Much has been said about CPEC – the 62-billion-dollar economic corridor China is building through Pakistan from   Kashgar in Xinjiang Uygur Autonomous Region to Gwadar on the Arabian coast. Some spoke about it from the strategic perspective, and hailed it as the new energy highway. For some others it is no more than a debt trap for a nation that is bankrupt at all times.  In recent days, CPEC has become a matter of concern from security lens as well.   I have a slightly different take.  In my view, CPEC is a political, financial and security burden for President Xi Jinping, who is working overtime to rewrite the world order with China in the driver’s seat. And his regime’s unadulterated greed has made the venture a self-inflicted wound for the Dragon.

Though neither Pakistan nor China has admitted for the record, both are increasingly concerned over the safety of men and machinery deployed particularly in blood-soaked Baluchistan which accounts for bulk of the CPEC projects, the Gwadar port including.  Both countries blame India for the CPEC troubles saying that Indian agencies are behind the resurgence of Baloch militancy. 

This is a good talking point but it does not hide the increasing perception that the powerful Punjab province will benefit at the cost of much neglected Baluchistan.  It is this anti- Baloch imprimatur that has become the soft underbelly, and exposed CPEC to pincer attacks. The motor mouths in Islamabad and Beijing, instead of searching for an Indian bogey, should have worked to set at rest the doubts and genuine concerns of the locals.  They did not. Not yet at least.

The anger amongst the local populace of their precious resources being exploited for development of another region (Punjab that has been dictating Pakistan narrative to the dismay rest of the country), and another country (China) has given a new lease to the gun culture in the Baloch tribal society, as also extremism and militancy that have taken a leaf from the officially-pump primed Islamist militancy.

DREAM TURNING A NIGHTMARE

Naturally, this groundswell has made China fear about ‘future’ of its dream project, which is also the one and only shining BRI venture of President XI. Foreign Minister Wang Yi articulated the fears in recent days in a clear give away that CPEC soft underbelly is an area of immediate concern for the Dragon diplomacy.

Some officials from China have since clandestinely opened negotiations with the local militant groups to put on track the delayed works.  China talking to Baloch militants? Well, for China, what matters is not the means but the end result. And this is not a new route to Chinese companies either. In the militancy infested North-West Frontier Province (NWFP), which is now called Khyber Pakhtunkhawa, (KP) Chinese companies have gained good experience of working with militants of all hues while laying telecom lines more than a decade ago.

The Pakistani government has been harping on job potential of Chinese projects.  There are few takers for the claim, going by local media reports. The swelling number of jobless in Baluchistan, and Khyber Pakhtunkhawa are aware of the harsh truth that they stand nowhere and that when chips are down it will be advantage for the developed Punjab and Sindh provinces.

“Where do we have the skills CPEC jobs demand? All the skilled jobs will go to the Punjabis or Chinese expatriates, who are arriving in large numbers,” said a youth leader in Quetta. His lament, which is widely shared, is that “We are destined to remain labourers”.  

The mushrooming Chinese enclaves are not helping matters either. So is the constant fear of losing one’s land which is closely linked to identity and ethnicity.  With Imran Khan government and its main prop, the military, not addressing the burning issue of regional imbalance, CPEC projects have become eye sores and therefore targets of attacks, to the dismay of their Chinese masters.

Admittedly, China forced Pakistan to create a special security net for its personnel. Despite spending US$ 140 million, the security umbrella is still a work in progress. More over the unending discord on the force’s jurisdiction and its powers has made security threat real and big. The promised two security divisions of around 20, 000 soldiers and paramilitary personnel are yet to materialise. No surprise, the Chinese representatives, at Ground Zero on CPEC route, are gripped by a fear of the unknown. At every interaction with the local officials, they have only one demand: “when will we get security cover”. And, according to a local media report, the reply is: “Very Soon”. How soon is very soon is the question that has not found the answer yet.

CPEC- MOST EXPENSIVE

There is another flip-side to CPEC. Various studies show that it is the most expensive infrastructure project. Even the maverick Trump administration veered round the view that Chinese are allowed under CPEC to pursue a development model that brought economic success only to them.  

Naturally, this conclusion brings upfront questions about the long-term effects of Chinese financing practices in Pakistan. And about costs to Pakistan that appear unsustainable.  Because, China has not implemented the G-20 Infrastructure Standards or Paris Club practices on transparency in lending practices.  Major payment deadlines begin to emerge in the next four to six years. These are in addition to the non-CPEC Chinese debt payments, which are due.  

The CPEC related outflows will peak at about $3.5 billion to $4.5 billion per annum by 2024-25, the International Monetary Fund (IMF) estimates. Pakistan owes to China about 24% of its total $85.8 billion external debt and liabilities.

Way back in 2017, the IMF slammed China for its credit fuelled economic strategy and said that China’s credit growth is on a dangerous trajectory with increasing risks of disruptive adjustment. The US law makers concern that Pakistan could divert IMF bailout package to repay the Chinese debt accumulated under CPEC. They pointed out that loan terms, debt repayment and profit repatriation terms are not transparent when it comes to the Chinese. Also, China could use its predatory loans to further its geostrategic goals and attempts to hold countries hostage over a debt-ridden economy.

Clearly, for Pakistan, the noose of a financial burden is getting tighter with every passing day, as China has not yet cleared funding for three major highway projects (210 km Dera Ismail Khan – Zhob road, 110 km Khuzdar – Basima Road and 136 km Raikot to Thakot portion of Karakoram Highway). Estimated at Pakistan Rupees 110 billion, these roads are to come up on the western segment under CPEC. Delay means cost escalation but the Chinese government is unmoved for the past three years citing charges of blatant corruption. In December 2017, China had assured Pakistan that new guidelines for financing would be issued. Till date, nothing has been done by China to address the financial concerns of its iron friend.  The question is why

A new irritant on CPEC front is the $6.8 billion railway line project from Peshawar to Karachi. It is to be a major milestone for the second phase of CPEC. But China has shown increasing reluctance over lending for the project.  For two reasons. One Pakistan has already sought debt relief from the G-20 countries like any other poorest country; two, Pakistan is not in a position to give sovereign guarantees, says Nikkei Asia, and adds that China has even sought additional guarantees before sanctioning the loan in view of Islamabad’s weakening financial position.  More over instead of cheapest lending, it has proposed a mix of commercial and concessional loans to fund the rail project.

This shows that Chinese are turning away from big ticket investments in Pakistan at least in the short run prompted as much by local politics and security concerns as by the delay in returns on investment.  Only 32 out of the 122 projects under CPEC have been completed till the third quarter of the fiscal year, a report in Hong Kong based Asia Times said recently.

China’s primary interest in CPEC is energy nirvana.  It is also eyeing the natural resources available along the corridor. With threats from militant groups and consequent questions over the safety of its nationals, China is wary about the road ahead.

Unlike conventional projects, the CPEC is not a single project; it involves a multitude of initiatives comprising railway and road infrastructure, power plants, special economic zones, a sea port and small townships. Initially the costs were pegged at $62 billion. The bill has since zoomed.

With a constant cost-benefit analysis, the modern Shylock has gone ahead with implementing some ventures, notwithstanding worries about Gwadar seaport and strategic road and railway lines passing through restive Baluchistan and Khyber Pakhtunkhwa. Voices of protest and resistance have started emanating from the Sindh, the richest province.  

IMRAN KHAN’s CPEC  BLUES

Thousands of labourers had hit the Karachi streets last November bitterly complaining against Chinese practices. “We, Pakistanis are paid less as compared to our Chinese counterparts”, a trade union leader thundered. Wage discrimination in Chinese ventures is not new.  It is a uniform policy. ‘Chinese staff engaged in the Lahore Metro Train project are getting huge salaries in comparison to Pakistani employees’, English daily, Dawn reported.

For the beleaguered Prime Minister of Pakistan, Imran Khan – the Opposition has ganged up demanding his scalp, CPEC blues have become a headache. He had held lengthy discussions with the Chinese President.  China is keen to keep under wraps the terms and conditions of its funding but the cash strapped Pakistan, under IMF pressure, shared CPEC funding details.  It did so firstly to meet IMF conditions for a $6 billion bailout. Secondly, it wanted to impress the Americans whose support Pakistan needs to bow out of the grey list of global watch dog against money laundering and terror financing. And annoyed Beijing in the process.

Not unrelated is the latest “discovery” by a high-level Pakistani government panel that cooperation with China in the power sector has become a one-way street. Chinese companies are constructing 27 power plants with a total installed capacity of 12,000 MW. Many of them had gold plated their costs.   

The government -to- government deals signed under CPEC in the power sector had unduly favoured Chinese investors. None of these projects were offered for bidding as they were directly funded by China. For one power project, the installation cost claimed was 234% more than a similar project in a nearby South Asian country, the probe panel said.  

Other findings are no less damaging the Sino-Pak ties. Many Chinese Power companies have received undue subsidies. Their corrupt practices worth about Rs. 100bn ($625 million) contributed largely to the mounting losses in the power sector. The recent nationwide blackout is attributed to China’s illegal profiteering in the power sector.

China was, is and may remain an all-weather friend but should Pakistan continue to put up with its excesses and bullying tactics while bending backwards for IMF bailouts from one economic crisis after the other.  Whatever be its political and strategic considerations, Pakistan cannot allow its financial sustainability undermined, more so when it is on the verge of bankruptcy with the situation aggravated by the COVID-19 pandemic. Pakistan must come to grips with this reality to avoid the tag of failed state.   

—-by Valentin Popescu
The writer is a London based commentator with interest in South Asia