The China-Pakistan Economic Corridor (CPEC) continues to look like a mystery, wrapped in an enigma. In the absence of agreements stipulating and documenting both countries’ interests, the CPEC is creating problems that would strip Pakistan of whatever benefits the multi-billion-dollar project promises.
Pakistan’s high-profile developmental claims notwithstanding, there are grey areas in which the CPEC appears to become a China-only project, stripping it of its game-changing elements for Pakistan and giving China a disproportionate presence in the country and the region.
Yet Pakistan continues to project it as a game changer for the country and the Economic Cooperation Organization (ECO) region. This was precisely the message at the recent ECO summit in Pakistan.
Sartaj Aziz, an advisor to Pakistani Prime Minister Nawaz Sharif, said the CPEC could “galvanize trade opportunities with the ECO region” by acting as a catalyst to boost intra-region trade through greater connectivity. “It could also help the entire ECO region emerge as a formidable economic bloc in the world,” he added.
Foreign office sources say Pakistan intends to use the CPEC as a “foreign policy tactic” to woo regional countries. The ECO summit, which China attended as a special guest, was about just that.
“The imperative of countering India’s policy of isolating Pakistan makes the tactical use of the CPEC essential,” said one official on condition of anonymity. “Hence, the CPEC’s elevation from a game changer for Pakistan to a regional game changer,” he added.
According to the official narrative, there is no limit to the benefits the deal would yield, while the costs and pitfalls are dismissed as the musings of skeptics or pessimists. Yet, these factors are as real as the mega-project itself.
What is the game changer for Pakistan?
However, just when Pakistan was hailing the CPEC as a genuine game changer during the summit, skepticism about its benefits was overwhelming during the Senate’s planning and development committee hearing held on the same day.
Committee chairman Syed Tahir Hussain Mashhadi voiced apprehension that the CPEC may not bring the promised benefits, saying: “China is our brother, but business is business.”
Staff from the planning commission, which oversees CPEC projects, told the committee that only Chinese investors would be allowed to invest in the proposed special economic zones being created under the corridor umbrella.
The committee was further told that no agreement exists between Pakistan and China to protect Pakistan’s interests. With Pakistani businessmen barred from investing in the special economic zones, “Where will be the benefit for Pakistan,” Mashhadi asked. “Will the Chinese give us some share in their profit or pay taxes?”
There were no assurances that Pakistani labor would be recruited to work on Chinese projects, or that the country would see a revenue windfall — something that is highly unlikely given the disproportionately expensive financing conditions that come with CPEC projects.
As comparisons have clearly shown, financing terms (and interest rates) are higher than China has stipulated to lend to other countries such as Myanmar. “We were informed that Chinese banks will charge us more interest than any other international bank,” Mashhadi said.
Funding, too, is not for all the projects envisaged under the CPEC. China would provide loans and grants for only 3% to 4% of the entire investment in the CPEC, raising concern that Pakistan may not have enough money to complete the rest of the projects.
No funds, no corridor
The absence of funding has already started to have an impact. This was clearly understood during the recent meeting of the Senate standing committee on communications.
The committee was told that no progress could be made on completion of the western route of the corridor. “Whenever we ask about the progress on the western route, we hear the excuse that the funds and workforce are not available,” said committee chairman Muhammad Daud Khan Achakzai.
The chief secretary of Balochistan acknowledged that a committee formed to acquire land in Balochistan and Khyber Pakhtunkhwa to complete the western route had not met since its formation. So, no area has been acquired, reducing an all-important portion of CPEC to paperwork.
Absence of funding for the western route has sparked controversy in Pakistan, stirring ethnic tensions and exacerbating regional disparities.
“What this case unambiguously shows is that the particular geography of trade and projects being built in Pakistan by China is primarily catering to Chinese interests, ” said an economist from a federal university based in Islamabad. “National considerations hardly figure in these mega-projects. This is likely to reinforce rather than mitigate, as is being widely projected by Pakistan, ethnic and regional disparities.”
Claims about CPEC’s ability to change Pakistan’s (and the ECO region’s) economic outlook appear hollow and unreal, while the government appears only to be using its imaginary completion as a platform in next year’s general elections.
What adds substance to its hollowness is the government’s inability to put these apprehensions to rest. During the past year, the planning and development committee has met six times, but the government has failed to tell the committee about any agreement between Pakistan and China to protect the interests of Pakistan, said the chairman.
The question remains: what’s the game changer for the region when CPEC is changing nothing in Pakistan? If anything, it is giving the Chinese a corridor to do business across the region via Pakistan. That’s where CPEC appears to begin and end at the same time.