CPEC's long-term plan

Finally, the governments of Pakistan and China have officially launched the Long-Term Plan of the China Pakistan Economic Corridor (CPEC), removing misperceptions and doubts in relation to transparency of the project in an effective and meaningful manner. The 26-page LTP document covers seven broad areas of cooperation where the two sides have to contribute to each other in three phases: the first ending in 2020, and the second in 2025 and third reaching completion in 2030.
A deeper look at the long-term plan will certainly prove that China, through CPEC, has shown utmost sincerity of purpose insofar as Pakistan's infrastructural development is concerned. Beijing seems to have committed itself to goals that exclusively constitute Pakistan's own responsibilities to send a strong message across that it has deep respect for its neighbour's strategic and financial sovereignty. In this generous deal, however, China wants Pakistan to accept its currency as the currency of bilateral trade. Speaking to journalists after the formal launch of CPEC's LTP (2017-30), Minister for Planning and Development Ahsan Iqbal said Pakistan is examining a proposal to replace the US dollar with the Chinese yuan for bilateral trade. According to him, the rupee will be used within the country, but China desires that bilateral trade should take place in its own currency, "and we are examining the use of RMB instead of the US dollar for trade between the two countries."
CPEC, which is the flagship of China's historic One Road One Belt project, envisages, inter alia, two profound features: greater monetary cooperation between the State Bank of Pakistan (SBP) and People's Bank of China (PBoC), and greater strategic cooperation between the two neighbours whose friendship is taller than the Himalayas and deeper than the oceans. The long-term plan, therefore, commits the two countries to implementing existing bilateral currency swap arrangements, exploring the use of the rupee and the yuan for settlement of bilateral trade/investments, a cross-border inter-bank payment system, promoting free flow of capital, financial cooperation between free trade zones and strengthening cooperation between the stock exchanges of Karachi and Beijing. The plan requires the two countries to strengthen cooperation in the fields of oil, gas, electricity and power grids, and focus on promoting construction projects of thermal power, hydropower, coal gasification and renewable power generation, and support networks enhancing power transmission and supply reliability. It also requires them to explore the establishment of multi-level cooperation mechanisms and strengthen policy coordination. They should also strengthen their own financial reforms, innovate their own financial products and financial services, and control financial risks to create a good financial environment for the construction of CPEC.
What is more important from Pakistan's perspective is that China will be supporting Pakistan's access to the Asian Infrastructure Investment Bank (AIIB)-a source of cheap loans. Both countries shall promote mutual opening of their financial sectors and establishment of financial institutions in each other's countries, encourage financial institutions of the two countries to support the financing, including loans from international consortia of banks for the projects along CPEC, establish and improve a cross-border credit system, and promote financial services such as export credit, project financing, syndicate loan, trade finance, investment bank, cross-border RMB business, financial market, asset management, e-banking, and financial lease, support the project by RMB loans and establish the evaluation power bills in RMB.
During his talk that he had with journalists after the launch of CPEC LTP (2017-30), which was attended, among others, by new Chinese ambassador Yao Jing. Planning Minister Ahsan Iqbal, however, appeared not fully prepared when he remarked that the use of the RMB is not against Pakistan, rather it would benefit the country. Although it is not known whether or not Pakistan's policymakers have fully examined the impact of this "great concession," they must not ignore the fact that, already, the China-Pakistan FTA is strongly skewed in favour of China. Indeed, it for this very reason that talks on the second FTA are clouded. The concerns of the Pakistani side are legitimate: Pakistan cannot overlook the genuine fears of the local manufacturers.
Secondly, one of the accusations that the world's engine of growth faces from its Western counterparts is the deliberate weakening of the yuan to make its exports competitive across the globe. Needless to say, China has already rendered uncompetitive most goods manufactured in Pakistan, by flooding the local markets with its cheap products that are beyond competition. Our policymakers must examine all the pros and cons before they take a final decision in this regard. In any negotiations protection and preservation of national interest always comes first.