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Top US diplomat Alice Wells revealed to the long-term effects of China’s “financing practices” and urged Islamabad to assess “the burdens that are falling on the new government”. The current debt included an estimated $15 billion to the Chinese government and $6.7 billion in Chinese commercial debt …. Writes Dr Sakariya Kareem

Alice Wells, the United States Principal Deputy Assistant Secretary for South and Central Asian Affairs (File Photo: State Dept./IANS) by .
Alice Wells, the United States Principal Deputy Assistant Secretary for South and Central Asian Affairs (File Photo: State Dept./IANS)

The US has warned that the China-Pakistan Economic Corridor (CPEC) would only benefit Beijing and inflict heavy debt burden on Islamabad. Addressing a gathering at the Wilson Center, a Washington think-tank, US South Asia Assistant Secretary Alice Wells said the multi-billion-dollar project would take a toll on Pakistan’s economy.

Wells emphasised the CPEC was not an aid to Pakistan but a form of financing that guaranteed profits for Chinese enterprises, with little benefits for Islamabad.

“The CPEC’s most expensive single project is upgrading the railway from Karachi to Peshawar. When the project was initially announced, the cost was set at $8.2 billion,” she said. But in October 2018, Pakistan’s Railways Minister announced that they had negotiated the cost down to $6.2 billion, a saving of $2 billion, she said. “He explained that Pakistan is a poor country and can’t afford this huge burden of loans,” the US diplomat said.

But according to recent media reports the price had risen to $9 billion, she said. “So, why doesn’t the Pakistani public know the price for CPEC’s most expensive project or how it’s being determined?”

The US diplomat pointed to the long-term effects of China’s “financing practices” and urged Islamabad to assess “the burdens that are falling on the new government”. The current debt included an estimated $15 billion to the Chinese government and $6.7 billion in Chinese commercial debt, the diplomat said.

BEIJING, Oct. 9, 2019 (Xinhua) -- Chinese President Xi Jinping meets with Pakistani Prime Minister Imran Khan at the Diaoyutai State Guesthouse in Beijing, capital of China, Oct. 9, 2019. (Xinhua/Liu Weibing/IANS) by .
Chinese President Xi Jinping with Pakistani Prime Minister Imran Khan (File)

Wells asserted that China was providing loans, not grants, as the US.

“It’s clear or needs to be clear that the CPEC is not about aid. This is almost always the form of loans or other forms of financing, often non-concessional with sovereign guarantees or guaranteed profits for Chinese state-owned enterprises that are repatriated to China,” she said.

“Now, together with non-CPEC Chinese debts payments, China is going to take a growing toll on the Pakistan economy, especially when the bulk of payment starts to come due in the four-six years.”

Even if loan payments were deferred, she said, “they are going to hang over Pakistan’s economic development potential, hamstringing Prime Minister (Imran) Khan’s reform agenda.”

Wells also underlined the long-term effects in Pakistan of China’s “financing practices” and urged Islamabad to examine “the burdens that are falling on the new government to manage with now an estimated $15 billion debt to the Chinese government and $6.7 billion in Chinese commercial debt”.

“Now, together with non-CPEC Chinese debts payments, China is going to take a growing toll on the Pakistan economy, especially when the bulk of payment starts to come due in the next four to six years.”

Wells warned that even if loan payments were deferred, “they are going to hang over Pakistan’s economic development potential, hamstringing Prime Minister (Imran) Khan’s reform agenda.”

Directly addressing the alleged lack of transparency in CPEC projects, she said this could increase projects costs and foster corruption, resulting in a heavier debt burden for the country.

In particular, she sought greater transparency on the proposed link between Gwadar Port and China’s Xinjiang since New Delhi clearly saw this as a military project aimed at encircling India.

Ms Wells also challenged the notion that CPEC would create jobs in Pakistan. “CPEC relies primarily on Chinese workers and supplies, even amid rising unemployment in Pakistan,” she said.

Pitching for her country and against China, she said that while CPEC would “only benefit China”, the United States offered a better model and urged Islamabad to introduce economic reforms that would encourage US investors to invest in Pakistan.

Is Imran to heed US Advice?

With the United States issuing it unsolicited warnings and advises, Pakistan has got into the Sino-US cross hair over its growing collaboration with China.

Immediately after Prime Minister Imran Khan brought him back into the government after virtually sacking him over the handling of talks with the IMF, Planning Minister Asad Umar had to hit the ground running to counter the American attack over Pakistan’s excessive dependence upon the CPEC.

Umar is Khan’s new points-person to deal with CPEC as Chinese ministers and officials have complained to Khan of sluggish pace of CPEC’s progress because of inept handling by the Pakistan side.

While this is largely true, Asad is actually having to do fire-fighting as the two giants are engaged in a trade war and on influence in Asia.

The Chinese envoy in Islamabad countered the US allegations by declaring CPEC as ‘clean’, insisting there was “no corruption”

With greater alacrity, Umar also insisted that Pakistan was dealing with China on CPEC “on equal terms.” This is laughable given the huge disparity between the two, but is needed for domestic consumption. CPEC is still feared as being China’s “East India Company” of exploiters.

ISLAMABAD, Jan. 15, 2016 (Xinhua) -- Photo released by Pakistan's Press Information Department (PID) on Jan. 15, 2016 shows Pakistani Prime Minister Nawaz Sharif (R, rear) attends a meeting on China-Pakistan Economic Corridor (CPEC) with political leaders in Islamabad, capital of Pakistan. A consultative meeting of Pakistan's senior political leaders decided on Friday to form a steering committee headed by Prime Minister Nawaz Sharif to oversee the implementation of the China-Pakistan Economic Corridor project. (Xinhua/PID/IANS) by .
Former Pakistani Prime Minister Nawaz Sharif (R, rear) attends a meeting on China-Pakistan Economic Corridor (CPEC) with political leaders in Islamabad, Pakistan (File)

Pakistani officials who deal with CPEC projects complain about the Chinese approach and attitude that they say is unhelpful and also over-bearing. An un-named Punjab Government official told Dawn newspaper recently: “a wide trust gap exists among Chinese firms. “We must remember the fact that Chinese firms are excessively pampered by their government and they expect similar treatment from our side for bringing their capital here.”

Then, Pakistan is torn internally as the all-powerful Punjab province gets most of the CPEC slice. There have been protests in other provinces and even violence in Balochistan. To obviate this, the government mooted what it called the ‘western route” for CPEC envisaging projects for the protesting provinces.

Calling it a myth, Pakistani economist Adnan Amir says Imran Khan raised this issue during his recent  Beijing visit. “This proved that so far, no funding was made available for this so-called western route by China under the CPEC framework.”

Amir blamed the former Nawaz Sharif Government, with its principal political base in Punjab of favouring that province with CPEC projects.

Pakistani analysts say this disparity will continue given the bias in favour of Punjab from where a bulk of the military is recruited.

Pakistan and China desperately need CPEC. For Pakistan, CPEC is the express ticket to building its infrastructure, and sustain economic growth. For China, CPEC is the express link between Western China, the Middle East, and Africa, where China has growing interests. That explains why Beijing has committed $46 billion to the project.

The problem is that CPEC passes through Pakistani regions claimed by India. That makes it a bumpy road, to say the least. That’s why CPEC activities are moving slowly in the region.

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