Editorial

Transparency needed

No one denies the potential of the CPEC to be a game changer for an investment-starved Pakistan

Editorial December 17, 2015

PHOTO: FILE

When there are billions of dollars involved in any project, there are bound to be concerns on how the money would be used, especially in a country like Pakistan where investment is on the lower side. The China-Pakistan Economic Corridor (CPEC) is said to be a $46-billion project, which is more than three times the reserves held by the State Bank of Pakistan. No one denies the potential of the CPEC to be a game changer for an investment-starved Pakistan. The corridor is slated to run along many underdeveloped areas and can provide employment for thousands. But when the governor of the country’s central bank says he is unaware of the debt and equity components of the billions that are to be invested in the CPEC, eyebrows are bound to be raised. Then comes the news of the government giving the go-ahead to CPEC projects at a higher cost than was originally planned, and more scepticism follows.

The Central Development Working Party, which usually does not act in haste in giving a thumbs-up to projects, swiftly cleared three CPEC-related infrastructure projects for the final approval of the Executive Committee of National Economic Council. It is not the clearance, but the cost at which these projects are getting the green light that is causing discomfort. On the one hand, the government is citing low tax revenue and imposing additional taxes to meet the shortfall; on the other hand, it continues to spend a bit too lavishly in other areas. Pressure from investors and contractors could be one reason for this, but the government needs to realise that the CPEC isn’t important just for Pakistan. China is slated to gain sufficiently from the project too, and this is not a favour we are being bestowed with. Why, then, is there a lack of a competitive bidding process, with awards being contracted to companies of just one country? It is time that the government revealed details of the share of debt and equity components of the CPEC. The last thing we need is billions of dollars of supposed investment leading to piles of debt with the returns on projects restricted to a handful. There is a clear need for more transparency here.

Published in The Express Tribune, December 18^th, 2015.

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COMMENTS (5)

curious2 | 8 years ago | Reply Good editorial - I would encourage ET to follow up on CPEC. To my knowledge nobody has ever bothered to write an article listing the numerous projects that have been attached to CPEC nor has anybody ever followed up on Gwadar to discuss how much progress has been made, how much money has been spent, how many jobs have actually been created or what capacity the port is running at.

bimal william | 8 years ago | Reply The main problem of third world countries are illiteracy and corruption.Country like Pakistan where more than half of the population is illiterate hardly have any say in govt decision.So there is no choice before Pakistan govt but to accept whatever China says.It will certainly accelerate the growth of Pakistan but Pakistan has to pay a very big price as so many experts have raised many valid questions over this deal

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Sanjay Sharma | 8 years ago | Reply @Raj - USA: Why should you worry about the CPEC when two 'sovereign' nations have taken a decision to 'uplift' their wealth?

Sher | 8 years ago | Reply @Raj - USA: A good observation from a fella from neighbor and I appreciate such good observation. But my friend, do the people of Pakistan have any other choice??? even this so-called investment is a big blessing. It will atleast start the economic activity at a big scale and eventually people of Pakistan will benefit, it will take some time though.

Raj - USA | 8 years ago | Reply Even Musharraf does not know anything about CPEC agreements. In yesterday's TV show when Mubasher Lucman asked Musharraf's opinion on CPEC, Musharraf said that the interest rate of 8.5% is too high and that it will become a burden on Pakistan and that only the Chinese will make huge profits. Mubasher Lucman then said to Musharraf that the interest rate (guaranteed minimum return to China) is not 8.5% but is actually 18%, Musharraf had no answers. What exactly is CPEC? It is the Instrument of Accession that the elites of Pakistan’s political and Army establishments have signed with China for giving away Gwadar port and huge territory of Pakistan to China. For over two years, no one has come out clearly if it is a loan or investment from China. If it is an investment from China, why Pakistan has guaranteed a minimum return of 18.5% per annum to China for 45 years on the $46 billion that China was supposed to invest. Nijam Sethi correctly said that the minimum guaranteed payments to China will be over 31% per annum as the figures of investments by China will be inflated to cover the kickbacks that China has to pay to the elites of PPP, PML-N and Army establishment. Already some projects have been awarded without any bidding to China at 23% over the planned amounts. The extra burden to date to Pakistan on this portion alone is over $1 billion. It will keep on increasing in the future also. Since army establishment is involved and is a beneficiary to the kickbacks, media does not raise any questions as they have been given clear warnings not to raise any questions. Army is also raising a special force of 32,000 commandos to protect this corridor and Chinese employees who would really be Chinese army personnel under disguise of project staff, that China will be bringing to Pakistan. No details will also be disclosed as the the tariff rates that the users of the corridor will be paying. Nor will there be any guarantee from China assuring that the corridor will generate any minimum revenue. Pakistan will pay 18.5% interest or annual returns to China but what tariff rates will China pay, and what volume of goods traffic has China guaranteed for the CPEC corridor, and such other information is not known to anyone. Even if China does not use CPEC corridor at all, Pakistan is bound to pay 18.5% annual returns to China for 45 years on the investments. Will CPEC be able to compete with the Chabahar port and land route that India and Iran are building. No, Never. Because both the capital and recurring costs for the India and Iran joint venture corridor will be just a hundredth of that of CPEC. The security situation is also much better in Iran than in Pakistan. Good thing that India is building the undersea pipeline that will connect Iran, Oman and India. This pipeline, may in the future connect Tajikistan to India also.

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