Rebuilding CPEC Progress – Journal


Zafaruddin Mahmood, SAPM on CPEC

Over the past four years, progress on the multi-billion dollar China-Pakistan Economic Corridor (CPEC) initiative has remained mostly sluggish and uneven. The question is: can the momentum seen in 2015 and 2016 be revived after years of little progress?

One of the main reasons for the slowdown in the momentum of CPEC-related projects is the political and economic changes in Pakistan, which have largely contributed to the slowdown of CPEC-related cooperation between Islamabad and Beijing. For example, there was simply never any real warmth between China and the previous government of Imran Khan; although there were some phases of optimism but no real progress.

Second, Pakistan’s fiscal problems and deteriorating balance of payments situation led to delays in payments to Chinese power companies and procedural and other obstacles to projects already agreed and undertaken.

China was also seen as cautious about such major investments. Second, there has been a growing sensitivity of Chinese financial institutions to Pakistan’s economic and political risk. In addition, Belt and Road Initiative (BRI) investment for China has slowed everywhere. It was only natural that its investment in CPEC, the BRI’s flagship initiative, would also decline.

PTI’s lack of heat and Pakistan’s economic conditions had slowed the Corridor’s momentum, but it is gradually picking up under PML-N

The pandemic that led to the global shutdown didn’t help either. All of these factors have together led to the closure of many projects like ML-1 and Karachi Circular Rail (KCR), or the slowdown of projects like Gwadar International Airport and Gwadar Coal Power Station.

“When in opposition, Imran Khan and his PTI party had reservations about the usefulness of CPEC for Pakistan. They associated this initiative with the PML-N. So when the PTI came to power, it suspended its work for a review. At that time, we saw PTI ministers making public statements about corruption in CPEC projects and excessive pricing of Chinese companies’ projects. These factors have created an element of mistrust between the two sides,” Zafaruddin Mahmood, Pakistan’s former special envoy to CPEC between 2015 and 2017 and chairman of the Lahore-based think tank, Understanding China Forum (UCF), said. correspondent in an interview.

“Then we had the pandemic which led the Chinese government to lock down its country to protect the lives of its citizens. The PTI government was inexperienced and could not induce Beijing to remove this element of mistrust. By the time Imran Khan understood the need to work closely with China and the importance of CPEC for the Pakistani economy, it was already too late. The damage was done and it is not easy to repair it in a short time.

But can we revive the old momentum? “Well, it will take some time before CPEC regains its lost momentum. But Prime Minister Shehbaz Sharif’s new government is now engaging the Chinese authorities. Our Foreign Minister Bilawal Bhutto Zardari recently visited China, and the Prime Minister himself has been talking to senior Chinese officials and is personally trying to address issues facing Chinese companies operating in Pakistan.

“The Prime Minister is also working on resolving the issue of payments to Chinese independent power producers and finding a long-term solution. He visited Gwadar twice to show his support for CPEC and Chinese companies working in Pakistan. Indeed, there is still some skepticism in Pakistan based on the experience of the past few years, but it needs to be fought,” says Mahmood.

Asked about Pakistan’s exclusion from the recently organized Global Development Initiative (GDI) dialogue organized around the BRICS (Brazil, Russia, India, China and South Africa) conference, he said that Beijing had not invited Pakistan to participate in the GDI dialogue. is misplaced.

“Pakistan’s participation was blocked by India because the organization takes decisions with the consensus of each member of the group having a right of veto. The Chinese authorities had informed our Ministry of Foreign Affairs. Pakistan is an important member of the Group of Friends of the Global Development Initiative, and China attaches great importance to Pakistan’s important role in promoting global development, promoting the implementation of the 2030 Agenda for United Nations for sustainable development and regional cooperation.

Mahmood said the recent visit to Islamabad by senior Chinese politician and Politburo member Yang Jiechi represents the return of an old warmth in cooperation between the two countries.

Yang is considered a personal representative of President Xi Jinping due to his position in the Chinese hierarchy and is the first senior Chinese official after his foreign minister to visit overseas since the outbreak of the pandemic. and the resulting lockdown in China. .

“That he chose Pakistan as the first stop shows the importance the Chinese authorities attach to Pakistan. This reflects their support for Pakistan and is a manifestation that Islamabad remains an important ally of Beijing as always.

“I believe that some projects under CPEC, such as ML-1 and KCR, will be revived in the near future. A meeting of the joint cooperation committee is scheduled in the next two months or less after a long time. I can say that sincere and sincere efforts are being made and that the initiative will regain lost momentum,” says Mr. Mahmood, who was recently appointed SAPM at CPEC.

He disagrees with the fact that Pakistan took expensive loans from China under the CPEC initiative. “Interest on government-to-government debt is on average below 2%, given the large subsidies China gives to Pakistan. For example, China developed the deep water port of Gwadar at a cost of $198 million with its own money. Likewise, it is in the process of establishing an international airport in Gwadar at a cost of $250 million in addition to several other socio-economic projects being undertaken across the country.

“Pakistan, in fact, is the biggest recipient of Chinese subsidies and assistance across the world. In the case of Chinese commercial loans, however, the yield is somewhat higher. »

He believes that Pakistanis should understand that CPEC is much more important for our country than for China. “Indeed, being a flagship project of the BRI, its progress will help China send the message across the world that the BRI is good for developing countries. But Pakistan remains the main beneficiary of the Corridor project,” says Mr. Mahmood.

He says Gwadar in particular will benefit massively from Chinese subsidies. “Most of the Chinese subsidy projects like a seaport, an airport, a state-of-the-art hospital, a water desalination plant and a vocational training center being built with Chinese subsidies are all located in Gwadar in Balochistan.

“They are working on projects to help solve electricity and drinking water problems for the people of Gwadar, as well as to create employment opportunities for the local population by distributing free fishing nets to fishermen and solar panels to the people of Gwadar. Then we have a coal-fired power plant project there. But we have to remember that Balochistan is very big and it is not the responsibility of the Chinese to develop this province .

Yes, he adds, there are some problems, but once economic activity opens up after the start of operations of Gwadar airport, it will create new opportunities for the local people. Additionally, the Chinese are also developing the Gwadar Free Industrial Zone, which has been delayed due to our failure to finalize an investor incentive package. Then, the availability of water and electricity is a major issue. Yet we see that Chinese investors have set up a food processing unit, a marble refinery and a fish processing plant in Gwadar. So this is progress. »

Posted in Dawn, The Business and Finance Weekly, July 4, 2022

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