China Pakistan Economic Corridor emerges as a major debt generator for Pakistan

0
430
Pakistani economy sinking
A Pakistani Naval personnel stands guard beside a ship carrying containers during the opening of a trade project in Gwadar port, some 700 kms west of Karachi on November 13, 2016. - Pakistan's Prime Minister Nawaz Sharif on November 13 opened a trade route linking the southwestern post of Gwadar to the Chinese city of Kashgar as part of a joint multi-billion-dollar project to jumpstart economic growth in the South Asian country. (Photo: Aamir Qureshi/ AFP)

While almost all of Plato’s erudite observations have withstood the test of time, “iron clad brothers”– opulent China and impoverished Islamabad, appear to disprove the ancient Greek philosopher’s view that “true friendship can exist only between equals”.

In March this year, when debt-ridden Pakistan was staring at a possible default in the face, Saudi Arabia, with whom Islamabad boasts of enjoying long standing fraternal ties rooted in common religion, shared values and culture, refused to extend an interest free loan. However, Beijing promptly came to Islamabad’s rescue and not only rolled over a $2 b loan but also agreed to lend it another $700m to facilitate a cash bailout from the International Monetary Fund [IMF].

However, AidData, a renowned US based research institute has in its detailed report covering the period from 2000 to 2021 revealed that while only two percent of the loans provided by Beijing to Pakistan came in the form of grants and  the balance 98 percent funding was on “less than generous loans.” [Emphasis added]. And Islamabad’s inexplicable refusal to disclose the interest rates being charged by Beijing on these loans adds further credibility to the AidData finding.

So, while Pakistan may cite this extraordinarily liberal loan regime as proof of its “higher than the mountains and deeper than the sea” friendship with Beijing, the lack of transparency in financial agreement clearly indicates that there’s obviously much more than what meets the eye. So, the natural question that arises is- what explains the extraordinary benevolence that Beijing is showering on Islamabad?

While former Pakistani Prime Minister Shehbaz Sharif has eulogised Sino-Pak friendship as “a sacred tale of abiding trust and love,” Chinese President Xi Jinping maintains that Beijing’s mission is to “pursue the cooperation of higher standards, broader scope and greater depth, and take the China-Pakistan all-weather strategic cooperative partnership to new heights.” Such grandiloquent explanation of Sino-Pak relationship is indeed impressive.

However, these proclamations fail to conceal the fact that Beijing doesn’t consider Islamabad as an equal. While every country endeavours to have an array of allies and makes adjustments in order to preserve cordial relationships, yet no nation lets such diplomatic manoeuvres overshadow its own national interests. That is why Pakistan’s caretaker Prime Minister Anwar-ul-Haq Kakar reportedly telling Xi that “We will always stand with China and trust you blindly,” [Emphasis added] is very significant as it clearly exposes the reality of Islamabad’s pathetic servitude.

Just four months ago, Pakistan’s ambassador to China, Moin ul Haque reiterated that the China Pakistan Economic Corridor [CPEC] project was a “game changer” that had brought “peace, prosperity and development opportunities not only to Pakistan but also to the entire region,” adding that it is an “excellent example of an open, coordinated, and inclusive development paradigm that benefits all parts of the country and all segments of society.”

Unfortunately, Haque’s claims aren’t supported by ground realities.

Within a year of the CPEC agreement being signed, the World Bank in its Global Economic Prospects 2016 report had cautioned that “Sovereign guarantees associated with CPEC could pose substantial fiscal risks over the medium term.” [Emphasis added]. However, both Beijing and Islamabad rubbished this warning as a result of this, rather than proving to be a “game changer”, CPEC has today turned into a ‘debt generator’ for Pakistan.

A classic example of how Beijing has exploited Pakistan’s ‘blind trust’ to further its own commercial interests at Pakistan’s cost is the development of Gwadar port. Islamabad continues to claim that this project will usher unprecedented economic growth and has even been projecting Gwadar as the future Dubai of Pakistan. However, the fact is that it’s actually Beijing that benefits from the development of Gwadar port as this facility provides a much shorter export/import route as well as an access to the Arabian Sea.

Conversely, Gwadar port project has created a lot of ill will amongst locals. Security check posts have mushroomed overnight and commuters are being subjected to frequent security checks, illegal fishing by Chinese fishermen using sophisticated fishing equipment has deprived local fishermen of their traditional livelihood while curbs on Iran-Pak border trade have adversely impacted local trade. The degree of public alienation can be gauged from the “Gwadar ko haq do” [Give Gwadar its rights] movement that saw tens of thousands of men, women and even young children participating in a more than a month-long protest.

In his well researched article [‘Pakistan’s debt from China becomes burden as CPEC does not generate enough growth’, carried by Committee for the Abolition of Illegitimate Debt [CADTM], Abdul Khaliq notes that “The government of Pakistan and ruling elite view CPEC as a game changer for the country and region; however, experts and local economists have different insights. They view CPEC as having much less to offer Pakistan in terms of trade. The Chinese approach of not partnering with local companies is not going to help create new job opportunities for millions of Pakistani youth. [Emphasis added].

Khaliq goes on to state that “Since Chinese companies are tax-exempt, they bring everything from China, including labour, and hence they will have no reliance on Pakistani businesses to fulfil their demands. This has shattered the dreams of many local companies that planned to expand their production facilities in anticipation of receiving orders from these Chinese companies. The Chinese companies play smart and get excellent returns on their investments. Many experts see it as a threat for local businesses and fear that it won’t be a win-win situation for Pakistan. [Emphasis added].

Islamabad’s ‘blind trust’ in Beijing is most certainly not a matter of choice but an inescapable compulsion for Pakistan as it needs a regular supply of financial aid to stay afloat but has no means to repay its burgeoning debt. Only China is willing to bail out Islamabad on an ongoing basis by rolling over existing loans as well as advancing new ones and is expectedly extracting its pound of flesh for putting its money into a financial ‘sinkhole’ by demanding that Islamabad  should blindly trust  Beijing in deciding what’s good for Pakistan.

The “all weather friendship” charade cannot hide the ugly truth of Pakistan’s financial exploitation by China and this proves that Plato’s view that true friendship can only exist amongst equals isn’t wrong after all!

Leave a Reply