduction on Indian export be any match to the devaluation of TSP Rupee?

Its a valid point. My 2% calculation was years ago, before Pak Rupee went into free fall. However, a lot of the cotton itself is imported - including from India (though Dubai) and now China, thanks to the CPEC road from the cotton growing areas of Xinjiang (paid for by Pak). Power cost and inflation rate is more than dollar depreciation. More importantly, if Pak is an unreliable supplier (because they have no money to pay for inputs), buyers will like to switch and a 2% reduction will remove the friction involved in changing suppliers.

[Deans]

Back in 2016, I had made several recommendations as to what GOI should do in such a situation. Since the best time to kick someone is when they are down, this is a good time to implement - if govt has the will. I am going to reiterate these to policy influencers I know. I would urge Rakshaks to do the same if you see merit in them.

These are great suggestions; something on lines of big powers who control the world think like, and India needs to w.r.t Terroristan. Good contrast with dhoti shivering even on collapse of the terrorist state. Hats off to you, sir. Any chance you've worked closely with three letter agencies?

I help a retired general with his articles, which find their way to the relevant agencies. Some of those ideas have been implemented - e.g. the Bilaspur-Mandi-Leh rail project (scrapped earlier, but revived in 2016, for national security considerations), or AIR Pashto and Baluchi services. I don't have the professional background to work directly, but since I don't need the credit, I prefer to do it through those that do.

[yensoy]

Wa'llah a solution to the stalemate has been found - ditch the subsidy to the hardworking farmer and exporter. Nobel prize in Economics, Peace, Physics and Chemistry are due to the geniuses behind this decision. https://www.dawn.com/news/1736694/govt- ... nche-early

So now we will see widespread starvation. Farmers whose input costs are already high (compared with India for instance) are going to see those costs rise further, which means they will let marginally profitable or risky plots run fallow. Less food will be grown and SL situation will follow. Likewise for exporters, those just about making ends meet are better off shutting shop and teaching peace book at the local madrassa instead. This isn't going to end well.

Some things never change.

[Deans]

In 2016, when people were dhoti shivering about the possible impact of CPEC in transforming Pak, I wrote an article for Indian defense review, suggesting that Pak is trapped and it could well lead to a situation we are now seeing (e.g with power tariff). I can't find the link, so posting it below:

Understanding the CPEC
The China Pakistan Economic corridor (CPEC) involves an investment of US$ 46 billion (now US$ 51.5 billion), by China, in Pakistan. It’s been touted as the game changer that can transform Pakistan’s economy and its strategic utility. The Pakistani and Chinese establishment have been understandably very optimistic about the gains from CPEC. The Indian media’s reaction is one of concern at the China-Pakistan partnership (and its negative implications for India’s defence), with suggestions that India join the CPEC. There is an inadequate economic analysis of the CPEC. This is resulted in criticism of the project, focussing on, in my view, secondary issues – such as the use of territory in POK, prospects of terrorism, or the limited gains that may accrue to Baluchistan.

An analysis of the CPEC using data in the public domain and Pakistani sources, indicate that the project is deeply flawed. The project has been promoted by Chinese exigencies that neither Pakistan nor India fully understand. Far from Pakistan gaining, the CPEC could result in serious damage to Pakistan’s economy and represents a significant risk to China.

China’s goals: The CPEC is one of the several overseas investment initiatives China has announced or undertaken around the world. Under Premier Xi Jinping, the scope and pace of these projects has greatly increased, exemplified by the One Belt One Road (OBOR initiative). It represents an audacious and risky gamble by Xi, to arrest falling growth and serious imbalances in the Chinese economy for the following reasons:

China has huge overcapacity and production of commodities like steel and coal – if production was to reflect demand, China’s GDP would fall further from the 6.5% currently projected ( a figure that is expected to fall steadily and seems inflated when correlated with other indices). There is also disguised unemployment, in the form of workers in State owned enterprises producing things no one wants – including entire ‘ghost cities’. Overseas investments seek to utilise these materials and workforce abroad.
Chinese `aid’ is in the form of loans from Chinese banks . China built up unprecedented levels of debt from 2008 to 2015 and their banks now have few profitable ways to disburse this money.
They are in fact forced to lend to near bankrupt Chinese state owned enterprises. The CPEC enables them to lend to these enterprises for ventures with guaranteed returns, where the collateral for these loans are either the raw materials of the host country, or economic concessions – which would either secure China’s raw material sourcing, or help its exports.

The Impact so far: Chinese investments are made in countries where there is either no credible democracy (e.g. Venezuela or African dictatorships) or where the Govt is too weak to withstand Chinese pressure and lacks a system of checks and balances (e.g. Sri Lanka, or Pakistan). In all cases, International agencies have found the projects financed by the Chinese, too risky.

Whatever evidence we have of Chinese overseas investments indicates that none have worked. A recent example is Chinese investments in Venezuela - US$ 57 Billion - in a country much smaller than Pakistan in which China has no military or strategic relationship, which have failed, due to the crash in oil prices and mismanagement by the Venezuelan govt. Thus while its citizens literally starve, the country’s future oil earnings have been pledged to China for loan repayment. This is similar to several Chinese investments in Africa, where a fall in commodity prices, will force the recipient country to renege on payments, particularly if there is a change in Govt. In Sri Lanka, every project financed by the Chinese has turned out to be a white elephant – the consequences of which Sri Lanka will have to face for decades. Thus a combination of unviable projects, a fall in commodity prices and inflated project costs threatens to cause failures across multiple countries. This is coupled with China’s own increasing economic problems (including high debt and huge NPAs of its banking sector) which have caused an increasing reluctance to lend to near bankrupt firms, for unviable projects.

Characteristics of the CPEC: What the CPEC actually involves, seems rather different from what the media typically projects.
Almost all the money pledged by China comprises loans from Chinese banks to Chinese state owned enterprises. These are shown as loans in Pakistan Govt accounting. Less than US$ 1 billion of 46, is either interest free loans, or aid. In the decade before CPEC too, barely US$ 200 million of aid was given by China.
Virtually all the capital equipment, for which loans are provided, comes from China with single bidders (including coal plants scrapped in China due to excess pollution and inadequate demand). Most of the labour will also be Chinese. Thus Pakistan neither develops a manufacturing base, nor gets technology, or generates local employment.

While funding details are very opaque, Pakistan is expected to provide approx. $ 13 billion to the project. Of this, it has so far allocated under US$ 3 billion. China has expressed frustration at the slow pace of disbursement of even the allocated amount. China has announced loans of approx. US$ 26 billion for the CPEC, with upto US$ 7 billion of equity.
This coupled with Pakistan’s expected investment, broadly accounts for the US$ 46 billion.
So far, just $ 2.2 billion of Chinese money has actually been disbursed as loans and $750 million as equity.

Chinese equity for power projects is guaranteed a 27% return on investment (compared to 15.5% in India). The investment itself is `gold plated’. Dividends to China are tax free. While the loan component has an interest rate of between 1.5 & 6% p.a this is Dollar denominated. Loan repayments, coupled with increased imports from China, under CPEC, will worsen Pakistan’s balance of payments. This will exacerbate currency depreciation and would result in a real interest rate of over 10%. This is for a highly inflated project cost – something inevitable in a single bidder situation, where the Pak army and politicians have to be paid off. Capital costs are therefore significantly higher than equivalent projects in India.
So far, $ 6 billion of CPEC funds have been disbursed (half by Pakistan) to start $16 billion worth of projects.

Impact of CPEC investments: $ 33.7 billion of CPEC investments are in the energy sector. While that is expected to ease Pakistan’s energy crisis, the reality is quite different. Pakistan’s existing installed power capacity is 24000 MW. Peak demand is 19000MW and actual generation around 13000MW. The shortfall is due to shortages of low cost coal, or Indus water, high tariffs and poor management.
There are another 13000 MW of projects under construction, excluding CPEC projects.

CPEC plants add 13880 MW of additional capacity, which Pakistan will not need for several years. However, since the operators of the CPEC plants have to be paid, it will result in existing plants supplying relatively low cost power, to shut, in favour of the higher cost power supplied by CPEC plants. China gains by supplying mothballed coal based plants to Pakistan (which they are required to close to reduce pollution and because there is no demand for that power in China), at prices higher than new thermal plants in India. Thus the lowest cost plant under CPEC will cost approx.
$ 1.47 million/ MW compared to under $ 1 million/MW for new plants in India. Pakistan imports both coal and gas at higher prices than India. CPEC is therefore a means for China to dump both surplus coal, coal plants and labour on Pakistan. Tariffs under CPEC start at Pak Rs 8.5/ unit (which will keep increasing) whereas Indian plants can run profitably at tariffs of IRs 3.05 unit (or Pak Rs 5/ unit). Under CPEC, Operators have a sovereign guarantee on their returns.

The example of the only project completed so far – a solar plant, is illustrative. The agreed initial tariff for the Chinese operator was Pak Rs. 14 / unit. Thereafter solar power tariff’s crashed and competitors in Pakistan offered to supply power at lower prices. However Chinese pressure ensured that the current tariff is PRs 17 /unit (more than double of India)

Gwadar & Road projects: The idea that China will use Gwadar port and the highway to Kashgar, to provide an alternate route for Middle east oil to Western China, is a myth. The reality is that the cost to supply oil by road from Gwadar will be upto $ 12/ barrel compared to $ 2.22/ barrel by Tanker to Shanghai and then inland to Central china. A Pipeline may be marginally cheaper than road, but the capital costs are too high for that. If an alternative to sea transport is required it would be cheaper to supply this from Kazakhstan (and less risky). In any case, China’s largest oilfield – The Tarim basin, is in the Xinjiang province, where the CPEC road project terminates.

The Gwadar port, which Pakistan suggests will handle 400MT of cargo under CPEC, currently handles under 1 million tonnes ! Acute water shortages make expansion unviable. The port project was based on the assumption of continued western sanctions on Iran making Chabahar port (which provides easier access to Central Asia and Afghanistan) a non-starter. Chabahar is not only a better option – which India is investing in, but China too is hedging by looking at investments in Chabahar and associated infrastructure. Moreover, strained Afghan-Pakistan ties and a Baloch insurgency reduce the possibility of any meaningful traffic through Gwadar.

There is nothing significant that Pakistan can export through the CPEC highway to China. However, goods produced in Xinjiang, particularly Cotton & cotton products which are 57% of Pakistan’s exports, can now be undercut by Xinjiang’s cotton, which will be subsidised and transported at low cost to both the Pakistani market and its export partners through Gwadar !

Pakistan’s failure to share in the financing of projects in Gwadar has resulted in China taking over land for a tax free industrial zone (as in Sri Lanka), a naval base etc. China has exited projects it deems unviable, even after signing agreements. Hence a gas plant in Gwadar will now only be built by the Chinese and not operated. Thus Pakistan pays for an unviable road/ port project and provides security to it, to enable China to eventually destroy their exports and a good part of their domestic industry, with subsidised tax free Chinese products. How China deals with its close ally should be an eye opener to those suggesting India be more accommodating to the Chinese.

The economic gains accruing to China from the CPEC (albeit at high risk if Pakistan defaults) suggest that CPEC is not Chinese charity done due to a special relationship with Pakistan. They have made bigger investments in Venezuela . Chinese investments in Myanmar, Sri Lanka and Bangladesh on a per capita basis, are bigger than CPEC. China has offered to spend almost the same amount as CPEC to build a new capital in Egypt !
In this context, strengthening a military relationship with Pakistan, or encircling India, would not be the primary objective of China through the CPEC, though it’s a consequence we have to deal with.

While there is a lot of consternation from reports about Chinese naval bases in Gwadar, Sri Lanka etc. I would assume that the placing of a couple of ships, thousands of miles from any support and in the Indian Navy’s backyard, would represent a bigger risk to the PLAN, than a threat to India. The release of a picture of a Chinese sub at Gwadar, misses the point that a submarine’s deterrence lies in the enemy not knowing where it is.

India’s strategy should be to delay the CPEC, increasing the costs to Pakistan and forcing a choice between a balance of payments crises, or pulling out of the CPEC. A failed CPEC along with other failed Chinese overseas investments, could exacerbate the mounting danger to China’s economy, from excess debt and a growth slowdown.

[yensoy]

^^^^ you are quite the visionary sir. Very well stated, not only are the economics of Pakistan's CPEC troubled, even the economics of China are in a mess as you say "excess debt and a growth slowdown". Too bad they (China) still continue to produce stuff at prices unimaginable and maintain a high trade balance with almost everyone else.

[kancha]

In 2016, when people were dhoti shivering about the possible impact of CPEC in transforming Pak, I wrote an article for Indian defense review, suggesting that Pak is trapped and it could well lead to a situation we are now seeing (e.g with power tariff). I can't find the link, so posting it below:

Understanding the CPEC

Can you pl share the link to where it is hosted on the www?

[Deans]

In 2016, when people were dhoti shivering about the possible impact of CPEC in transforming Pak, I wrote an article for Indian defense review, suggesting that Pak is trapped and it could well lead to a situation we are now seeing (e.g with power tariff). I can't find the link, so posting it below:

Understanding the CPEC

Can you pl share the link to where it is hosted on the www?

It was published (no changes to what I posted above) in the April 2017 edition of Indian Defense review , but I can't find the link on google.
Originally part of a larger paper on Pak that I submitted to a think tank in 2016, but that is not in the public domain.

[Neela]

Wonderful insight Deans. Very enlightening.
Essentially, China is a loan shark which confiscates assets when you cant pay up.

[kancha]

Can you pl share the link to where it is hosted on the www?

It was published (no changes to what I posted above) in the April 2017 edition of Indian Defense review , but I can't find the link on google.
Originally part of a larger paper on Pak that I submitted to a think tank in 2016, but that is not in the public domain.

No worries. Just realised I missed the part in your original post where you mentioned you are unable to find the link!

[chetak]

These are great suggestions; something on lines of big powers who control the world think like, and India needs to w.r.t Terroristan. Good contrast with dhoti shivering even on collapse of the terrorist state. Hats off to you, sir. Any chance you've worked closely with three letter agencies?

I help a retired general with his articles, which find their way to the relevant agencies. Some of those ideas have been implemented - e.g. the Bilaspur-Mandi-Leh rail project (scrapped earlier, but revived in 2016, for national security considerations), or AIR Pashto and Baluchi services. I don't have the professional background to work directly, but since I don't need the credit, I prefer to do it through those that do.

CPEC was also offered to India and the hans were very cut up that India did not accept their "offer".

what was the cheeni and the Indian (Modi Govt) rationale there...

Deans ji, a quick analysis perhaps....

[SRajesh]

Deansji
what are the reasons for not joining CPEC
1. Allowing Chin into Bilateral Conflict/Dialogoue/Himalayan Blunders of yesteryears(abrogating 370 might have been an issue??)
2. The same reasons of not entering RECEP(Jihad stamp on Chin maal)
3. POK retake at later date held ransom to CPEC agreement
4. IWT treaty renegotiations difficult
5.Increasing or worsening trade deficit
6.Pakis holding ransom to land transit of goods back to Chin
7.legitimising Chin claim on Aksai Chin and Saksgam valley
8.Kebab and Chai Biskoot people to people contact nonsense to continue
9. Balakot type jhapads not allowed due to some clause in the treaty
10 ultimately carrying the 'Still-birth that is Pakistan' for another Century(via indirect Jeziya)

[Pratyush]

The simplest reason for not joining CPEC is that it goes through Indian territory under occupation of hostile power's.

Joining the CPEC gives legitimacy to that occupation.