There is widespread support for the $46 billion proposed Chinese investment to Pakistan and the credit for the 52 memoranda of understanding signed between the two governments during the recent visit of Chinese President Xi Jinping to Pakistan has been rightly given to the PML-N.
And yet there are nay-sayers crying foul by pointing out, unfortunately with a deal of accuracy, that none of the contents of the 52 MoUs signed has been made public. To further murky the waters of the growing trust deficit between the joint opposition, led by the wily former President Asif Ali Zardari who called for the government to be more open about the project designs as well as the terms and conditions of the Chinese loans/investments, was the government offer of first an in-camera session and on the last day of April an invite extended by the Federal Finance Minister Ishaq Dar to all leaders of political parties to attend a meeting on 13 May, to be chaired by Prime Minister Nawaz Sharif, with the objective of briefing the politicians on China Pakistan Economic Corridor. This offer has fuelled serious concerns in the general public as there is no logical explanation as to why, at best, infrastructure development projects funded through lower than market rates of return and, at worst, commercial deals requiring repayment of loans at a market rate should not be discussed in parliament and made public.
First off, it is relevant to note that the $46 billion funding is not earmarked for budget support - that if past precedence is an anything to go by would have been used by Finance Minister Ishaq Dar to reduce the budget deficit that, in turn, would reduce the growth rate - but for specific infrastructure development projects. Thus the inflow of this amount as and when it is released can not but be fully supported by economists and the public alike.
Project specific loans have the capacity to repay the loan once the project is complete because the internal and economic rates of return of projects are well in excess of the rate at which the money is lent to undertake the project. Thus for example once the Gwadar port is operational and has the necessary linkages with neighbouring countries the use of the road as well as of the port would enable the government to repay the interest as well as the loan as and when it becomes due, because whatever the rate of interest the government may have agreed to, the fact remains that the rate of return of the project would be much higher than the rate of return of the money lent by the Chinese. In this context, however, the government is advised to undertake only those projects that undertake credible calculation of the internal and economic rates of return of any project. Thus for example the beautiful Lahore modern airport, built at great cost to the treasury, has yet to generate the kind of revenue that was envisaged simply because its usage is well below capacity.
The Awami National Party (ANP) has been most vocal in opposing the China Pakistan Economic Corridor and accusing the government of changing the routing to benefit Punjab instead of the undeveloped areas of Balochistan and Khyber Pakhtunkhwa; and ANP, in common with Sindh and Khyber Pakhtunkhwa governments, remains unconvinced by government ministers claims that the routing has not been changed. Business Recorder requested proof of the government's agreement to a change in the routing from a senior member of ANP who promised that he would provide the documents; however, more than a month later he has yet to provide the documents generating considerable room for doubt.
Be that as it may, there are economists who maintain that even if the routing has been changed 46 billion dollars is a massive inflow that any country, including developed countries, would bend over backwards to attract. Others point out that the change in routing was suggested by the Chinese who reportedly presented a legitimate economic rationale for the change namely (i) the existing road networks must be strengthened which would lower the cost of the project, which implied a routing through Punjab, as a cost saving measure, and (ii) the change in routing can be logically explained by pointing out that while a road route through undeveloped regions would usher an era of much needed development yet these regions are controlled by terror elements as well as separatists and therefore foreign truckers may not be tempted to use it unless and until the government/armed forces successfully clear the area. It would therefore be economically more feasible to complete the original routing once the area is cleared of insurgents/terrorists.
What is unfathomable is the government's refusal to upload the 52 agreements signed with the Chinese during the visit of the Chinese Premier on relevant official websites or indeed to identify which sectors would benefit from the investment except in the broadest possible terms. As aforementioned any investment (other than portfolio investment) - whether it is in the form of Foreign Direct Investment or indeed a bilateral loan or under a private public partnership - would generate economic activity in the country that would benefit all. The most favourable inflow would be through FDI, which essentially implies that the project cost would not be payable by the government from its budget but the constructed infrastructure would charge user fees that would ultimately cover the entire cost of the project within a stipulated period of time, followed by public-private partnership which again would not be payable by the government. Even a bilateral loan at market rate would benefit the economy. Thus this reticence on the part of the government ministers is simply inexplicable especially as project priority rests with the party in power and is, in democratic dispensations, used to garner greater support during election time. In effect if the public is unhappy say with the twin cities metro-project and would have favoured a clean drinking water project instead, PML-N Rawalpindi/Islamabad candidates would bear the cost in the next elections; and, needless to add, the PTI is also citing this project's negative features to garner voter support not only where the project is located but also countrywide.
It is indeed unfortunate that this reluctance to share details of deals, commercial like the LNG import deal with Qatar as well as development projects with China, is being seen as the hallmark of the third tenure of the PML-N government. Transparency requires that all deals be uploaded on the relevant websites and criticism, if any, can then be appropriately dealt with.