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The $46 billion handshake

While being accepted as a possible game changer in the fortunes of the country, the ambitious CPEC has become a major bone of contention between the political parties here at home

The $46 billion handshake

Power plants and highways. Railroad expansions and international airports. Hospitals and technical institutes. These are just some of the projects that are part of the ambitious China-Pakistan Economic Corridor (CPEC), which, while being accepted as a possible game changer in the fortunes of the country, has also become a major bone of contention between the political parties here at home.

The fact that this is China’s most ambitious overseas investment yet is not lost on anyone. Nor is the fact that this is but one part of Beijing’s ambitious One Belt, One Road initiative, a strategy that aims to further cement China’s influence in the region and give it greater power in global economic affairs.

Yet at home, there is growing criticism on how the PML-N government is going ahead with the project. “It’s shrouded in secrecy,” says renowned business journalist, Khurram Husain. “We have no timelines, no idea on the financials and no finalised locations for the special economic zones.”

Officially, hardly any information has been shared. The website of the Planning Commission of Pakistan has a mere listing of the projects along with projects costs, but beyond that, all we have is that magical figure of USD 46 Billion.

“It’s a fantastic headline figure,” says Asad Sayeed, research economist at the Collective for Social Science Research in Karachi. “But we need to know what is the debt equity ratio, what is the timeframe of the debt, what is the employment capacity, the returns on investment, etc, everything is missing.”

Some people close to the CPEC project have suggested that the on-going secrecy on the details of the project is at the request of the Chinese themselves. “They’re not a very transparent nation themselves and want to keep it that way,” I was told.

Still others believe that it is all too soon for this information. “Neither country has ever done anything on this scale before,” says Andrew Small, author of the book, The China-Pakistan axis: Asia’s New Geopolitics. “the whole thing is in flux at the moment, and there will not be a lot of transparency till everything is locked down and agreed upon.”

There is the fundamental matter of finance. “20 per cent of the investment will come from the investors, and the remaining 80 per cent will be debt based (in the form of loans),” says Husain.

And then there are those that feel that the key driver of the CPEC is not economics, but security, going so far as to suggest that perhaps the Chinese portion of the investment is coming from the budget of the Chinese Army. “The CPEC is an extension of Pakistan’s security pact with China,” says Sayeed. “Because economics is not the main driver, it becomes very difficult to not only understand but also to negotiate.” 

He feels that since the CPEC is a part of China’s expanding influence in the region, they may demand certain projects that may not be in the best interest of Pakistan, but cannot be denied to Beijing.

However, there is the fundamental matter of finance. “20 per cent of the investment will come from the investors, and the remaining 80 per cent will be debt based (in the form of loans),” says Husain. “The state bank needs to know the details of these loans so that financial arrangements for repayment (or interest payments) can be made.”

Recently, Ashraf Mahmood Wathra, Governor State Bank of Pakistan (SBP) caused quite a stir when he told a news agency that “the CPEC needs to be more transparent,” and that he doesn’t know what is the debt equity ratio of the total investment. While the State Bank quickly issued a statement, saying that the Governor’s remarks “were not quoted in its entirety”, clearly it had hit a nerve. “The Governor is the most important man in the country’s finance,” says Husain. “That even he doesn’t know how the deal is going down does not boost anybody’s confidence.” Even the International Monetary Fund (IMF) has jumped in, saying that “information on contracts should be provided transparently as soon as it emerges…”

Read also: “CPEC alone is a huge opportunity to put on the table,” says Andrew Small

All this aside, the bulk of the criticism here at home centres around the suspicion that, as with all things PML-N, most of the benefits that will accrue towards Pakistan will be in the Punjab. A cursory stroll around Lahore is enough to lend credence to this fear. Under the Nawaz government, Lahore continues to undergo a fast transformation, with new infrastructure projects underway across the city. One particular project, the Orange Line of the Lahore Metro is part of the CPEC, costing a cool $1.6 billion. At the same time, the city continues to host a large number of Chinese companies on a regular basis. Incidentally, a five-day Pakistan China Business Opportunities Conference has just gotten underway at a local hotel as well.

The bulk of the political opposition to the handling and implementation of the CPEC is from Khyber Pakhtunkhwa, with the provincial chief minister threatening mass agitations and a halt to land acquisitions underway for the project in the province. His gripe centres around the non-allotment of funds for projects within the province and changes in routes and allocations without consulting his government.

While the KP government’s reservations have been satisfied for the time being, their need for information is bound to keep coming up in the near future.

This local opposition is not lost on Beijing. A recent statement from the Chinese embassy in Islamabad reads “relevant parties should strengthen their communication and coordination on the matter.” As an expert on foreign affairs told me, “this is as hard a slap on the wrists as any.”

Analysts have also questioned how the Pakistani military is allowing the civilian government to take the lead on such a crucial project with our closest allies. To be fair, an entire division, headed by a two star general, is going to be raised for the security of the CPEC, which is a sure sign of the Army’s signing off on the project.

For the time being, it’s a matter of transparency. As the government continues to hide the finer points of the agreement with the Chinese (especially the financials), opposition voices will continue to get louder and louder, which will frustrate our allies in Beijing.

The fact remains that the CPEC is not just vital to Pakistan, it is a vital ingredient in China’s global strategy. And since the core of the relationship between our two countries is security, how the Pakistan Army will react is anybody’s guess.

Aasim Zafar Khan

Aasim Khan
The author is a Lahore based journalist. He may be contacted at [email protected],

2 comments

  • A simple question what will China get out of CPEC may answer many queries. CPEC route is part of what China call ‘one belt one route ‘i.e. Trading link to Pakistan and other countries in Central Asia and India. While western route will serveBaluchistan and part of Khyber Pakhtnwa in Pakistan and Central Asia , the eastern route may serve Punjab (Pakistan) and markets in Northern India . In present scenario of recession in China, it may not require much raw material from Baluchistan . As far as Central Asia is concerned China may find a cheaper and shorter route through Tajikistan. Baluchistan and Khyber pakhtunwa only amount to about15% Pakistan economy. whereas Punjab( Pakistan ) is 55% of PakIstan economy with added advantage of trading with northern India therefore eastern route is preferred . I doubt Gwadar port will be used for much trading by China as cost of transportation by road is about 10 times that of sea route.

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