The China Pakistan Economic Corridor (CPEC) has been the focus of the past government and is the focus of the current government as well; and rightly so as this is one reality which has the most far reaching impact on the economy, social mosaic and global diplomacy of Pakistan and its relations with China.
The management of the CPEC warrants the top focus of the incumbent government's 100-day plan.
While the priority of the PMLN government has been mega projects, the government of PTI has decided to shift its focus to socio-economic projects which could provide civic amenities and job opportunities to a wider segment of the population. The random and conflicting policy statements recently issued on the subject by public functionaries created misunderstanding between Pakistan and China which prompted the visit of Chinese foreign minister to Pakistan and the follow-up meeting in China between General Bajwa and President Xi.
The spread of the CPEC is now over $ 62 billion and largely committed to development projects in infrastructure, logistics and energy sector. By and large this amount is dedicated to specific projects in the private and public sector as commercial loans as per international norms & facilitated by the Eximp Bank of China. Foreign Direct Investment (FDI) of China in Pakistan continues to be sluggish.
The CPEC has propelled economic growth and the road network and mobility projects being executed under it shall eventually open up the country to markets which were earlier out of the reach and out of the national economic growth spectrum. But all this, soon enough, turned out to be at a price which Pakistan can ill afford on account of loss of its local industry, mounting loans and its dividends not trickling down to a wider segment of population in terms of employment and social welfare.
The last three years witnessed the ill-considered and irresponsible rush of the provincial governments to randomly fill their baskets with mega projects under the CPEC, with little concern of their financial viability, with Punjab in the lead followed by Sindh and KPK - Orange line and coal/LNG based power plants in Punjab, circular railway in Sindh and Urban Mass Transit Train for KP. The incumbent government last week stated that the subsidy to the Lahore Metro Bus System and Orange line is unsustainable. More of such projects will encounter similar consequences.
It is about time the government realigned the CPEC to the country's needs and insulate it against vote politics and greed. It's too expensive an option to play around in the current fragile economic situation of the country.
China's interest is undoubtedly mega projects with the engagement of large Chinese Companies, whereas, Pakistan's priority should be sustainable projects which can generate revenue to settle loans and guarantee profitability and offer employment opportunities to the youths of the country. In other words, there should be projects of social welfare for the masses. This means that Pakistan should divert its focus to SME industry and Special Economic Zones.
Pakistan must get its industry back. It must move out of the perception that the CPEC is Pakistan-China centric which has much alienated traditional lenders like KFW of Germany, IFC of the USA, JIBIC of Japan and other OECD countries who for seven decades supported mega projects in Pakistan through soft loans and grants on easy and longer payback period - in most cases payable in 30 years.
The recent categorical government statement that the CPEC is open to all countries is an encouraging development. The expected participation of Saudi Arabia in CPEC will constitute a major impetus to the energy sector and industry.
Criticizing the last PML-N government for what it called wasting a lot of time, the PTI government last week announced that it would speed up implementation of the $62 billion China-Pakistan Economic Corridor (CPEC), open it to other countries and hire international consultants for financial modeling of future projects.
Speaking at a news conference after a meeting held to review progress of the CPEC-related projects, Minister for Planning and Development Makhdoom Khusro Bakhtiar played down some critical comments about Chinese loans in the CPEC portfolio, but hinted at exploring new financing options for future projects.
"We have decided to conduct a study for exploring a new mode of financing in order to undertake future projects on a build, operate and transfer basis, instead of the existing mode of engineering, procurement and construction contracts by securing loans," he said, adding: "We are working on financial modeling of future projects."
Some of the key tasks and deliverables which the incumbent government can straight away roll out in its 100-day plan are proposed by the writer as follows:
Special Economic Zones?
- Prioritise the most viable SEZ under Public-Private Partnership (PPP)
- Launch SEZ marketing campaign (tax incentives, power island for each SEZ, one window facility at each estate)
- Engage and reach out to investors & suppliers from OECD countries
Power Projects?
- Priortise power islands for industry, housing and commercial complex
- Move out of oil and coal-based PPs in favor of hydro, wind & solar PPs
- Expand out to engage lenders and suppliers from China, OECD countries for renewable energy projects (Hydro, Wind, Solar)
Mobility and Mass urban transportation Projects
- Engage lenders and project sponsors from China and OECD countries
Road Network?
- Priortise the most financially viable routes under Public Private Partnership
Chinese Direct Investment?
- Work out strategies to invoke FDI from China especially in Industry planned under SEZs
Vocational Training?
- Engage and train the youth of Pakistan to meet the massive challenge of skilled workforce requirement under the CPEC
The CPEC undoubtedly is of great economic and strategic value to Pakistan and China is the best business and strategic partner Pakistan could look up to. We only need to put our act together and the first step is to set up a team of knowledgeable professionals who have wisdom and skills to efficiently work in tandem with the Chinese. Up to now this is not the case and Pakistan is losing out on this count.
With reservations expressed on the Chinese financial modeling of One Belt One Road (OBOR) by the new regime in Malaysia and by the opinion makers in Uganda and frequently cited poor experience of Sri Lanka, the success and credentials of CPEC are now of great importance to China. Pakistan can position itself at significant advantage on this account while supporting China to make the CPEC a great success.
(The writer is former President, Overseas Investors Chamber of Commerce & Industry (OICCI))
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