Home »Editorials » Address the erosion in CPEC support

The usual refrain that China has been Pakistan's all-weather friend and that our friendship is as high as the Himalayas was appropriately qualified during the recent three-day visit of Chinese Foreign Minister Wang Yi to Pakistan on the heels of a few hours stay by the US Secretary of State Mike Pompeo in Islamabad en route to a three-day visit to India for strategic talks: economic considerations must be a win-win for both the countries. The widely-held perception is that China Pakistan Economic Corridor (CPEC), a small component of the One Belt One Road (OBOR) initiative, not only has the potential of being a game changer for Pakistan but also benefits China.

It is true that there is a perception within Pakistan that details of CPEC projects were never fully shared by the Pakistan Muslim League-Nawaz (PML-N) government, irrespective of claims to the contrary by the then relevant minister in charge, Ahsan Iqbal; and parliamentarians' requests for information on the financing details of these projects as well as on the 13 billion dollar short-term loans procured from China at different times for balance of payment (BoP) support were never revealed in spite of repeated requests by the Pakistan People's Party and Pakistan Tehreek-e-Insaf National Assembly members.

There is considerable evidence to suggest that China as a rule does not make available any details of lending to foreign governments, in contrast to other countries, and insists on keeping details of project assistance out of the public eye. Non-transparency in OBOR-related deals accounts for several countries - particularly those where there has been a recent change in government, for example, Malaysia - challenging Chinese investment priorities as well as the financing arrangements. In recent months, the CPEC too has come under criticism for the very same reasons with domestic as well as international analysts arguing in favour of complete transparency that would ease all concerns.

Recently released data suggests that the Chinese government is lending at the enviable 2 percent rate of return for CPEC projects. However, in the absence of international bidding, there is an impression that is held generally, that unfortunately, includes Pakistani firms too that the total cost of a project can be considerably higher than if international bidding had been allowed in projects. In addition, the Free Trade Agreement (FTA) with China that was signed by the Musharraf/Shaukat Aziz government, that local trade and industry alleges is lopsided in China's favour to the detriment of Pakistani side, Chinese firms have benefited from its provisions that implies an unfair advantage to Chinese companies on projects under the CPEC - a situation that incidentally has been highlighted by several Pakistani construction companies.

Attempts by the PML-N administration to negotiate FTA-II were unsuccessful though China more recently offered to make some unilateral concessions to the caretakers. To conclude, there is no doubt that China and Pakistan have the same geopolitical considerations, especially given the enhanced US-India ties. The two countries support for each other's point of view at international fora is also legendary, however Pakistan is in dire economic straits at present and needs a friend able and willing to assist us get out of the morass - China is certainly able and willingness was much in evidence during Wang's recent visit. The best way forward is to make all deals transparent that would silence CPEC critics domestically as well as abroad.

It is therefore of utmost importance that while both Islamabad and Beijing fully support CPEC and firmly stand behind it, they should jointly take steps to address the erosion of consensus that has set in of late and rehabilitate the image of this mega scheme that possesses the potential to yield immense benefits for the two countries.

Copyright Business Recorder, 2018

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