Credit By: Climate Home News
Data from FY18 to November 2023 reveals that over 50% of foreign direct investment in Pakistan has been directed towards the power sector, predominantly in coal power projects. During this period, foreign investments were primarily concentrated in a few sectors like finance and manufacturing, with coal power projects emerging as the most significant attraction.
Dominance of Coal Power Projects:
Despite facing the severe impacts of climate change, Pakistan has continued to attract substantial investments in coal power projects, often funded by China. Notably, this trend is exemplified by coal-fired power plants, such as the 1,320MW Shanghai Electric and the 330MW Thal Nova power plants, inaugurated in Tharparker. With a direct investment of $3.53 billion, these projects are expected to generate 11.24 billion units of low-cost electricity annually, contributing to a total coal-based electricity production of 3,300MW in Thar.
Investment Inflows and Sector Breakdown:
Since FY18, the power sector has received inflows totaling $3.89 billion, with an additional $263.9 million in the first five months of the current fiscal year (FY24), bringing the total inflows to $4.154 billion. Out of the overall investment in the power sector, $2.822 billion (55%) has been explicitly invested in coal power projects, while the remainder is allocated to thermal and hydel powers. Chinese investments, primarily under the China-Pakistan Economic Corridor (CPEC), have significantly financed these projects.
Thar Coal Reserves and Economic Implications:
The Pakistani government claims that the total value of Thar coal reserves is $25 trillion, providing an attractive prospect for a country grappling with foreign debts. With a foreign deficit of approximately $128 billion and the need for substantial funds for debt servicing, the government sees coal power projects as a means to bolster its economy and attract foreign investments.
Economic Challenges and Export Focus:
While the government emphasizes the economic potential of Thar coal reserves, critics argue that a broader focus on increasing exports and creating a favorable environment for foreign investors is crucial for sustainable economic growth. Challenges such as high gas and electricity prices and difficulties importing raw materials must be addressed to encourage exports and improve the overall economic landscape.
In conclusion, the influx of foreign investment into coal power projects in Pakistan, particularly from China, remains a dominant trend despite concerns about environmental impacts and the global shift towards cleaner energy sources. The economic implications and long-term sustainability of this strategy continue to be subjects of debate among experts and stakeholders.
Follow ARP Media for more informative blogs.