CPEC: Perception vs reality

The trade war between China and the US is no longer limited to the two leading global economies, it has affected economies of Europe and is now influencing those of Asia. The other day, US Assistant Secretary of State Alice Wells, speaking at the Woodrow Wilson International Center for Scholars, said Pakistan was faced with long-term economic damage from China's Belt and Road Initiative. In his response, Chinese ambassador to Pakistan Yao Jing pointed out that the China Pakistan Economic Corridor (CPEC) is a win-win for both countries.

The US and much of Europe view China's One Belt One Road (OBOR) initiative with suspicion. They view that OBOR more as a move by China to expand its political, strategic and business influence around the globe and fill in the space vacated by the US which opted to go for 'America first'.

To a great extent China, in the last few years, has well managed to compete for influence in Asia, the Pacific, the Middle East, Africa and parts of Europe, particularly Eastern Europe and Italy.

The US is now beginning to take stock of its economic and political consequences, especially after its trade war with China which has developed a trust deficit between the two, which is likely to widen.

It appears to be the beginning of a new Cold War. The difference this time is that China is a new entrant in a war in which the US and Russia already there.

Alliances of the Cold War such as SEATO, CENTO and NAM are no longer there.

These are interesting but dangerous times. New alliances are being firmed up. Pakistan, is a country most vulnerable to these global changes on account of its economic dependence upon foreign funding and porous borders.

Never before has the US criticised CPEC so bitterly and openly. Earlier, it had only expressed guarded opinion and on one occasion it even expressed its interest to be part of the CPEC.

Many parliamentarians in Pakistan came up with uncalled for aggressive statements citing the US' criticism of CPEC as interference in Pakistan's internal matters. They seem to have lost sight of the fact that the country today is heavily dependent on the IMF, the World Bank, ADB and FATF for its economic survival. All of these entities function under the US influence.

One thing is now clear that the US supported by India, is inimical to CPEC and will not let it go. It will attempt to manoeuvre Pakistan out of it or at least dilute its strategic influence in the region. Here Pakistan needs to apply wisdom and not emotions. A well balanced, articulated and meaningful response was, however, presented by Asad Umar, the new Planning and Development Minister in this regard.

Much of US criticism on CPEC is unfounded and outdated.

In the last PML-N tenure, the CPEC focus was largely on mega energy projects in private sector and mass transportation and infrastructure projects in public sector.

In mega projects, China's scope of work amounted to around 80 percent in terms of Chinese turnkey contractors, Chinese supplies and technical workforce while 20 percent went to Pakistan in terms of local works, supplies and workforce. Here the concerns raised by Alice Wells appear to be legitimate.

The PTI government, however, had to move out of mega projects on account of unsustainable fiscal exposure and rightly moved its focus to Special Economic Zones (SEZs) that promise country's industrial growth and employment opportunities.

In the energy sector, the Eximp Bank of China has extended commercial loans described as 'Project Loans' largely to Chinese contractors on the strength of their credentials, project feasibilities and cash flows with little or no exposure to the government of Pakistan.

However, the government has to bear the fiscal exposure on infrastructure projects sponsored by federal or provincial governments. For Pakistan, the CPEC is more than just connectivity and business; it is, in fact, of strategic, defence and business advantages and there is no way that it will forego any of it as no other viable and reliable option is available to Pakistan. It has more than once burnt its fingers in alliances in the past. It is required to dispel apprehensions of the US and Europe in an effective and meaningful manner with a view to bringing them on board.

(The writer is former President of Overseas Investors Chambers of Commerce and Industry)