As part of the Belt and Road Initiative (BRI), the CPEC economic corridor was conceived in 2013 and was operationalized in Pakistan in 2015. It was immediately hailed by the incumbent government as a ‘flagship’ project of Pakistan-China economic cooperation and was termed as a ‘Game Changer’ for Pakistan’s economy. It was claimed that it would generate tens of thousands of sustainable jobs, create an industrial base, and help boost exports. China also promised to invest 50-60 billion USD into the CPEC project in the shape of loans and grants.
However, the planning of CPEC, solely left in the hands of Pakistani planners and economic wizards, divided CPEC into two phases with Phase I constituted of setting up thermal power plants and motorways. Phase I required huge loans and most of the qualified personnel were hired from China by Chinese companies working on these projects. Strangely, no industrialisation effort was concurrently started, as only industry generates sustainable economic activity and revenue for the government. Further, to make matters worse, successive incumbent governments signed projects, especially power projects, which added obligations in foreign currencies, and which continue to affect Pakistan’s domestic-oriented exchange rate and industrial policies. These obligations have narrowed Pakistan’s fiscal space. Presently, Pakistan owes more than USD 7.5 billion in project debt to power plants set up under the CPEC. The country also owes around $2 billion in circular debt to Chinese power producers. Consequently, based on the failed premise of industrialisation and economic activity which would accompany CPEC, Pakistan now faces a debt crisis where it is seeking new loans to pay past debts.
It has been a decade since the CPEC ‘economic corridor’ was launched, and the present government has announced the initiation of second phase of CPEC. Much like before, instead of learning from past mistakes, the government is again hailing CPEC II as a ‘game changer’ for Pakistan, a project that will bring Pakistan out of its current economic trepidations. The second phase has been renamed as an ‘upgraded version’ of CPEC, but no one has explained what this upgraded version entails and how it benefits Pakistan. Recently, the PM visited China with an entourage of government officials, a large number of cabinet members, and a delegation of businessmen. The PM announced that the second phase of CPEC would promote B2B relations between the two countries, and hoped that China would invest in Pakistan to help industrialisation. He also requested China to transfer its labour-intensive industries to Pakistan. The PM also hoped that China would invest in IT, agriculture, telecommunications, mining and petroleum sectors.
Thus, with a long wish list, PM landed in China, starting his tour with China’s tech hub of Shenzhen to seek more investments. The tour culminated with a meeting with Chinese President Xi Jinping, where the two leaders reaffirmed their consensus on CPEC’s upgradation and advancing the mega project’s development in its second phase. According to a joint statement issued at the end of the visit, China and Pakistan signed around 30 agreements and Memoranda of Understanding, in a myriad of fields including cooperation on agriculture, infrastructure, industrial cooperation, inter-governmental development assistance, market regulation, surveying and mapping, media, and film. Hence, from an optics point of view, it was a successful visit, where everything to be said was said, but no details on the ‘upgraded version’ were provided nor any firm commitments made against Pakistan’s wish list: no industrial investment was announced by China; nor any hint was dropped on restructuring of loans and accrued interest.
Presently, a high-powered Chinese delegation, as announced during the PM’s visit to China, is visiting Pakistan and meeting top civil and military leadership seeking commitment to CPEC projects and protection of Chinese personnel working on different projects. However, there is no word as to how this CPEC ‘transit corridor’ for Chinese goods will make a transition to an ‘economic corridor’ to help Pakistan idustrialise: generate jobs and engender economic activities, which would help pay the debilitating debts accrued during the first phase of CPEC through ill-conceived planning, and are being paid through more borrowing and hyper-taxing ordinary masses.
Ahsan Munir
The writer is a freelance columnist.
