With $46 billion under CPEC (China Pakistan Economic Corridor) promised to trickle into Pakistan from China in the coming 15 years, the excitement here is quite understandable. For right or wrong reasons, comparison is being drawn with the colonial (European and primarily British) infrastructure and corporate investments in the country post partition (1947) and with similar neo-colonial (USA) investments post 1958, which for a long time went on to serve as incubators to our manufacturing sector’s growth and as the mainstay of our national infrastructure development. Now China, the latest economic success story of the world, wants to assume the mantle of Pakistan’s economic patron – A strategy that also fits well with its larger vision of one belt-one road aimed at reviving the oriental glory days of the silk-route trade. And since Pakistan on the other hand has literally been starved of any real underlying financial investment for almost over 3 decades now – partly owing to geopolitical challenges and partly due to sheer incompetence of our economic managers – the country almost seems over-eager to make CPEC happen at any cost; even if that cost in some areas threatens to be unsustainable for the country’s long-term economic health. Everyone from politicians to bureaucrats to military hierarchy and to the self-styled business experts are busy singing endless praises for China’s generosity as if some divine windfall seems headed Pakistan’s way, in the process making CPEC a sacrosanct initiative where even a slight or a rational criticism is regarded as anti-state. While no denying (even slightly) China’s long-standing friendship and its support to Pakistan in difficult times and that investment under CPEC finally puts investment back on the centre of our economic plate, especially at a time when most western investors are even reluctant to visit, let alone invest, the reality however remains that all said and done, CPEC is primarily a business proposition and therefore needs to be looked as such. The reason, ‘business’, because the project does not involve outright grants or aid, but instead relies on business principles of interest based lending and borrowing underwritten by payback collaterals, which in this case happen to be sovereign guarantees of the state of Pakistan. So, naturally if (God forbid) things were to go wrong, the implications for Pakistan can turn out to be very grave. A failure would not only deprive Pakistan of the opportunity to post significant growth and development (through CPEC), but also leave it in a financial quagmire, and in the process prove right our critics who doubt our very ability to successfully implement large-scale national projects.

And remember these loans - from the little information that has been released - carry a rather healthy ROI (Return On Investment) and tend to be front loaded. Meaning before we know we can be confronted with obligations on significant external (foreign exchange) outflows.

True that China is Pakistan’s well meaning and time-tested friend, but at the same time it is also the new global economic power that continues to rewrite management books with its peculiar yet successful business models of combining the state’s might and its capital with corporate professionalism.


Not doubting its sincerity towards Pakistan, but in this new Chinese corporate culture, the fiduciary duty of safeguarding Chinese interest first, tends to be taken quite seriously by its today’s economic managers. Likewise, if we are also to optimize our interests in CPEC we need to think the same way. Basically, we need to learn from them on how to corporatize economic propositions in order to overcome typical concerns like: lack of transparency; political bickering; general mistrust in public; and standard operational hazards of big-ticket projects in a developing country. On the contrary, the management at our end is clearly faltering on most of the above counts and is being held hostage to misplaced perceptions or innuendos or sheer politicization. The solution or rather the ‘management solution’ (like done by China) lies in putting CPEC management in Pakistan under professional control; albeit quickly since these emerging controversies carry the danger of undermining the entire initiative itself. Ahsan Iqbal, arguably PML(N) cabinet’s most committed and competent minister, seems headed on the wrong track. The fact is that he has a political leaning (even if it is by default) and given that his party’s record on transparency, merit and conflict-of-interest is far from stellar, no amount of press conferences, television shows or public explanations will end the constantly fresh brewing controversies. Prudence lies in giving decision making and implementation control under an autonomous, non-political and professional Apex Board. And God knows the selection of an effective Board of Directors for an initiative of this magnitude is going to be a challenge in itself. Assuming responsibility of $46 billion is no mean task, because in the process lie the critical trade-offs between: development cum investments needs with the new evolving climate-change responsibilities; ensuring space for Pakistani private sector versus a natural competitive cum ownership advantage of the Chinese firms; guaranteed returns on investment versus sound evaluation of project costs, returns and equipment sourcing to ensure value for debt assumption; economic rationale versus respective provincial aspirations on development and social harmony; and last but not least, prioritizing or pacing of capital spend versus intra-CPEC project sustainability purely on financial merit. History tells us that it does not take long for unmonitored inflow/loans to turn from joy to pain; Greece, Portugal, and Spain, all being recent examples in this regard. The real challenge of course will be to select a Board of Directors which can achieve all the above. Here, it is imperative that we do not repeat past mistakes by appointing merely ‘trophy’ boards - An error that over years has played havoc with our public sector enterprises, reducing them to naught. The government this time will therefore be well advised to avoid politicians, bureaucrats, friends, relatives, bankers and ex-multinational executives (often devoid of true spirit of nationalism) and instead opt for clean and competent private sector entrepreneurs from home who not only understand the role of board in a modern enterprise, but also possess the necessary skills to add value to the overall CPEC vision. As we know that no major investment can yield its due dividends unless its management (board) has the ability to: identify the fundamentals for an effective performance, learn through global networking to add exceptional value, and to always put itself up for performance evaluation. Given the environment that is developing in the country, it will be good if the government willingly allows space to the army on the management table of CPEC and the army leadership in-turn takes it upon itself to ensure that it supports the apex board in instilling principles/codes of professional corporate governance in CPEC’s operational and decision-making processes.

Lastly, like it or not economic decisions and their outcomes cannot be frozen in a time warp. Fifteen years is a long time and local, bilateral, regional and global economic events will keep on evolving during this period. It will be up to us to act proactively and chalk out policy and agreements that serve us well even with altered global realities. For example, it will be worth a ponder to determine that with fuel and energy prices crashing internationally, how prudent is our choice of coal as the main fuel in a potentially $34 billion investment proposal and what possible financial repercussions could we face say if the power tariff drops to a point that can no longer justify the returns being promised to our investors? After all, we have a recent example where the Chinese companies have threatened to walk away in wake of reduction in the pre-fixed tariff for wind power! The thing is that Chinese generosity may not last endlessly. Already their patience is running thin and they are asking Pakistani government to act professionally to avoid making CPEC controversial. Also, lately the Chinese internal economic situation looks fairly grim and the worry in this for Pakistan could be that the Middle Kingdom’s troubles may one way or other have the effect of depressing its investment spending in countries that fail to live up to the operational and financial discipline it seeks in return. And for this reason alone we must act quickly to not only convince our Chinese friends that we have a sound structure in place to judiciously use its allocated funds, but to also satisfy ourselves that a professional team is indeed there to manage these investments prudently, regardless of changing political dispensations over time.