ISLAMABAD: Pakistan has turned down a loan offer from Japan for infrastructure projects at cheaper rates compared to Chinese lending for the economic corridor, arguing the country’s loan portfolio has already gone up sharply and it needs no more credit for such projects.
Talking to The Express Tribune, a senior government official revealed that the Japanese government had earlier approached Pakistan with interest in joining the $57-billion China-Pakistan Economic Corridor (CPEC).
Japan wanted to pour capital into a tunnel being built as part of CPEC, but China resisted the move, leading Pakistan to refuse the offer.
Later, Japan came up with an offer of cheap loans for building infrastructure projects in Pakistan. Japan was seeking to provide credit at rates lower than those being charged by China on its loans for CPEC projects.
At present, China is extending loans to Pakistan at London Interbank Offered Rate (Libor) plus 2-2.5%. This time too, according to the government official, Pakistan declined to accept the Japanese offer and asked it to invest in the country rather than providing cheaper credit.
“The government has decided it will not seek any more loans for infrastructure projects, instead the country will encourage investment from different countries,” he said.
Though many countries have expressed the desire to join CPEC, but nobody has so far been able to be part of this Chinese initiative.
Under CPEC, Pakistan and China have been developing scores of power projects that are expected to inject over 10,000 megawatts this year into Pakistan’s power system which currently produces around 17,000MW.
Pakistan has invited Japanese companies and investors to explore the option of investing in the $4-billion electricity distribution market with particular focus on modern technological solutions for service delivery to consumers. Since the demand and supply gap will be bridged with the completion of new power projects, the emphasis is fast shifting towards electricity supply to end-consumers with service delivery of international standards.
The government is looking to engage the private sector for better service delivery. As the power distribution network and associated gadgets could not catch up with technological advancements and state-owned distribution companies could not find enough investments, opportunities have grown for public-private partnerships in the area. In this regard, the government is considering attractive incentives including a high rate of return on investments.
While appreciating the existing cooperation with Japan, especially in the power sector, the government is also seeking Japanese assistance in building capacity of human resources at different levels in the power sector.
In this regard, the Power Division has been directed to work in close liaison with the Japanese embassy.