CPEC- The opaque view from a Pakistani perspective
|Image credits- VOA|
( After a break of nearly two months, I am returning to active blogging. To start with, I have decided to deal with CPEC, the most talked about project in South Asia)
China Pakistan Economic Corridor (CPEC) is a collection of projects undertaken by China in Pakistan to connect landlocked Western China to the Arabian sea based Gwadar post in Pakistani Baluchistan. This includes rapid development of infrastructure including roads, railways, power generation projects, industrial parks, special economic zones besides developing Gwadar port. CPEC is termed as a game changer by Pakistan. But doubts still linger in the minds of many. The international monetary fund (IMF) in it's report has warned Pakistan of long term consequences that will bring untold misery to the Pakistani economy due to their inability to repay the loan amount back to China with above normal interest rate.
There is also concern that China will virtually take over the entire Pakistani economy. The first significant measure was their investment in Karachi Stock Exchange where in now they own majority stakes. Then there is the issue of whether other international companies will be allowed to invest in the project. The conditions of the project are still opaque and the government of Pakistan has not allowed the public access to the details of the project. It is also stated that only Chinese companies will be allowed access to invest in the project. So what gain does Pakistan makes from the project is anybody's guess. Besides there are still no details from what Pakistan will gain from allowing Chinese trucks to pass through Pakistan.
In the energy front, China will set up power generation projects mostly run on coal. The environmental impact on Pakistan will be imminence as China is reinstalling these power plants which itself has shut down. Besides, with a free trade agreement too, it is virtual certainty that Chinese goods will flood Pakistani market that will be a death knell to the Pakistani industry who are not technologically advanced enough to withstand the onslaught. Recently a Pakistani senate committee expressed it's apprehension on the project ( as reported by the Dawn Newspaper).
Then there is the big issue of internal security inside which may act as a spoil sport for the project. Pakistan has a long running insurgency is a hot bed of Islamic Terrorism. There has been frequent attacks on the project not only from Islamic militants but also from Baloch nationalists who sees this project as another oppressive movement by Pakistan for which they do not have any gains. Pakistan had to create a separate force to protect the CPEC which is unheard off in any other international projects. The viability of the project is still debated and China may just have invested in a white elephant. Then there is the issue of the CPEC running on the Indian territory which will be an additional challenge to Pakistan and China.
THE GHOST OF HAMBITOTA
When we talk of Chinese investment, one should never forget the experience of Sri Lanka. China undertook massive projects in Hambitota and Colombo for which Sri Lanka agreed to pay back with high interest rate. But Hambitota has proved to be a proverbial white elephant. Sri Lanka has fallen to a debt trap and is now forced to restructure the loan by giving the project to China on a 99 year lease. This in turn allows China to get a lock on the project for the next 99 years including the resources. This is in a way new type of colonisation.
For Pakistan the stakes are much higher. If the Sri Lankan project was just about $10 billion US dollars, for Pakistan the entire project will come to $51 billion US dollars. It is said that on many projects, the interest rate is as high as 12% to 18%. The penal interest will come to around 26%. How Pakistan with it's precarious financial position will repay such a huge amount with interest is anybody's guess. China will demand every last ounce of blood from Pakistan and if Pakistan defaults, China will virtually take over Pakistan. The viability of the project is still debated and it will be decades before we see how the project has turned out to be. If Pakistan manages their finances and allow other international players to also invest, CPEC will be a launching pad for Pakistan for economic prosperity. But if they mismanage, then Pakistan will end up being a Chinese colony without much to look on too with their own industry and economy in shambles. Let us see how things turn out to be.