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The multibillion-dollar China Pakistan Economic Corridor (CPEC), which is part of Chinese President Xi Jinping's 'Belt and Road Initiative', will benefit China more than Pakistan due to lack of Pakistani input in the project.
The lack of Pakistani input into the CPEC, which the government said would drive economic growth to a targeted 6 per cent this financial year, adds to concerns that its benefits might not be as widely distributed as initially thought, the South China Morning Post reported, adding that it runs the risk that Islamabad will be left paying interest on loans to Chinese banks way into the future.
According to the news report, Chinese banks are keenly waiting to get their share of the pie, holding more than $20 billion for potential financing, much of it has already been filled by the Chinese, with Pakistani lenders getting a little look in.
"As of now, around $6 billion to $7 billion worth of projects are likely going on. Out of that, 10 per cent, or around 50 billion rupees ($470 million), can be local financing," the South China Morning Post quoted Saad Hashemy, research director at Karachi brokerage Topline Securities, as saying.
"It seems the lion's share of CPEC financing will come from China itself," Bilal Khan, a senior economist at Standard Chartered, said.
The Thar coal mine worth $3.5 billion, which is expected to generate 1.3 gigawatts of electricity, is one of the most expensive energy projects.
China will also spend $5.5 billion for a significant upgrade of Pakistan's rail system.
Meanwhile, local lenders, both Islamic and conventional, are keen to deploy funds after parking much of their advances in government securities, holding 82 per cent of the total 9.26 trillion rupees of local securities, the report said.
Pakistan's banks will have minimal opportunities for direct financing in CPEC projects as the private sector at the government level is not so much involved in the project.
When the CPEC was announced a few years back, it was anticipated that the project would mostly be funded with Chinese money as Pakistan was not in a position to deploy the necessary capital after taking an International Monetary Fund bailout in 2013.
China Development Bank is providing $7.9 billion, according to a report by the state-run China News Service, and Bank of China said it had lent more than $80 billion as of the end of June.
The national leader of the government affair unit of Deloitte, Norman Sze, has said that the financing demand for the project has since increased from more than $40 billion in 2015 to $62 billion this year, and most of the funding so far has come from Chinese banks.
He added that the finance sector in Pakistan is not very advanced and mature to participate in the projects, but it would be difficult for them to meet such a huge financing demand.
However, China has faced criticism for its decision to import goods and labour for the projects at the expense of the local market.