CPEC: The ball is in Pakistan’s court

Afshan SubohiUpdated February 10, 2020

China asserts that it is not wavering from its commitment to assist Pakistan in the second, people-centric phase of the China-Pakistan Economic Corridor (CPEC). — AP/File

China asserts that it is not wavering from its commitment to assist Pakistan in the second, people-centric phase of the China-Pakistan Economic Corridor (CPEC).

Despite being embroiled in multiple problems — the virus epidemic, growth moderation and trade spat with the United States — the Asian dragon is all set to commit $1 billion in the current calendar year to kick-start the next phase of CPEC.

In an exclusive interaction with Dawn, China’s Consul General in Karachi Li Bijian was open and clear about the mutual relationship and its future. He dismissed the perception that China is disillusioned by the Pakistani leadership and has adopted a wait-and-see strategy before committing support for CPEC’s second phase.

This is a figment of some naïve elements’ imagination. Nothing can be far from the truth. I can confirm that China has helped Pakistan close physical infrastructure gaps in the first phase and wishes to see benefits of this massive investment flowing to Pakistani youth, farmers, labour and disadvantaged segments in the second phase,” he asserted.

He declined to comment on a possible US role in peddling doubts about CPEC and its cost.

We can’t order private investment. We know well it will not be persuasion but the profit expectation and risk coverage that will mobilise them,’ CG Li

The second phase of CPEC is focused on public and private collaboration in industrial, agriculture and social sectors (poverty alleviation, training and research to transform industrial/agriculture sectors to improve productivity and competitiveness). The specifics of commitments for the identified projects have yet to be finalised, but about $1bn is expected to land in the country over the next 11 months.

In the first phase, the thrust was on bridging the physical infrastructure deficit (electricity, logistics and the port). Big-ticket projects close to $21bn in energy, transport infrastructure and Gwadar Port are either complete or about to finish shortly.

Expanding on his argument, the consul general stated: “The relationship between the two countries is not transactional. We are long-term partners who share the common dream for a just and inclusive order that affords decent living standards for all citizens. China chose Pakistan to be the first stop for its One Belt, One Road vision.”

If there was some confusion in the party that assumed power after the 2018 general elections, it has been cleared. We know the current leadership in Pakistan understands and acknowledges CPEC’s value for the country and its future,” he added, putting to rest the perception of deliberate reluctance on either side.

He also mentioned the revised China-Pakistan Free Trade Agreement (FTA) that has added 301 items to the list of articles enjoying duty-free access to the gigantic Chinese market. “It can translate into $6bn worth of additional export from Pakistan to China if the potential of the facility is properly leveraged,” Mr Li elaborated.

To a question regarding little interest among private Chinese companies in relocating their operations in Pakistan, the consul general was not apologetic. He attributed it to a lack of suitable business environment that had de-motivated even local investors.

We can’t order private investment. Yes, we are encouraging companies. We know well that it will not be persuasion but the profit expectation and risk coverage that will mobilise them. We are engaging with the relevant quarters in Pakistan to work out an incentives package for Chinese investors in special economic zones (SEZs).”

About $1bn is expected to land in Pakistan over the next 11 months as part of the second phase of CPEC

Elaborating on multiple factors that influence the decision of Chinese companies about the destination of their overseas investment, he mentioned the low quality of workforce in Pakistan. “Finding workers with required skills was identified as a big challenge by prospective Chinese investors. We intend to initiate more skill training programmes for workers in Pakistan to ensure the availability of employable youth for Chinese companies setting up shop here. Currently, we are setting up one such facility at Gwadar.”

Commenting on the current slump in Chinese funding, the consul general mentioned multiple challenges that his home country is facing. “Taking care of I.4bn- strong population is not a mean challenge in itself, especially when the GDP growth rate has moderated to 6.1 per cent from over 8pc annual average. The global slowdown and trade frictions with the United States are there. The fear of a virus epidemic in a country of high population density has soaked up the government attention. In this environment, China can’t afford to be too generous. Like others, we also need to justify to our people the resources diverted to other countries.”

He said the next Joint Coordination Committee meeting is still on the agenda. “The tradition of top-level exchange of visits will be maintained this year. Such frequent bilateral visits will further promote and strengthen the existing relations and cooperation.”

Experts involved in CPEC-related affairs agree that sometimes China raises issues, but it would be wrong to interpret those as second thoughts on Pakistan. “The problem is on Pakistan’s side. The PTI leadership took long to absorb the value of Chinese support to the economy that is on a slippery slope. All members of the leading team might still not be fully convinced by the official line to make CPEC fly. This, however, has proven to be insufficient.

The Khan government is still struggling to put in place a workable mechanism acceptable to all federating units for implementing the second phase of CPEC,” a well-connected source in Islamabad commented.

Several attempts to reach retired Lt Gen Asim Saleem Bajwa, chairman of the China-Pakistan Economic Corridor Authority (CPECA), for his input did not succeed.

Zafar Hasan, federal secretary for planning, was upbeat about the future of CPEC. He confirmed that the incentives package for local and Chinese investors in SEZs was in the works in collaboration with Chinese counterparts.

He defended the newly established autonomous authority that he said would be sufficiently empowered and made financially independent to coordinate and streamline dealings with all relevant departments and ministries and lower tiers of the government in CPEC-related projects across Pakistan.

As for the past and present inflow of funds from China, Mr Hasan said working out the exact quantum was a little difficult and involved monetising goods and services associated with CPEC projects. He did not confirm or dismiss the projection of $1bn worth of support in 2020 mentioned by the Chinese consul general.

The intent might be there but the pace of progress is woefully slow. It is almost criminal. The government must immediately remove irritants delaying the arrival of Chinese investment that might ease economic stress through job creation or the strengthening of social protection programmes,” commented a senior officer anonymously.

Published in Dawn, The Business and Finance Weekly, February 10th, 2020

Source: Dawn “CPEC: The ball is in Pakistan’s court”

Note: This is DAWN’s article I post here for readers’ information. It does not mean that I agree or disagree with the article’s views.

Pakistani PM Prioritizes Implementation of CPEC Projects

PM Khan chairs a meeting. Photo: APP

In its report “PM Imran reviews CPEC progress, directs ministries to fast-track projects” on January 29, Pakistan’s geo.tv says that Pakistani Prime Minister Imran Khan told officials at a high-level review meeting to ascertain progress on different CPEC projects that the China Pakistan Economic Corridor (CPEC) should be completed on a fast-track basis.

The report says, “Lauding the time-tested friendship with China, the premier said China had always supported Pakistan during difficult times and the CPEC was a manifestation of the partnership between the two countries” and “‘Chinese experiences in the social sector, especially for the eradication of poverty and promotion of agriculture, must be fully explored,’ the prime minister said, according to the media wing of the PM Office.”

CPEC and the China-Myanmar Economic Corridor are of vital strategic importance in China’s Belt and Road initiative (BRI) as they will provide vital trade routes to China’s west. The BRI railway connections to China’s west through Central Asia and Russia lack volume and are slow and too expensive to accommodate China’s huge volume of trade with Europe, the Middle East and Africa. BRI’s 21st century maritime Silk Road through Pakistan and Myanmar will provide shortcut to bypass the Malacca Strait. The route through CPEC is especially secure due to Iran’s friendship with Russia and China and enmity against the US. Iran may protect China’s trade route there.

Comment by Chan Kai Yee on geo.tv’s report, full text of which can be viewed at https://www.geo.tv/latest/269622-pm-imran-reviews-progress-on-cpec-directs-ministries-to-fast-track-projects.

Second phase of CPEC will allow Pakistan to collaborate with 60 other BRI countries

The solutions are available, but it will depend on Pakistan as a nation to set targets and benefit from the given opportunities

By Mahnoor Izhar On Jan 29, 2020

The second phase of the China Pakistan Economic Corridor (CPEC) has been launched which will open new doors for Pakistan. Pakistan will be able to collaborate with 60 other countries partnered in the Belt and Road Initiative (BRI).

Improved connectivity:

National Agriculture and Food Security in Pakistan’ held a meeting at the Institute of Policy Studies (IPS), where experts said that CPEC would provide the roadmap for further strengthening ties with China and collaborating with 60 other BRI countries.

The Pakistan Agricultural Research Council (PARC) Chairman Dr. Muhammad Azeem Khan attended an event held in collaboration with Pakistan Agriculture Scientists Forum (PAS Forum). He said that we have to focus on developing Pakistan’s agriculture sector, which offers enormous prospects of growth and trade by collaborating with partners at the right time.

Agricultural sectors:

Dr. Azeem Khan provided a clear picture of the agricultural industry and insisted that productivity through international trade and affiliation would secure Pakistan’s food security concerns. He also addressed the productivity of various potential sub-sectors of agriculture.

Dr. Azeem pointed out that Pakistan was a food exporting country till 2013 but now has become a food importing country. He said that CPEC’s second phase offers an excellent opportunity to help the agriculture sector to recover.

The solutions are available, but it will depend on Pakistan as a nation to set targets and benefit from the given opportunities.

Many experts at the event spoke on the issue at Pakistan Agriculture Scientists Forum which included University of Haripur Vice-Chancellor (VC) and Pakistan Council for Science and Technology (PCST) ex-chairman Professor Dr. Anwar-ul-Hasan Gilani, Faisalabad University of Agriculture Professor Dr. Amanullah Malik, IPS Executive President Khalid Rahman, and PAS Forum President Dr. Abdul Wakeel.

Experts also emphasized that combinations of different products being produced alongside the CPEC routes boast significant prospects.

There is considerable potential for the production and export of fodder, edible oils, and palm oil, whereas pulses and oilseeds are some other lucrative areas that can be invested in.

Source: blog.siasat.pk “Second phase of CPEC will allow Pakistan to collaborate with 60 other BRI countries”

Note: This is blog.siasat.pk’s article I post here for readers’ information. It does not mean that I agree or disagree with the article’s views.

Pakistan PM Imran rejects CPEC’s criticism as ‘nonsense’

Anwar Iqbal January 24, 2020

In an interview with CNBC, Prime Minister Imran Khan explained that his government was now creating special economic zones to attract investment. — Screengrab courtesy CNBC

WASHINGTON: Prime Minister Imran Khan has rejected the criticism of the China-Pakistan Economic Corridor (CPEC) as ‘nonsense,” insisting that the project “is really helping” the country.

In an interview to a US news channel CNBC, shown on Wednesday night, Mr Khan also urged US President Donald Trump and the United Nations to mediate between Pakistan and India over Kashmir.

When the Chinese came to help us with this Belt and Road Initiative (BRI) and CPEC, we were really at the rock bottom,” said the prime minister when the interviewer, Hadley Gamble, asked if the project was a debt-trap for Pakistan.

So, we are really grateful to the Chinese that they came and rescued us,” he added.

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They came and pumped in, not just they gave us loans – and the loans, by the way are barely five or six percent of the total portfolio,” said Mr Khan, rejecting the suggestion that the CPEC was a debt-trap. “This is nonsense.”

Terms Kashmir far more serious a problem than people realise

The Chinese, he said, actually helped Pakistan with investment and because of them the country now “has an opportunity to attract foreign investment”.

The prime minister explained that his government was now creating special economic zones to attract investment. “We just opened two and we are opening more where we are giving special concessions to industries,” he said.

Mr Khan said the CPEC was “beyond BRI as China was also helping Pakistan in technology transfer. They are especially helping us in agriculture because Chinese technology (can boost) development (in this sector) much better than Pakistan’s as “our productivity is very low”.

The CPEC, he said, was also teaching Pakistanis the skills they needed to benefit from the CPEC projects. “They are building skill centers in Pakistan. So, they are helping us and we are grateful,” the prime minister said.

Earlier this week, senior US diplomat Alice Wells once again urged Pakistan to rethink its wholeheartedly embrace of China’s economic initiative. Speaking at a think-tank in Islamabad, she alleged that there was no transparency in the CPEC projects, and warned that the country’s debt burden was growing due to the Chinese financing.

Both Chinese and Pakistani officials have rejected the US criticism as misleading but the prime minister’s remarks further cemented the impression that Islamabad remains committed to the CPEC.

The prime minister spoke with CNBC in Davos, Switzerland, where he was attending the annual summit conference of the World Economic Forum.

When the interviewer asked how useful could the US president be in settling the Kashmir dispute, Mr Khan said: “I can’t say what would be the outcome but for me it is important to try my best because Kashmir is a far more serious problem than people realise.”

This is serious because there are two nuclear-armed countries,” the prime minister said. “That’s why I want President Trump, head of the most powerful country in the world — he should intervene right now. United Nations, or President Trump through the UN at least.”

Mr Khan explained that the possibility of an India-Pakistan conflict had increased because “India has been taken over by an extremist ideology, which is called Hindutva or the RSS.”

The prime minister said that the founding fathers of RSS were “inspired by the Nazis” and the Nazi concept of “racial purity” and “believed in ethnic cleansing, of Muslims.”

Mr Khan said that the ideology which was responsible for the assassination of Mahatma Gandhi and the group that was declared a terrorist organisation three times by previous Indian governments had now taken over India.

Responding to another question, he said the people of Kashmir, through a referendum could decide whichever country they wanted to join.

Now, that disputed territory has been annexed by India, and, they are trying to change the demography of (the) people of Kashmir, which according to the fourth Geneva Convention is a war crime,” he added.

The prime minister also expressed concern about ongoing protests in India over a controversial citizenship bill passed last December that many say is set to disproportionately affect Muslims.

Published in Dawn, January 24th, 2020

Source: DAWN “Imran rejects CPEC’s criticism as ‘nonsense’

Note: This is DAWN’s article I post here for readers’ information. It does not mean that I agree or disagree with the article’s views.

Pakistan defends Chinese investment after U.S. official’s criticism

January 23, 2020 / 10:27 PM / Updated 12 hours ago

ISLAMABAD (Reuters) – Pakistan on Thursday rejected criticism of the $60 billion China-Pakistan Economic Corridor (CPEC), after a visiting U.S. official was quoted expressing apprehension over the plan.

While Pakistan has continuously defended Chinese investment, it has also attempted to mend relations with the United States. Prime Minister Imran Khan and U.S. President Donald Trump have held at least three one-on-one meetings over the last six months, the latest on the sidelines of the World Economic Forum in Davos on Tuesday.

U.S. officials have repeatedly criticized CPEC, under which Beijing has pledged about $60 billion for infrastructure in Pakistan, central to China’s wider Belt and Road initiative to develop land and sea trade routes in Asia and beyond.

Washington says the project is not sufficiently transparent and will saddle Pakistan with the burden of expensive Chinese loans. Pakistani newspaper Dawn reported that Alice Wells, U.S. Deputy Assistant Secretary of State for South and Central Asian Affairs, had made similar remarks at a closed-door think tank event in Pakistan on Tuesday.

Asked about the U.S. official’s comments, Pakistan’s foreign office spokeswoman, Aisha Farooqui, said CPEC was a transformational project for Pakistan, and completing it was the government’s highest priority.

To claim that CPEC is always in the form of loans and other forms of financing often non-concessional with sovereign guarantees is not based on facts,” Farooqui said during her weekly briefing.

Before coming to power, Khan had also questioned the transparency of CPEC projects and expressed concern over Pakistan’s rising debt burden. Since winning the 2018 election, he has tended to avoid such remarks, although some ministers in his cabinet have spoken of the need to renegotiate some deals.

The Chinese Embassy in Islamabad, in a statement on Wednesday, said: “The U.S. is obsessed with the story it [has] made for CPEC.”

If the U.S. truly cares about the development and prosperity of Pakistan and this region, it should bring cash and funds, promote win-win cooperation on the basis of mutual respect, fairness and justice, rather than act as a world policeman, spreading rumors and provoking China-Pakistan relations.”

Reporting by Gibran Peshimam; Editing by Peter Graff

Source: Reuters “Pakistan defends Chinese investment after U.S. official’s criticism”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.

East, West and CPEC

Afshan Subohi December 16, 2019

ISLAMABAD claims to be on the same page with Beijing as the China-Pakistan Economic Corridor (CPEC) enters its second phase. It dismisses the perception that the ongoing arrangement with the International Monetary Fund (IMF) is being used by the West to pressure Pakistan into backtracking from sealed deals with the superpower of the East under a grand bilateral partnership framework.

Early last week, a media report hinted at simmering discontent in China over Pakistan’s demands for transparency in CPEC contracts and a quiet campaign to malign Beijing.

It was reported that China’s displeasure with Pakistan has mounted to a level where it has threatened to scrap all contracts and leave the country if the government fails at course correction. The report has not been contested by either side, ie China or Pakistan, to date.

Executives of overseas companies declined to comment on the issue. On the other hand, local business leaders blamed a “lethargic and inexperienced” economic team for the bitterness surrounding CPEC. “Prime Minister Imran Khan is looking forward to the second phase of CPEC to kickstart the growth through Chinese support for the social sector, industry and agriculture. The intent is there but the problem is in translating it to an actionable strategy,” commented a Karachi-based businessman who spends a better part of his week in Islamabad these days.

CPEC watchers in Pakistan have persistently been highlighting the challenges of policy balancing in the post-IMF deal period because of tensions between the United States and China, spilling over into a trade war.

The United States and other Western nations did not hide their discomfort with CPEC. Around $50 billion contracts were announced under CPEC during the previous government. Out of this, projects worth $28bn have matured.

The West may frown to its heart’s content on our deep ties with China, but it is clear that these ties are not up for bargain’

Ignoring economic compulsions, the West detests Pakistan drifting closer to China. The sentiments were shared at multiple forums in their engagements with the government and other stakeholders in the country.

The issue came to the fore when Pakistan was negotiating a bailout package with the IMF. The lenders raised concerns on the possibility of money loaned directed to settle credit liabilities of China under CPEC. They stopped short of making IMF support conditional on scaling down Chinese involvement in Pakistan’s economy.

In July, the IMF’s executive board approved a 39-month Extended Fund Facility for Pakistan for an amount of around $6 billion. There was already some discussion over the transparency of CPEC in the country and the real dividends it would bring to the economy. The position was also taken by some leaders of the PTI government. However, it is hard to say if the objections were primarily politically motivated or the country’s economic interest was at the heart of the opposition.

It did not, however, take the PTI government long time to grasp the value of massive Chinese investment in power and infrastructure projects. It realised the support that China has already garnered in business circles on the strength of completed projects worth $28bn. Besides, political dimensions of ties with China in the wake of a provocative stance taken by India explains why the PTI leadership reacted the way it did to comments by Alice Wells, the principal deputy assistant secretary of state for South and Central Asia at the US Department of State.

In a speech last month, the top US diplomat for South Asia warned that the multibillion-dollar CPEC project would push Pakistan deeper into an already stifling debt burden, foster corruption and repatriate jobs and profits to China.

However, Planning Minister Asad Umar defended not just ties with China but also CPEC, and rejected the notion that the megaproject has increased debt burden of the country in dramatic proportions. He stated that the loan component of the massive investment is barely $4.9bn, which is a tiny portion of the $74bn total public debt that Pakistan owes to global lenders.

Attempts were made to secure comments from leaders of the government’s economic team on the reported threat by China, but they did not wish to come on record. In private, they did accept that China is not happy with the pace of progress on CPEC under the current government, but in their opinion the convergence of interests of two nations is too strong for a major setback on the CPEC front.

The United States and other Western nations may frown to their heart’s content on our deep ties with China, but it is clear that these ties are not up for bargain,” a senior member of the government’s economic team said. “For us, China has proven times and again to be the most dependable ally and we will not trade this relationship of trust for anything.”

Adviser to the Prime Minister for Commerce, Textile and Industry Production Abdul Razak Dawood in his brief emailed comment stated, “China has not given an ultimatum and yes the IMF and CPEC can coexist.”

Retired Lt Gen Asim Saleem Bajwa, recently appointed the head of CPEC Authority, was approached but he was not inclined to share his thoughts on the threat of rollback at this point.

Dr Liaqat Ali Shah, CPEC’s Project Director in the Planning Commission, termed the news item (mentioned earlier in this article) baseless without stating reasons for not contesting it publicly. “There are no second thoughts on CPEC in Islamabad or Beijing. We are on the same page. The negotiations are in progress with China on an incentive package for investors in special economic zones and Gwadar. We are hoping for groundbreaking at multiple locations of special economic zones over the next few weeks and months,” he asserted.

The second phase of CPEC is focused on a business-to-business engagement under a broad umbrella against government-to-government deals that were the hallmark of the first phase of CPEC, except for the Main Line-1 (Karachi-Lahore-Peshawar) Railway Line project. The fact is that China has not ruled out the possibility of deferring the loan repayment schedule beyond 2022 if Pakistan’s fiscal issues persist,” he told Dawn by phone.

Mushahid Hussain, a politician and an active advocate of CPEC, was in China but promised to share his views. His response did not reach Dawn until the filing of this report.

Shazia Syed, CEO of Unilever and the president of the Overseas Chamber of Commerce and Industry, declined comment, stating: “It’s too early to take a position.”

Ehsan Malik, CEO of Pakistan Business Council, an advocacy platform of the big business, said the council “has been advocating an exchange of information (EOI) with not just China but all major trading partners. In the absence of EOI, under-invoicing and misdeclaration are rampant. We understand that China agreed to it earlier. The government should pursue it, notwithstanding any threats on CPEC, which we believe are exaggerated.”

President of the Federation of Pakistan Chambers of Commerce and Industry Daru Khan Achakzai was all supportive of CPEC, but he prayed for the de-politicisation of the project, which in his view benefits Punjab and Khyber Pakhtunkhwa and ignores Sindh and Balochistan. “I don’t think Pakistan can afford to annoy China in this regionally hostile environment,” he said.

He was pinning his hopes on former finance minister Asad Umar, who has recently assumed the charge of planning minister to remove bottlenecks and make CPEC more broad-based, with benefits of the megaproject equitably shared between all provinces.

Published in Dawn, The Business and Finance Weekly, December 16th, 2019

Source: Dawn “East, West and CPEC “East, West and CPEC “

Note: This is Dawn’s article I post here for readers’ information. It does not mean that I agree or disagree with the article’s views.

Iran, Russia, China to Hold Joint Wargames in ‘Message to the World’

Adam Kredo – November 27, 2019 1:25 PM

Iran, China, and Russia will hold in the coming weeks their first-ever joint war drills, which leaders say are meant to send a “message to the world” about increased military cooperation between the rogue countries.

The commander of Iran’s navy, Rear Admiral Hossein Khanzadi, said Wednesday that the Islamic Republic will team up with Moscow and Beijing within the next month to hold the mass war drills.

“When we talk about joint wargames, we are talking about two or more countries with a high level of relations in various political, economic and social fields, which culminate in cooperation in the military sector, with wargames usually being the highest level of such cooperation,” Khanzadi was quoted as saying in remarks to Iran’s state-controlled press.

“A joint wargame between several countries, whether on land, at sea, or in the air, indicates a remarkable expansion of cooperation among them,” the military leader said.

The joint war drills will be aimed at sending a message to the world, particularly Western nations, like the United States, that have sought to constrain Iran’s expanding military ambitions.

“The joint wargame between Iran, Russia, and China, which will hopefully be conducted next month, carries the same message to the world, that these three countries have reached a meaningful strategic point in their relations, with regard to their shared and non-shared interests, and by non-shared I mean the respect we have for one another’s national interests,” Khanzadi was quoted as saying.

The Iranian military leader emphasized the importance of performing military drills in the sea, where the Islamic Republic has been particularly troublesome for Western nations. Iranian naval vessels routinely harass American military ships and have played a role in various sabotage efforts aimed at disrupting international shipping lanes.

“The wargame seeks to deliver this message to the world that any kind of security at sea must include the interests of all concerned countries. We do not condone the kind of security that only caters to the benefits of one specific country at a specific time and which disregards the security of others,” Khanzadi said. “Seas, which are used as a platform for conducting global commerce, cannot be exclusively beneficial to certain powers.

Source: Washington Free Beacon “Iran, Russia, China to Hold Joint Wargames in ‘Message to the World’”

Note: This is Washington Free Beacon’s report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.

This blogger’s note: With China-Pakistan Economic Corridor (CPEC), Gwadar Port, and Iran, China and Russia’s joint protection of sea route in the Middle East, China’s maritime Silk Route through the Indian Ocean is secured.