By Agha Iqrar Haroon
Ambassador Alice Wells, the Principal Deputy Assistant Secretary of State for South and Central Asia at the U.S. Department of State has raised several critical questions about the China Pakistan Economic Corridor (CPEC) during her talks at Woodrow Wilson Center.
The way she cited financial figures related to CPEC project indicates the deep interest of US in this project and its access to CPEC related financial data.
Meanwhile, On Friday Ambassador of China to Pakistan Yao Jing repulsed the narrative of Ambassador Alice Wells about CPEC and said that China-Pakistan relationship is (was) mutually beneficial and based on “win-win cooperation” for both sides. Yao said China has always come forward to assist Pakistan in need without any political or government differences.
Speaking at the fifth CPEC Media Forum, organised jointly by the Chinese Embassy in Islamabad and Pakistan-China Institute, the Chinese Ambassador stated that CPEC projects were investigated and it was unanimously concluded that there was no corruption in their affairs.
Pakistan Foreign Office is yet to come up with its comments over critical observations of Ambassador Alice Wells.
It is pertinent to mention that CPEC came under scrutiny when some cabinet members of PTI government raised questions and confusion about the transparency process adopted by the previous government of PMLN while launching early harvest projects of CPEC. Even some questions raised by Ambassador Alice Wells are directly linked with allegations raised by PTI cabinet members in past.
In her talks at Woodrow Wilson Center, Ambassador Alice Wells gave an in-depth comparative study of working of International Monitoring Fund, World Bank and Chinese model of lending. Her discussion indicates that US considers China as a major competitor of western-controlled IMF and World Bank.
Interestingly, heads of Economic Team of PTI Cabinet – Abdul Hafeez Sheikh and Dr. Reza Baqir have directly landed in PTI government straight from these two competitors of China—IMF and World Bank.
Abdul Hafeez Sheikh serves as Advisor to Prime Minister Imran Khan on Finance, Revenue and Economic Affairs since 20 April 2019 while Dr. Reza Baqir is the Governor State Bank of Pakistan. Dr. Reza Baqir was appointed as the Governor SBP by the President of Pakistan on May 04, 2019 for a period of 3 years from the day he assumes the office of the Governor.
Regional experts believe:
US and India stand together against OBOR (Read as Belt and Road Initiative or as BRI) and avoided to attend both Belt and Road Forums which took place in China. It may be mentioned that over 150 countries of the world attended Belt and Road Forums.
Pakistan being a flagship of OBOR has been facing wrath of India since CPEC was initiated and India has been trying to engage Pakistan into a war like situation so this region (South Asia) would involve in a limited war and development projects like CPEC could be halted. However, Pakistan tactfully avoided to fall in this trap despite of over thousands of cross border violations during the last two years.
Indian intelligence agency RAW had actively been operative in Baluchistan province to halt development because this province is the route of western wing of CPEC and from where CPEC would be linked to Afghanistan and then onward to Central Asia.
Chinese growth is linked with OBOR (Read as Belt and Road Initiative or as BRI) and United States and India are trying their best to block Chinese access to Gwadar Port and Middle Eastern regions.
Some of observations of Ambassador Alice Wells are as follow:
Chinese state companies undertaking OBOR projects have a clear incentive to inflate costs and encourage corruption. Failure to repay those huge loans raises roadblocks to further development and leads to a surrender of strategic assets and it diminishes sovereignty.
The flagship of OBOR is the China-Pakistan Economic Corridor or CPEC and largest OBOR Initiative, reflecting over $60 billion in regionally pledged commitment for projects in Pakistan.
According to Pakistani government statistics, for each megawatt generated by a completed CPEC thermal energy project, developers spent an estimated 1.5 million. In comparison, the cost per megawatt of building non-CPEC thermal plants is half of that, or 750 million.
Similarly, CPEC’s most expensive single project is upgrading the railway from Karachi to Peshawar. When the project was initially announced, the price was set at $8.2 billion. In October of 2018, Pakistan’s Railway Minister (Sheikh Rasheed) announced that they had negotiated the price down to $6.2 billion, a savings of $2 billion, and he explained, Pakistan’s a poor country, we can’t afford the huge burden of these loans. But recent media reports claim the price has now risen to $9 billion. So why doesn’t the Pakistan public know the price for CPEC’s most expensive project or how it’s being determined?
She raises questions including:
On debt. What are the long-term effects in Pakistan of Chinese financing practices? And what are the burdens that have fallen on the new government to manage, now with an estimated $15 billion in debt to the Chinese government and another $6.7 billion in Chinese commercial debt?
It’s clear, or it needs to be clear, that CPEC is not about aid. This is almost always the form of loans or other forms of financing, often non-concessional, with sovereign guarantees, or guaranteed profits for Chinese state-owned enterprises that are repatriated to China.
Now together with non-CPEC Chinese debt payments, China’s going to take a growing toll on the Pakistan economy, especially when the bulk of payments start to come due in the next four to six years. Even if loan payments are deferred, they’re going to hang over Pakistan’s economic development potential, hamstringing Prime Minister Khan’s reform agenda.
On transparency, the lack of transparency can increase CPEC costs and foster corruption resulting in an even heavier debt burden for Pakistan.
For example, last year a Pakistani Senate Committee Report expressed astonishment at what they called the controlled bidding process for construction on the recently inaugurated Sukkur to Multan Motorway. According to the Committee, Beijing had allowed only three firms — all Chinese — to participate in that tender, while the entire project was financed by a Chinese loan with the risk entirely borne by the people of Pakistan.
Now given the lack of transparency, that road project has unsurprisingly been the subject of corruption allegations against officials from the previous government including accusations of cost inflation and misappropriation of funds. Meanwhile the China State Construction Engineering Corporation which was awarded the contract claimed to be extremely shocked by what they characterized as groundless allegations of corruption, asserting that the company came to Pakistan in the spirit of win/win cooperation. But importantly, in 2009, just a few years before this Pakistani contract, that same Chinese state firm was banned for six years from World Bank projects for what the Bank called engaging in collusive practices, in other words, corruption in bidding. And this is just one example.
We know that Pakistan’s National Accountability Bureau has a number of CPEC-related investigations ongoing.
The new Pakistani government prioritizes rooting out corruption, but the recently announced CPEC authority has immunity from corruption prosecutions. Again, those interested in Pakistan’s development are asking hard questions.
Lastly, on jobs. We hear the familiar Chinese catch phrase win/win cooperation and mutual benefit. But really, CPEC relies primarily on Chinese workers and supplies even amid rising unemployment in Pakistan. And for these projects, Chinese companies are importing materials and equipment from China rather than giving that business to Pakistani companies which would actually create jobs for locals.
CPEC is even bringing in Chinese workers who earn money in Pakistan, take the wages back to China, leaving very little in the local economy.
Now China’s statistics on how many thousands of Chinese workers are in Pakistan are so inconsistent and so unreliable that we don’t actually know how many are there. But this is all the more extraordinary because Pakistan has an abundance of young, eager and capable workers. According to the UNDP, 64 percent of the population is younger than 30 years old. They are Pakistan’s future and they’re hungry for opportunities.
CPEC doesn’t give Pakistani young people, it doesn’t give Pakistani companies the same opportunities that the Chinese themselves enjoyed decades ago, and that’s one of the reasons why Pakistan’s trade relationship with the People’s Republic remains so lopsided.
In 2018, Pakistan’s exports to China constituted $1.8 billion while Pakistan’s imports from China totaled $14.5 billion.
What is needed now from Pakistan?
Observations or what one can call allegations of Ambassador Alice Wells against CPEC are linked with irresponsible statements of some members of Federal cabinet of PTI government, who possibly in a quest to gain domestic leverage against former government of PMLN raised allegations of possible corruption in CPEC projects and now such statements are being used against China and CPEC.
Federal Minister for Communication Murad Saeed and Federal Minister for Railways Sheikh Rasheed on record questioned CPEC projects awarded by previous government of PMLN and leveled allegations of corruption process of awarding in CPEC projects.
There is a need that Prime Minister Imran Khan should strictly direct his cabinet members not to talk about baseless and unfounded information about CPEC projects.
Meanwhile, the government of Pakistan must release a rejoinder to allegations leveled by Ambassador Alice Wells if these allegations are baseless.