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Campaign of Fear, Uncertainty and Doubt (FUD) About CPEC

An unrelenting campaign of fear, uncertainty and doubt (FUD) about China-Pakistan Economic Corridor (CPEC) has been unleashed in the media in recent weeks. This strategy harkens back to the aggressive marketing techniques used by the American computer giant IBM in the 1970s to fight competition. As in IBM's case, the greatest fear of the perpetrators of FUD is that CPEC will succeed and lift Pakistan up along with rising China.

Fear, Uncertainty and Doubt (FUD):

A definition of FUD that captures its essence is offered by Roger Irwin as follows: "Unable to respond with hard facts, scare-mongering is used via 'gossip channels' to cast a shadow of doubt over the competitors offerings and make people think twice before using it".

A number of articles in western and Indian media have attempted to use FUD against China-Pakistan Economic Corridor. Some Pakistani journalists and commentators, some unwittingly, have also joined in the campaign.   As expected, these detractors ignore volumes of data and evidence that clearly contradict their claims.

Part of the motivation of those engaged in FUD against CPEC appears to be to check China's rise and Pakistan's rise with its friend and neighbor to the north. Their aim is to preserve and protect the current world order created by the Western Powers led by the United States at the end of the second world war.

Growing Infrastructure Gap:

Development of physical infrastructure, including electricity and gas infrastructure, is essential for economic and social development of a country such as Pakistan. China-Pakistan Economic Corridor financing needs to be seen in the context of the large and growing infrastructure gap in Asia that threatens social and economic progress.

 Rich countries generally raise funds for infrastructure projects by selling bonds while most developing countries rely on loans from international financial institutions such as the World Bank and the Asian Development Bank to finance infrastructure projects.

The infrastructure financing needs of the developing countries far exceed the capacity of the World Bank and the regional development banks such as ADB to fund such projects. A recent report by the Asian Development Bank warned that there is currently $1.7 trillion infrastructure gap that threatens growth in Asia. The 45 countries surveyed in the ADB report, which covers 2016-2030, are forecast to need investment of $26 trillion over 15 years to maintain growth, cut poverty and deal with climate change.

Chinese CPEC Loans to Pakistan:

About 80% of the $55 billion of the Chinese money for CPEC is private investment while the rest is composed of soft loans to the government, according to Shanghai Business Review.

The Chinese soft loans for CPEC infrastructure projects carry an interest rate of just 1.6%, far lower than similar loans offered by the World Bank at rates of 3.8% or higher.

Chinese companies investing in Pakistan are getting loans from China's ExIm Bank at concessional rates and from China Development Bank at commercial rates. These loans will be repaid by the Chinese companies from their income from these investments, not by Pakistani taxpayers.

Rising Confidence in Pakistan:

Pakistani economy is already beginning to reap the benefits of the current and expected investments as seen in the 5.2% GDP growth in the current fiscal year, the highest in 9 years.

The World Bank's Pakistan Development Update of May 2017 says that "Pakistan’s economy continues to grow strongly, emerging as one of the top performers in South Asia".

Rapidly expanding middle class and rising demand for consumer durables like vehicles and home appliances attest to the positive impact of CPEC. Consumer confidence in Pakistan has reached its highest level since 2008, according to Nielsen.

US-based consulting firm Deloitte and Touche estimates that China-Pakistan Economic Corridor (CPEC) projects will create some 700,000 direct jobs during the period 2015–2030 and raise its GDP growth rate to 7.5%,  adding 2.5 percentage points to the country's current GDP growth rate of 5%.

US News Ranks Pakistan Among World's 20 Most Powerful Nations

Countering FUD:

Pakistani government should respond to the FUD campaign against CPEC by countering it with facts and data and increasing transparency in how CPEC projects are being financed, contracted and managed. It is particularly important in a low-trust society like Pakistan's where people can be easily persuaded to believe the worst about their leaders and institutions. 

Summary:

An unrelenting campaign of fear, uncertainty and doubt (FUD) about China-Pakistan Economic Corridor (CPEC) has been unleashed in the media in recent weeks. This strategy harkens back to the aggressive marketing techniques used by the American computer giant IBM in the 1970s to fight competition. Part of the motivation of those engaged in FUD against CPEC appears to be to check China's rise and Pakistan's rise with its friend and neighbor to the north. As in IBM's case, the greatest fear of the perpetrators of FUD is that CPEC will succeed and lift Pakistan up along with rising China.  Their aim is to preserve and protect the current world order created by the Western Powers led by the United States at the end of the second world war.   Pakistani government should respond to the FUD campaign against CPEC by countering it with facts and data and increasing transparency in how CPEC projects are being financed, contracted and managed. 

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Comment by Riaz Haq on June 12, 2017 at 9:00pm

Financing burden of CPEC
Ishrat Husain

https://www.dawn.com/news/1313992

The total committed amount under CPEC of $50 billion is divided into two broad categories: $35bn is allocated for energy projects while $15bn is for infrastructure, Gwadar development, industrial zones and mass transit schemes. The entire portfolio is to be completed by 2030. 

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The entire energy portfolio will be executed in the IPP mode —as applied to all private power producers in the country. Foreign investors’ financing comes under foreign direct investment; they are guaranteed a 17pc rate of return in dollar terms on their equity (only the equity portion, and not the entire project cost). The loans would be taken by Chinese companies, mainly from the China Development Bank and China Exim Bank, against their own balance sheets. They would service the debt from their own earnings without any obligation on the part of the Pakistani government.

Import of equipment and services from China for the projects would be shown under the current account, while the corresponding financing item would be FDI brought in by the Chinese under the capital and finance account. Therefore, where the balance of payments is concerned, there will not be any future liabilities for Pakistan.

To the extent that local material and services are used, a portion of free foreign exchange from the FDI inflows would become available. (Project sponsors would get the equivalent in rupees). For example, a highly conservative estimate is that only one-fourth of the total project cost would be spent locally and the country would benefit from an inflow of $9bn over an eight-year period, augmenting the aggregate FDI by more than $1bn annually. This amount can be used to either finance the current account deficit or reduce external borrowing requirements. Inflows for infrastructure projects for local spending would be another $4bn over 15 years.

Taking a highly generous capital structure of 60:40 debt-to-equity ratio for energy projects, the total equity investment would be $14bn. Further, assuming the extreme case that the entire equity would be financed by Chinese companies (although this is not true in the case of Hubco and Engro projects, where equity and loans are being shared by both Pakistani and Chinese partner companies) the 17pc guaranteed return on these projects would entail annual payments of $2.4bn from the current account.

CPEC’s second component, ie infrastructure, is to be financed through government-to-government loans amounting to $15bn. As announced, these loans would be concessional with 2pc interest to be repaid over a 20- to 25-year period. This amount’s debt servicing would be the Pakistan government’s obligation. Debt-servicing payments would rise by $910 million annually on account of CPEC loans (assuming a 20-year tenor). Going by these calculations, we can surmise that the additional burden on the external account should not exceed $3.5bn annually on a staggered basis depending on the project completion schedule.

As a proportion of our total foreign exchange earnings of 2016, this amounts to 7pc. These calculations do not take into account the incremental gains from GDP growth that will rise because of investment in energy and infrastructure. As the loan amounts would be disbursed in the next 15 years and repayments would be staggered, the adding of the entire $15bn to the existing stock of external debt and liabilities is not an accurate representation. The more realistic approach would be a tapered schedule, with $2bn to $3bn getting disbursed in the earlier years and slowing down in the second half.

Comment by Riaz Haq on June 14, 2017 at 4:51pm

In Pakistan, China presses built-in advantage for 'Silk Road' contracts

https://www.reuters.com/article/us-china-silkroad-pakistan-insight-...

By Drazen Jorgic | ISLAMABAD
Last year, Pakistan held informal talks with General Electric, Siemens and Switzerland's ABB to build the country's first high-voltage transmission line. Chinese power giant State Grid committed to building the $1.7 billion project in half the time of its European counterparts – and clinched the deal.

This is a familiar tale in Pakistan and many other countries.


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As China makes its "Belt and Road" initiative – a massive project to connect Asia with Africa and Europe through land and maritime routes – a policy priority for the next decade, Chinese companies are taking the lion's share of infrastructure projects across the region.

Just last year, Chinese firms won project contracts in Belt and Road countries worth $126 billion, state media reported.

In Pakistan, whose geographical position makes it central to Beijing's "Silk Road" plans, contracts have been awarded for projects worth more than $28 billion – all by Chinese companies working together with local firms. More than $20 billion in new investment is likely in the next few years, Pakistan's Planning Minister Ahsan Iqbal told Reuters this week.

Last month, Pakistan's government took out full-page newspaper advertisements on the first China-Pakistan project completed under the plan, a 1,300 mw coal plant that it said was constructed in 22 months, a record time for such a facility. The plant is owned by China's state-owned Huaneng Shandong and the Shandong Ruyi Science & Technology Group.

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But two officials at two Chinese state-owned banks that direct government funding, China Development Bank (CDB) and Export-Import Bank of China (EXIM), told Reuters that they have been instructed by the government to favor lending to Chinese firms for Silk Road projects.

The officials also said that the two banks prefer that companies working on infrastructure projects across the region import raw materials or purchase equipment from China.

There is some criticism in Pakistan that the awarding of the contracts to Chinese companies – while speeding up projects – is also costing the country more money.

In the transmission line project deal, for example, General Electric estimated it could make one key part of the line – the converter stations – for about 25 percent less than what State Grid was charging, according to a Pakistani government official and two power sources familiar with GE's projections. By awarding the contract to State Grid, Islamabad paid a higher price, they said.

An official at Nepra, Pakistan's independent energy regulator, said State Grid was also given a tax break not on offer to other investors.

Pakistani government officials declined to comment on tax issues regarding the deal.

China Electric Power Technologies Company Limited (CET), the State Grid subsidiary that will build the line, said the price it asked for was fair. "It's a very reasonable cost," said Fiaz Ahmad Chaudhry, managing director of Pakistan's National Transmission & Despatch Company (NTDC) referring to the overall State Grid contract.

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POWER LINES

The transmission line project was conceived as a government-to-government contract to build a 878-km (545-mile) connection between soon-to-built power plants near the coastal town of Matiari and Pakistan's industrial heartland by the eastern city of Lahore.

According to Pakistani officials, no formal competitive bidding was sought for the project, which was finally awarded in December last year.

Comment by Riaz Haq on June 15, 2017 at 4:39pm

By some measures, the MDBs today are not only existing
but thriving, with demand for their financing and services
growing. But this picture belies a critical need for reinvention
if they are to rise to meet today’s pressing challenges effectively.
In particular, the legacy MDBs—the World Bank, the InterAmerican
Development Bank (IADB), Asian Development
Bank (AsDB), African Development Bank (AfDB), and European
Bank for Reconstruction and Development (EBRD)—
have been slow to adjust to many of today’s realities, starting
with the increasing economic role and growing capability of
their borrowers. For example, their major shareholders have
agreed to only minimal adjustments in corporate governance
systems and leadership selection, creating tensions with major
borrowers who want more voice and influence over their policies
and operations. With age, MDBs have become bogged
down in bureaucracy, increasing delays and raising costs to
borrowers, particularly for major infrastructure projects. Perhaps
in frustration, China and other major borrowers have
taken leadership in creating two new MDBs focused heavily
on infrastructure: the Asian Infrastructure Investment Bank
(AIIB) and the New Development Bank (NDB).

Beyond business-as-usual on
concessional financing. Shareholders should commit to
maintain current levels of concessional support across all
MDBs, implying at least $25 billion in concessional lending
annually over the next decade (and possibly more given
the possible additional amounts the AIIB might provide on
concessional terms). As a growing number of countries graduate
from concessional assistance to non-concessional borrowing
and other forms of engagement with MDBs, this baseline
commitment should allow for increased support in the remaining
poor countries, and for allocation of concessional funding
to countries in crisis and to post-conflict reconstruction,
especially at the World Bank (see Recommendation 4). In
addition, given the expected concentration of poor countries
in Sub-Saharan Africa, there should be a shift in concessional \

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Why the slowness to adapt? One reason is that age and
bureaucratic growth have taken their toll, particularly at the
World Bank, where political pressures and the close scrutiny
of NGOs have affected its operations by making traditional
donors very—and perhaps excessively—risk averse to stories
of corruption, waste, human rights abuses, and environmental
injustices.10,11 In response to these pressures, the legacy MDBs
have gradually become burdened with a proliferation of rules
and processes that are meant to eliminate corruption and
safeguard legitimate aims such as environmental and social
protection, but that often fail to do so effectively or to serve
the institutions’ broader development mission. The result is
widespread borrower frustration with the hassle factor that
increases the costs and delays of major infrastructure projects.
Another reason is that adjustments in the legacy MDBs’
governance have been modest, with the largely western donor
“creditors” dominating the official governance arrangements.
Slow adjustments in governance, especially at the World
Bank, have frustrated the political ambitions of emerging
markets to assume greater leadership at the global level—
through increased capital participation, voting power, and
influence on these and other operational issues that affect
them as borrowers.
The initiative of China and other emerging markets to set
up their own institutions—the AIIB and the NDB—reflects
these two factors. 

https://www.cgdev.org/sites/default/files/multilateral-development-...

Comment by Riaz Haq on June 19, 2017 at 9:49am

China Pushes U.S. Aside in Pakistan

China is staking a claim to supplanting the U.S. as a Pakistan’s most influential ally with tens of billions of dollars of investment, an embrace that promises Pakistan economic benefits and saddles it with debt—ensuring the relationship will last.

http://www.cetusnews.com/views/BklEbNyNXb?cat=news&title=China-...

By

Saeed Shah

ISLAMABAD—Pakistan’s ruling power structure has long been summed up with the saying “Allah, Army and America.”

China is now staking a claim to supplanting the U.S. with tens of billions of dollars of investment, an embrace that promises Pakistan economic benefits and saddles it with debt—ensuring the relationship will last.

Chinese President Xi Jinping has made Pakistan his flagship partner in a program to spread Chinese-built infrastructure—and Beijing’s sway—across Asia and beyond. Pakistan has so far signed on to $55 billion in Chinese projects, many of them guaranteeing China a high return on its investments and granting tax breaks to Chinese companies.

Former President Barack Obama’s “Asia pivot” is giving way to Mr. Xi’s infrastructure juggernaut, in a model that could be replicated across the region.

“China came in when no one else was willing to invest,” said Commerce Minister Khurram Dastagir. The U.S. missed its chance, he said.

Beijing calls its program “One Belt One Road,” referring to the ancient sea and land Silk Road trade routes that China seeks to revive. Pakistan Prime Minister Nawaz Sharif inaugurated the program’s first big completed project here in late May, a Chinese-built, coal-fired power plant in his home province of Punjab.

China is building roads, railways, power plants and a port, and has lent Pakistan $2 billion in under two years to shore up its foreign-exchange reserves.

A promised $1 trillion Chinese splurge hasn’t yet materialized for many countries. But in Pakistan, $18 billion in projects are under construction in what is known as the China Pakistan Economic Corridor.

The centerpiece is Pakistan’s Arabian Sea port at Gwadar, under expansion and run by a Chinese company to enable trade in goods from China’s southwest.

Pakistan calculates that the Chinese investments will add 2 percentage points to growth in the next few years by providing infrastructure needed to kick-start industrialization.

President Donald Trump has abandoned what was viewed by the Obama administration as a counterbalance to China, a trade deal with nations in the region called Trans Pacific Partnership. An American official said civilian aid to Pakistan, a longtime ally, remained substantial but “getting our message out is a challenge.”

Chinese workers gather at an open pit mine in Pakistan’s Thar desert in March. Photo: Asim Hafeez/Bloomberg News

“The Chinese are winning the perceptions game, whatever the reality. That then leads to political outcomes, because people see the inevitability of China’s rise and China’s power,” said Ely Ratner of the Council on Foreign Relations, an independent U.S. think tank.

While Washington’s approach in Asia is military-led, Beijing is binding countries to its interests with economics, said Mr. Ratner.

At a Chinese celebration of its belt and road plan in Beijing in May, Matt Pottinger, senior director for East Asia at the National Security Council, welcomed the initiative but called for Beijing to “ensure that privately owned companies can bid in a fair process.”

That means that American businesses should be allowed to compete for contracts, U.S. officials said.

There is little sign of that in Pakistan. Islamabad chooses bidders from an all-Chinese short-list provided by Beijing. Pakistani officials say this is because Chinese companies bring their own financing.

The U.S. has asked to participate in the China-Pakistan Economic Corridor, but nothing has come of it, one of the American officials said.

Much as the U.S. secured the Pakistan alliance with aid to the country’s powerful military, China has made the Pakistani army a beneficiary. Many construction contracts that weren’t given to Chinese firms have been awarded to the military’s engineering arm. The military has raised a special force, now at 15,000 and set to double in size, to protect Chinese projects.

Since 2001, Islamabad has received $33 billion in U.S. military and civilian aid, according to the Congressional Research Service. But U.S. aid hasn’t yielded any high-profile infrastructure projects in Pakistan, and Pakistani officials say that joining America’s war on terror has cost it $123 billion in economic losses and tens of thousands of lives.

Infrastructure development under the China-Pakistan Economic corridor plan links southwest China to Pakistan’s Arabian Sea port at Gwadar, shown here in March.Photo: Liu Tian/Xinhua

“We want to move away from geopolitics, to geoeconomics, from fighting wars for others,” said Ahsan Iqbal, Pakistan’s planning minister, who oversees the Chinese investment. “Our vision is to place Pakistan as the hub of trade and commerce in this region.”

China’s expenditure isn’t aid. With transport projects, Pakistan incurs debt; power plants come with an obligation for Pakistan to purchase the electricity produced.

Tahir Mashhadi, a senator from the opposition Muttahida Qaumi Movement, compared China to the East India Company, the commercial enterprise that colonized India before the British government took over.

“Here’s the danger: the banks are Chinese. The money is Chinese. The expertise is Chinese. The management is Chinese. The profits are for China. The labor is Chinese,” said Mr. Mashhadi.

Nadeem Javaid, chief economist at Pakistan’s planning ministry, said Pakistan would be paying $5 billion a year to China by 2022, but that the debt should be easy to manage as Pakistani exports rise, electricity prices fall, and toll revenues are generated from trade from China to Gwadar.

“The fears,” he said, “are not genuine.”

Comment by Riaz Haq on June 25, 2017 at 9:58am
From Spectator Index:
 
Govt debt as share of GDP
 
Japan: 250%
India: 70%
Pakistan: 66%
Vietnam: 62%
China: 46%
Thailand: 41%
Iran: 35%
Indonesia: 28%
Saudi: 13%
 
Comment by Riaz Haq on June 29, 2017 at 5:12pm

Pakistan’s old economic vulnerabilities persist

Massive Chinese projects actually exacerbate some of them

http://www.economist.com/news/finance-and-economics/21724427-massiv...

On June 16th the IMF warned of re-emerging “vulnerabilities” in Pakistan’s economy. It praised GDP growth of above 5% a year, but noted missed fiscal targets and a ballooning current-account deficit. The fund’s own projections a year ago for the fiscal year ending this June underestimated this deficit by about half the final total of $9bn. And based on trends in early April it overestimated the fiscal-year-end foreign-exchange reserves by $3bn.

Independent economists point out that, many times before, collapse has come on the heels of an IMF programme’s conclusion. Sakib Sherani, a former government economist, says that to avoid “egg on its face” for cheerleading Pakistan’s economic recovery just months ago, the IMF is slowly changing its story. By the end of 2018, many predict, Pakistan will come begging again. The fund responds that it is “too early to speculate”.

Some of Pakistan’s faltering can be blamed on bad luck, such as a fall in remittances from workers in the Middle East. But mostly it was, as usual, bad policy. Like its predecessors, the PML-N has failed to enact the structural reforms needed to break Pakistan free of its cycle of crises. Barely any goals of the IMF’s programme were met. Bloated, underperforming or, in the case of Pakistan Steel Mills, closed-down publicly-owned enterprises drain millions from the government each month. “Circular” debt, caused by delayed payments along the electricity-generation chain, is swamping the energy sector once more.


Annual exports have declined by 20% in dollar terms since 2013, stymied by an overvalued currency. All this means the government is again borrowing hand over fistfrom local and foreign banks. In some cases the design of the IMF programme itself has added to Pakistan’s woes: by pushing for increased tax revenue above all else, it has allowed the government to clobber the poor with indirect taxes, milk the (few) direct taxpayers even further, and, as ever, ignore the wealthy elites.

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To make matters worse, instead of snapping its jaws at Pakistan’s failure to meet targets, the IMF meekly indulged its partner, argues Khurram Husain, a journalist working on a book about the relationship between Pakistan and the IMF. It kept acting “like an ATM machine”, he says, even as Pakistan kicked serious reform into the long grass.

The IMF has long been accused of going soft on Pakistan, mindful of its nuclear weapons, boisterous jihadis and proximity to war-torn Afghanistan. Successive Pakistani governments have exploited the sense that their country is too dangerous to fail. They have taken out 12 IMF loans since 1988. The result, argues Ehtisham Ahmad of the London School of Economics, is that aid money plays the role resource riches do in some other countries, encouraging spendthrift government.

The source of funds is changing even if government recklessness is not. China plans to invest $62bn in Pakistan for a range of projects, particularly power plants, around the 3,000km (1,875-mile) China Pakistan Economic Corridor (CPEC). That could lift Pakistan to more stable prosperity. But paying for the CPEC will not be easy. Unlike loans from the IMF or World Bank, some two-thirds of those taken out so far, for $28bn-worth of early projects, are on commercial terms, with interest high at around 7% a year. When these loans come due, argues Farooq Tirmizi, an emerging-markets analyst, Pakistan will need a bigger bail-out than ever before.

The IMF has concerns about the lack of transparency surrounding Pakistan’s CPEC debts and how it will repay them. Any future fund lending to the country may include conditions that sow discord between the country and its new patron. And with President Donald Trump in charge of America’s foreign policy, there is no guarantee that the old one, America, will prove as generous—in the event of a crisis—as it has in the past.

Comment by Riaz Haq on July 3, 2017 at 7:02am

Here's another example of FUD against CPEC by Christine Fair:

ARGUMENT
Pakistan Can’t Afford China’s ‘Friendship’
Pakistan's elites think Chinese cash can save the country. They're wrong.

http://foreignpolicy.com/2017/07/03/pakistan-cant-afford-chinas-fri...


In recent months, the Chinese-Pakistan Economic Corridor (CPEC) has left Pakistanis emboldened, Indians angry, and U.S. analysts worried. Ostensibly, CPEC will connect Pakistan to China’s western Xinjiang province through the development of vast new transportation and energy infrastructure. The project is part of China’s much-hyped Belt and Road Initiative, a grand, increasingly vague geopolitical plan bridging Eurasia that China’s powerful President Xi Jinping has promoted heavily.

Pakistani and Chinese officials boast that CPEC will help address Pakistan’s electricity generation problem, bolster its road and rail networks, and shore up the economy through the construction of special economic zones. But these benefits are highly unlikely to materialize. The project is more inclined to leave Pakistan burdened with unserviceable debt while further exposing the fissures in its internal security.

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Despite the bold claims made by China and Pakistan, there are many reasons to be dubious about the purported promises of CPEC. There’s already violence all along the corridor. The north-most part of CPEC is the Karakoram Highway (KKH), which gashes through the Karakoram Mountain Range to connect Kashgar in Xinjiang with Pakistan’s troubled province of Gilgit-Baltistan. Xinjiang is in the throes of a slow-burning insurgency by the Muslim Uighur minority against the Communist state. Gilgit-Baltistan, a Shiite-majority polity under the thumb of a Sunni-dominated Pakistan, is part of the above-noted contested territory of Jammu-Kashmir. Here, geology and weather further limit CPEC. The Karakoram Highway, a narrow road weaving through perilous mountains, can’t bear heavy traffic. Expanding the KKH will not be easy. Residents of Gilgit-Baltistan worry about the environmental costs in relation to the few benefits they will enjoy. There have been episodic protests, which the Pakistani government has ruthlessly put down. Meanwhile, Gwador is experiencing a prolonged drought, frustrating the project while the four extant desalination plants remain idle.

In the south, CPEC is anchored to the port at Gwador in Pakistan’s insurgency-riven Balochistan province. The local Baloch people deeply resent the plan because it will fundamentally change the demography of the area. Before the expansion of Gwadar, the population of the area was 70,000. If the project comes to full fruition the population would be closer to 2 million — most of whom would be non-Baloch. Many poor Baloch have already been displaced from the area. Since construction has begun, there have been numerous attacks against Chinese personnel, among other workers.

There’s also the stubborn problem of economic competitiveness. For CPEC to be more competitive than the North-South Corridor that is rooted to the Iranian port of Chabahar, Gwador needs to offer a safer and shorter route from the Arabian Sea to Central Asia. For that to happen, Gwador needs to be connected by road to the Afghan Ring Road in Afghanistan’s Kandahar province, which is under sustained attacks by the Afghan Taliban. Alternatively, a new route could connect Gwador with the border crossing at Torkham (near Peshawar) by traveling up Balochistan, with its own active ethnic insurgency, through or adjacent to Pakistan’s Federally Administered Tribal Areas, which is the epicenter of Islamist terrorism and insurgency throughout Pakistan. It takes great faith — or idiocy, or greed, or all of the above — to believe that this is possible.

Comment by Riaz Haq on July 3, 2017 at 10:12am

Clearly, the so-called stakeholders that include the US, the EU, Russia, India and Japan seem either not to have understood the $4 trillion venture across 69 countries meant presumably to project China’s strategic vision for global peace, won through mutually beneficial economic cooperation or they are so fearful of being swamped by its success that they want to stop it before it takes off.


https://tribune.com.pk/story/1443447/inclusive-economic-model/

A study of the Silk Road Economic Belt by the Friedrich-Ebert-Stiftung (FES) and the Stockholm International Peace Research Institute (Sipri) has identified potential issues that may negate any benefits the initiative brings.

The study speculates that the Chinese will likely accept or reject projects based on whether they serve the needs of Chinese industry, rather than what they bring to the recipients.
It also suspects that political tensions between different countries may impede the smooth rollout of projects.

Local elites, the study further suspects, may corner the “spoils” from new projects, thereby exacerbating social tensions. It has also expressed fears that labour rights and environmental protection may not be given the attention they deserve.

Therefore, the study recommends that:

The EU put forward a joint consultative mechanism with China to ensure projects are implemented smoothly, by ensuring all stakeholders have a hand in planning and supervision. Official development assistance programmes in BRI recipient countries should, include assistance in project evaluation. Organisations such as the UNDP and the UN Economic and Social Commission (ESC) for Asia should advise recipient countries on the impact and viability of planned projects. BRI loans should not be allowed to breach the debt burden thresholds determined under the World Bank-IMF debt sustainability framework. And finally, the Belt and Road Initiative needs to attract private capital as there are around $8.5 trillion “sitting in cash, waiting for better investment opportunities”. Bringing in private capital would increase the scale of BRI, open it to non-Chinese companies and allow projects to be implemented more efficiently.

It was perhaps in this frame of mind that some of the delegates at the May Belt and Road Forum had called for a rules-based approach, sensitive to the developmental needs of recipient countries. The stakeholders such as the US, the EU, Russia, India and Japan, according to the study, need to coordinate among themselves and engage with China to promote more transparent partnerships.

Meanwhile, the China-Pakistan Economic Corridor (CPEC) continues to bug India. Out of fear of being overwhelmed socio-economically by China’s Road and Belt Initiative (RBI) India seems to have decided to create problems for the initiative. To start with it has decided not to attend any events connected with the BRI Forum.

What India is most worried about, however, is a collection of infrastructure projects under the label of CPEC, currently under construction throughout Pakistan. It traverses territory which India considers to be disputed. China officially claims not to take sides in the Kashmir dispute, but India believes it has done so by finalising CPEC with Pakistan and ignoring India’s position. As well as compromising India’s territorial integrity, CPEC, in India’s view, is raising other concerns about BRI projects.

India’s version on Gwadar port: the seaport has been leased to China until 2059. Chinese companies are operating the port, developing a 1,000-hectare Special Economic Zone nearby, and building an international airport with a Chinese grant of $230 million. These actions are certainly not driven by altruism. They reflect the strategic value to China of access to the Arabian Sea and proximity to energy-rich West Asia. It should be no surprise that Chinese naval submarines have been spotted in Gwadar.

Comment by Riaz Haq on July 4, 2017 at 10:16pm

THE EXPRESS TRIBUNE > BUSINESS
SEZs ‘to turn Pakistan into engine of growth’

https://tribune.com.pk/story/1450362/sezs-turn-pakistan-engine-growth/

Federal Minister for Planning, Development and Reform Ahsan Iqbal assured that China-Pakistan Economic Corridor (CPEC) will not harm domestic industries and interests of the local business community.

Addressing a meeting, held to review the development status of Special Economic Zones (SEZ) under CPEC, Iqbal instructed federal and provincial authorities to keep the business community in the loop about latest developments and policies. He also assured of their inclusion in the consultative process for policy formulation to protect indigenous industries.

“Chinese investment will augment our industrial capacity through state-of-the-art technology and expertise transfers, which will increase our productivity,” he remarked while putting emphasis on formation of joint ventures between local and Chinese manufacturers through increased business collaboration.

The minister updated participants on the status of several energy and infrastructure-related projects, promising increased trade and industrialisation in Pakistan once they are completed.

Highlighting the importance of SEZs, Iqbal said that the next stage of CPEC encompasses massive production in these zones leading to higher output and exports.

“Development of SEZs will play an important role in the future of CPEC by converting Pakistan into an engine of growth,” he stated while instructing officials to prepare comprehensive strategy papers to attract investments.

He also stressed on the importance of taking advantage of the ‘window of opportunity’ created by unprecedented foreign [Chinese] investments in the country

“A paradigm shift is taking place as the world passes through a fourth industrial revolution where automation and robotics are replacing relatively expensive manual labour.”

Pakistan needs to take advantage of its cheaper labour to overcome the technology gap while maintaining production levels, added the minister.

“Provincial governments also need to take concrete steps in order to make SEZs a success,” he said, adding that the country needs a robust industrial base to ensure sustainable economic development and creation of employment opportunities in view of the ballooning labour force.

Representatives from provincial governments and federal territories including FATA and Gilgit-Baltistan gave detailed briefings on the status of SEZs in their areas during the meeting.

Comment by Riaz Haq on July 8, 2017 at 7:56am

Denigrating CPEC
As the CPEC early harvest projects near fruition, detractors are stepping up their propaganda to denigrate the mega project
http://dailytimes.com.pk/opinion/08-Jul-17/denigrating-cpec

As the early harvest projects of CPEC near fruition, detractors are stepping up their propaganda to denigrate the mega project. Christine Fair, of the Foreign Policy magazine has jumped into the fray to disparage CPEC. Christine Fair is an associate professor at the Centre for Peace and Security Studies (CPASS), within Georgetown University’s Edmund A. Walsh School of Foreign Service. Author of the 2014 book Fighting to the End: The Pakistan Army’s Way of War has been criticized for her hawkish rhetoric, riddled with factual inaccuracies, lack of objectivity, and being selectively biased viewpoints. Her pro-drone stance has been denounced, and called "surprisingly weak" by Brookings Institution senior fellow Shadi Hamid. Journalist Glenn Greenwald dismissed Fair’s arguments as "rank propaganda", arguing there is "mountains of evidence" showing drones are counterproductive, pointing to mass civilian casualties and independent studies. Fair’s journalistic sources have been questioned for their credibility and she has been accused of having a conflict of interest due to her past work with U.S. government think tanks, as well the CIA. She has also been rebuked for comments on social media perceived as provocative, such as suggesting burning down Pakistan’s embassy in Afghanistan or asking India to "squash Pakistan militarily, diplomatically, politically and economically." She has been accused of double standards, partisanship towards India, and has been criticized for her contacts with dissident leaders from Balochistan; a link which "raises serious questions if her interest in Pakistan is merely academic."

China constructed the Karakoram Highway across Gilgit Baltistan in 1974. For forty years, the Indian government found no cause for concern, but is now suddenly raising alarm bells with the advent of CPEC
In her latest Op-Ed titled ‘Pakistan can’t afford China’s friendship’ carried by Foreign Policy issue of July 3, 2017, Ms Fair plays to the Indian gallery by claiming that Pakistan has been emboldened by the CPEC to take on India.

Firstly, she conveniently remains oblivious to the fact that India has upped the ante in Occupied Kashmir by killing more than 200 Kashmiri youth and blinding 3,500 children by firing pellet guns at their eyes. To hide its own atrocities against the hapless Kashmiris, India is incessantly violating the ceasefire agreement across the LOC and killing innocent civilians besides staging fake encounters to malign Pakistan. Indian government has formally protested to the Chinese leadership that portions of CPEC traverse through Azad Jammu Kashmir and Gilgit Baltistan, which are disputed territory. Chinese government has responded that CPEC is an economic project and not a strategic one. Moreover, China has invited India to become a part of CPEC to benefit from the mega project as well as address its grievances or misgivings.

The fact is that China constructed the Karakoram Highway across Gilgit Baltistan in 1974. For forty years, the Indian government found no cause for concern, but is now suddenly raising alarm bells with the advent of CPEC.

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