Asad debunks myth of CPEC ‘debt trap’

Published: November 23, 2019
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KARACHI: Pakistan jumped into the fray a day after a rare public slugfest between top Chinese and American diplomats over the multibillion-dollar China-Pakistan Economic Corridor (CPEC). A key cabinet minister brushed aside US concerns as “wrong analysis” and called CPEC a “blessing” for Pakistan.

“The CPEC projects are not a burden on Pakistan’s economy. Instead, they have provided a strong basis for industrial growth in the times to come,” Planning Minister Asad Umar told a news conference in Karachi on Saturday.

“There is no controversy on the CPEC projects. All provinces are on board and foresee a positive impact of these projects on the economy in the long-run,” he added.

Umar’s presser came a day after Chinese Ambassador in Islamabad Yao Jing spurned the criticism of CPEC by US Acting Secretary for South Asia Alice Wells who said Pakistan faced long-term economic damage with little return if China keeps pursuing its giant infrastructure push.

Speaking at Woodrow Wilson International Center for Scholars, Wells said private US investment, coupled with US grants, would improve the fundamentals of Pakistan’s troubled economy. “There is a different model,” she said. “Worldwide we see that US companies bring more than just capital; they bring values, processes and expertise that build the capacities of local economies.”

Umar said Pakistan wanted to work with all the nations. “The unity between Pakistan and China is against no nations [including the US],” he said. “We welcome US investment offer in Pakistan,” Umar added. “US investors were, are, and would be welcome to invest in Pakistan. They have already been investing in Pakistan and earn handsome profits.”

However, he made it clear that Pakistan’s friendly relations with China remained “higher than the Himalayas and deeper than the Arabian Sea” which would “continue to grow”.

Ambassador Yao, in his scathing rejoinder to Wells, said China has always come forward to assist Pakistan in need without any political or government differences. At the same time, he questioned why the US had suspended its promised aid to Pakistan only because of political priorities.

Asad endorsed Ambassador Yao’s statement that China has always stood by Pakistan in times of need. “China has helped us at times when no one else was with us,” he said. “The friendly relationship would be strengthened further. The [relationship with China] would never be rolled back.”

The Chinese envoy also sought to enlist Pakistani media’s help in nullifying the effects of propaganda against CPEC.  Umar agreed that anti-Pakistan elements had run a wide but foiled campaign against the CPEC projects. “I don’t know,” he said when asked if the United States was part of the campaign.

The United States has gone on the offensive against China’s Belt and Road Initiative, a signature project of President Xi Jinping which aims to build ports, highways and railways around the world. The multibillion-dollar CPEC is a part of President Xi’s BRI vision.

“The IMF [International Monetary Fund] has agreed CPEC … is not against Pakistan. Nothing is left hidden on the CPEC projects,” the planning minister said.

According to him, CPEC projects would have a positive impact on the region. “We await a government in India which would let peace prevail in the region. A couple of days ago, US President Donald Trump acknowledged Pakistan’s facilitation in the release of Western prisoners from Taliban captivity,” he said.

He said Prime Minster Imran Khan was running a successful foreign policy of friendly relationship with all the nations even though some of countries do not like each other. “We want peace in Afghanistan and a healthy relationship with Saudi Arabia, Iran, Qatar, the UAE, Turkey, and everyone,” he added.

Similarly, the premier welcomed investment from across the world, including China, the US, Europe, the Middle East, Far East and other parts of the world, he said.

Umar said Alice Wells has made a “wrong analysis”, that the loans extended under CPEC were of short-term maturity and that they were expensive loans. “CPEC projects have added only $4.9 billion in foreign loans to Pakistan’s total debt pie of $74 billion. “This [CPEC debt] is less than 7% of the total debt,” he said.

He added that the loans were extended for a long-term period of up to 20 years at a nominal interest rate of 2.34%. “The interest rate falls to less than 2% in case we include the interest rate on Chinese grants,” he clarified.

He, however, agreed that the size of the total foreign public debt at $74 billion was not little, considering sluggish exports at around $22-23 billion. The total Chinese loans stand at $18 billion, including $4.9 billion under CPEC and those borrowed from commercial banks to manage Pakistan’s foreign currency reserves at the minimum level and to make international payments in the past.

The Chinese loans would drop at a fast pace over the next three years. “Out of every $3 to be paid in foreign debt repayment and servicing over the next three years, $1 would be paid to China. Later on, the ratio would drop to $1 to China out of each $5 to be paid back to the lenders,” he said.

Umar said the first phase of CPEC projects of infrastructure development – roads and power houses – has been completed. This would provide strong support for phase-II projects which are about industrialisation.

Pakistan is all set to initiate work on first special economic zone in Khyber Pakhtunkhwa over the next one to two months. Out of total nine special economic zones to be established under CPEC all over the country, three would be done on fast track for pacing up industrialisation in Pakistan. Besides, the CPEC Phase-II projects would also be run in agriculture, education and health sectors, he said.

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