The first tangible progress in Belt and Road infrastructure can be seen in Pakistan. The China-Pakistan Economic Corridor has been valued at $62 billion of projects, from the seaport in Gwadar to the reconstruction of the Karakoram Highway across the Himalayas to the Chinese border.
Among the very first Belt and Road projects was the Karot Hydropower plant, a 720 megawatt run-of-river project on the Jhelum River, not far from Rawalpindi and Islamabad. Karot is the first investment project to be funded by the Silk Road Fund.
Silk Road is one of four known lenders to the project, the others being the IFC, China Development Bank and China Eximbank. The sponsor is China Three Gorges South Asia Investment, a state-owned company that holds a majority share in Karot Hydropower Project, the special purpose vehicle that is developing the project. Another constituent is the Pakistan Private Power and Infrastructure Board.
The project is being built under a build-own-operate-transfer basis and should be operational by 2020/21: “And it shall be transferred to Pakistan without compensation after a 30-year operation period,” says Jin Qi, chair of the Silk Road Fund.
“The project reflects the principles and ideas of the investments of the Silk Road Fund,” says Jin, who says the fund’s support came in the form of both equity in China Three Gorges South Asia Investment and a loan to the project. She says it is “expected to achieve a reasonable investment yield under controllable risks”.
Jin explains the clear rationale for the project – the shortfall of electricity in Pakistan, presenting an opportunity not only to alleviate that shortage but also boost economic growth and demonstrate a strong environment for sustainable development.