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

[Riaz Haq]

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. 

Related Links:

Haq's Musings

Media Advertising Boom in Pakistan

China-Pakistan Economic Corridor to Add Over 2 Million Jobs

Pakistan's Growing Middle Class

Vehicles and Appliance Ownership in Pakistan

Rising Consumer Confidence in Pakistan

Pakistan to Build Massive Dams for Abundant Water and Power

[Riaz Haq]

Phase-II of CPEC, flagship BRI project, much broader in scope: Pakistan Ambassador to China
Phase-II much broader in scope: Ambassador


https://www.globaltimes.cn/page/202201/1246043.shtml


GT: The first brick of the CPEC was laid in 2013, it has been nine years, can you comment on the current status of CPEC construction efforts? Tackling the energy shortage was frequently mentioned in the earlier years of the CPEC, how is the situation now?

Haque: The CPEC marks a new phase in Pakistan-China relations by placing economic cooperation and connectivity at the center of bilateral agenda. Being the flagship project of the Belt and Road Initiative (BRI), it aims to enhance connectivity and trade linkages between Pakistan, China and the region through a network of roads, rail, fiber optic, energy pipelines, industrial clusters and Special Economic Zones.

In its first phase, the CPEC has helped us develop major infrastructure and address our essential energy needs. The energy projects which have already been completed include 1,320 megaWatt (MW) capacity coal-fired power plants in Sahiwal (Punjab), Port Qasim (Karachi) and Hub (Balochistan); 660MW Engro Thar coal power project; 1,000MW Quaid-e-Azam Solar Park in Bahawalpur (400MW project is complete while 600MW is under-implementation), and some smaller wind & solar energy projects. A mega, 878-kilometer long, Matiari to Lahore ±660 KV HVDC Transmission Line project has also been completed with the capacity to evacuate 4,000 MW electricity.

It has also upgraded Pakistan's national and international highway network to provide more reliable Pakistan-China connectivity across the Karakoram Mountains and smoother inland communications. The CPEC investment and its spin-off effects have also generated thousands of jobs.

GT: How do you see the current challenges and opportunities facing the CPEC in 2022? What's there to be built in the second phase?

Haque: It is a matter of great satisfaction that despite the challenges posed by COVID-19 pandemic in the last two years, the CPEC cooperation and work on all projects continued unhindered. The recently held 10th meeting of the Joint Cooperation Committee reviewed wide-ranging cooperation under the CPEC framework and identified more areas of cooperation including establishment of a Joint Working Group on Information Technology and Industry, which is expected to support high-quality development of the CPEC as envisioned by the leadership of the two countries.

While the first phase of CPEC was mainly focused on infrastructure and energy projects to cater to the immediate needs, the high-quality CPEC phase-II is much broader in scope and focuses on industrial relocation, agricultural modernization, science and technology cooperation, job creation and our people's socio-economic well-being. We are also making rapid progress on the development of the Gwadar Port and Free Trade Zone, which would promote regional connectivity and economic integration.

GT: What is the current level of third-party participation in the construction of the CPEC?

Haque: As the CPEC aims to promote regional integration and win-win cooperation, Pakistan and China have agreed to welcome and encourage high-quality investments and introduction of advanced technologies and expertise in the CPEC from third-party partners who are ready to work with us for common development.

The two countries are jointly working to finalize a mechanism for third-party cooperation under the CPEC framework before formally processing such requests.



GT: Regional cooperation is a key word for 2022 and BRI construction is also progressing rapidly. How do you see Pakistan's and CPEC's role in this direction?

Haque: Pakistan is one of the earliest supporters and participants of the BRI. We emphatically endorse the spirit and philosophy of the BRI, which seeks to transcend national boundaries and lay bridges for a win-win cooperation and closer economic integration for a shared future.

[Riaz Haq]

ADB study stresses economic corridor development to transform Pakistan's economy

https://www.dawn.com/news/1672882


https://www.adb.org/sites/default/files/publication/768396/economic...


Explaining the rationale behind selecting the routes, the study said: "[They] offer real untapped economic potential with opportunities to diversify; good development synergy for linking production networks especially small and medium-sized enterprises with markets and other economic agents; close links to the CPEC (China-Pakistan Economic Corridor) and Carec (Central Asia Regional Economic Cooperation) routes; and favourable prospects for connecting and realising the economic potential of underdeveloped regions in Balochistan and Khyber Pakhtunkhwa."

Maximising CPEC benefits
The study also touched upon CPEC and said that it could pull off a number of economic objectives if it was implemented successfully.

However, it cautioned that CPEC alone could not improve the economy and would need to be supported by structural reforms to unleash its true potential.

The ADB report suggested four policy recommendations to fully benefit from CPEC.

Undertaking structural reforms to facilitate private sector development.
Broadening the tax base to make use of the country's tax revenue potential and improve fairness of tax collection.
Utilising transport infrastructure under CPEC to maximise investment return and turn it into a multilateral initiative.
Expediting development of nine special economic zones planned along CPEC routes.

[Riaz Haq]

#China Agrees to rollover a whopping $4.2 billion in #Pakistan #debt. The request for rollover was reportedly made by Prime Minister #ImranKhanPTI during his meeting with #Chinese President #XiJinping last month at #WinterOlympics. #CPEC #economy #PTI https://www.business-standard.com/article/international/china-agree...

China on Wednesday acceded to Pakistan's request to rollover a whopping $4.2 billion debt repayment to provide a major relief for its all-weather ally, which is reeling under major economic crisis.

Chinese Foreign Minister Wang Yi in his meeting with Pakistan counterpart Shah Mehmood Qureshi on the sidelines of the 3rd meeting of the 'Foreign Ministers of Neighbouring Countries of Afghanistan' in China's eastern Anhui province has conveyed Beijing's decision to rollover the debt.

In a video message, Qureshi said Wang has conveyed China's decision to rollover Pakistan $4.2 billion to enable Islamabad to tide over the current economic crisis.
"I am immensely happy to share that the Chinese FM has given a nod of approval on the rollover of commercial loan as well," Qureshi was quoted as saying by Pakistan daily Dawn.

The USD 4.2 billion debt, which was maturing this week, has been rolled over providing major financial relief to Pakistan, the daily reported.

"The procedural formalities are being completed by relevant authorities. An announcement will be made as soon as they're sorted," Qureshi said.
The request for rollover was reportedly made by Pakistan Prime Minister Imran Khan during his meeting with Chinese President Xi Jinping here last month to attend the opening ceremony of the Beijing Winter Olympics.

Pakistan continues to undergo a huge economic crisis despite heavy investment by China in the $60 billion China Pakistan Economic Corridor (CPEC). In addition to Pakistan, Sri Lanka, a major recipient of Chinese loans and investments, too has asked China to reschedule its debt as it is going into a crippling financial crisis.

China is considering a fresh request from Sri Lanka for a loan of USD one billion and a credit line of USD 1.5 billion, Chinese Ambassador to Sri Lanka Qi Zhenhong told the media in Colombo last week. He, however, was silent about Sri Lankan President Gotabaya Rajapaksa's request for rescheduling of debt repayments.

[Riaz Haq]

CPEC Results According to Wang Wenbin of China

https://twitter.com/bilalgilani/status/1677391745112477696?s=20

Bilal I Gilani
@bilalgilani
CPEC projects are creating 192,000 jobs, generating 6,000MW of power, building 510 km (316 miles) of highways, and expanding the national transmission network by 886 km (550 miles),” Foreign Ministry spokesman Wang Wenbin told reporters in Beijing."


Associated Press of Pakistan: On July 5, Prime Minister Shahbaz Sharif while addressing a ceremony to mark a decade of signing of the China-Pakistan Economic Corridor (CPEC), said that CPEC has been playing a key role in transforming Pakistan’s economic landscape. He also said that the mega project helped Pakistan progress in the region and beyond. What is your response?

Wang Wenbin: The China-Pakistan Economic Corridor (CPEC) is a signature project of China-Pakistan cooperation in the new era, and an important project under the Belt and Road Initiative. This year marks the 10th anniversary of the launch of CPEC. After ten years of development, a “1+4” cooperation layout has been formed, with the CPEC at the center and Gwadar Port, transport infrastructure, energy and industrial cooperation being the four key areas. Projects under CPEC are flourishing all across Pakistan, attracting USD 25.4 billion of direct investment, creating 192,000 jobs, producing 6,000 megawatts of electric power, building 510 kilometers of highways and adding 886 kilometers to the core national transmission network. CPEC has made tangible contribution to the national development of Pakistan and connectivity in the region. China and Pakistan have also explored new areas for cooperation under the framework of CPEC, creating new highlights in cooperation on agriculture, science and technology, telecommunication and people’s wellbeing.

China stands ready to work with Pakistan to build on the past achievements and follow the guidance of the important common understandings between the leaders of the two countries on promoting high-quality development of CPEC to boost the development of China and Pakistan and the region and bring more benefits to the people of all countries.

https://www.fmprc.gov.cn/eng/xwfw_665399/s2510_665401/2511_665403/2...

[Riaz Haq]

The mega undertaking (China-Pakistan Economic Corridor or CPEC) has created nearly 200,000 direct local jobs, built more than 1,400 kilometers (870 miles) of highways and roads, and added 8,000 megawatts of electricity to the national grid, ending years of blackouts caused by power outages in the country of 230 million people.


https://www.voanews.com/a/top-china-official-visits-pakistan-markin...


Chinese Foreign Ministry spokesman Wang Wenbin told reporters in Beijing earlier this month that CPEC projects "are flourishing all across Pakistan," making a "tangible contribution" to the national development of the country and to regional connectivity.

But critics say many projects have suffered delays, including several much-touted industrial zones that were supposed to help Pakistan enhance its exports to earn much-needed foreign exchange.

The country's declining dollar reserves have prevented Islamabad from paying Chinese power producers, leading to strains in many ties.

Pakistan owes more than $1.26 billion (350 billion rupees) to Chinese power plants. The amount keeps growing, and China has been reluctant to defer or restructure the payment and CPEC debts. All the Chinese loans – both government and commercial banks – makeup nearly 30% of Islamabad's external debt.

Some critics blame CPEC investments for contributing to Pakistan's economic troubles. The government fended off the risk of an imminent default by securing a short-term $3 billion International Monetary Fund bailout agreement this month.

Security threats to its citizens and interests in Pakistan have also been a cause of concern for China. Militant attacks have killed several Chinese nationals in recent years, prompting Beijing to press Islamabad to ensure security measures for CPEC projects.

Diplomatic sources told VOA that China has lately directed its diplomats and citizens working on CPEC programs to strictly limit their movements and avoid visiting certain Pakistani cities for security reasons.

"They [Chinese] believe this security issue is becoming an impediment in taking CPEC forward," Senator Mushahid Hussain, the chairman of the defense committee of the upper house of the Pakistani parliament, told VOA in an interview earlier this month.

"Recurring expressions of concern about the safety and security of Chinese citizens and investors in Pakistan by top Chinese leaders indicate that Pakistan's promises of 'foolproof security' for Chinese working in Pakistan have yet to be fulfilled," said Hussain, who represents Prime Minister Shehbaz Sharif's ruling party in the Senate.

[Riaz Haq]

Debunking the Myth of ‘Debt-trap Diplomacy’


https://eastasiaforum.org/2024/10/07/its-time-for-the-united-states...
It’s time for the United States to drop the debt-trap narrative


https://www.chathamhouse.org/2020/08/debunking-myth-debt-trap-diplo...
Debunking the Myth of ‘Debt-trap Diplomacy’

https://thediplomat.com/2020/11/belt-and-road-stakeholders-dont-bel...

Belt and Road Stakeholders Don’t Believe China Uses ‘Debt-Trap Diplomacy’
The authors’ recent book, which includes a survey of opinion leaders from BRI stakeholder countries, debunks the “debt-trap diplomacy” thesis.

https://www.theatlantic.com/international/archive/2021/02/china-deb...

The Chinese ‘Debt Trap’ Is a Myth
The narrative wrongfully portrays both Beijing and the developing countries it deals with.

[Riaz Haq]

World Bank pledges $40b to Pakistan


https://tribune.com.pk/story/2522225/world-bank-pledges-40b-to-paki...

ISLAMABAD:
The World Bank has pledged to provide $40 billion to Pakistan under the 10-year Country Partnership Framework (CPF), according to sources in Ministry of Economic Affairs.

Interestingly, Shahbaz Rana, an economic correspondent at The Express Tribune, broke the news on January 4 while citing a key Pakistani official.

The sources termed the commitment as a testament to the successful efforts of Prime Minister Shehbaz Sharif in securing international support for Pakistan's economic growth, adding the joint efforts by PM and Army Chief General Asim Munir have started producing results.

Out of the total $40 billion, $20 billion would be provided through International Development Association (IDA) and International Bank for Reconstruction and Development (IBRD).

The CPF will focus on six key development areas, including reducing child stunting, mitigating climate change, improving learning outcomes, providing clean water, and promoting public resources and private investment for comprehensive development.

The International Finance Corporation (IFC) will also provide funding of $20 billion to support the CPF.

Specific goals include increasing tax revenue to over 15% of GDP, adding 10 Gigawatts of renewable energy capacity, providing quality education to 12 million students, and delivering healthcare services to 50 million people.

The framework also aims to provide safe drinking water and sanitation facilities to 60 million people, strengthen food security for 30 million individuals, and increase access to family planning services for 30 million women.

Additionally, the CPF includes objectives to address flood and disaster risks, benefiting 75 million people, the sources added.

It is worth mentioning, 19 out of 24 directors voted in favor of Pakistan when approving the 10-year Country Partnership Framework.

[Riaz Haq]

Sustainable Infrastructure Finance Overview

https://www.worldbank.org/en/topic/sustainableinfrastructurefinance...


Quality, sustainable, low-carbon and inclusive infrastructure is crucial for creating a livable planet.

The scale of the world’s infrastructure needs is huge, and so is the financing required to meet the needs of millions of people.

Consider that, globally, 685 million individuals are without electricity, 2.2 billion lack drinking water, 3.5 billion lack safe sanitation, 1 billion live more than 2 kilometers from an all-season road, and a third of the global population, 2.6 billion people, remain digitally unconnected. Addressing these challenges requires about $1.5 trillion every year through 2030 - 4.5% of the GDP of low- and middle- income countries.

In addition, infrastructure is both vulnerable to and a contributor to climate change, making the challenge is even more complex. Every dollar of infrastructure investment must support high-quality, sustainable infrastructure that maximizes its value to a country’s economy, citizens, and environments and that builds resilience to extreme climate events.

-----------------------

Infrastructure financing gap - Opinion - Business Recorder

by Zafar Masud, President, Bank of Punjab

https://www.brecorder.com/news/40239999

If we forecast a 10-year GDP for Pakistan, the requirement for infrastructure financing is around PKR 5 trillion ($18 billion) a year, which is obviously not possible through the current funding pot of term deposits and required substantial improvement in treasury management to be equal to this mammoth task of outstanding infrastructure financing.

[Riaz Haq]

A decade later, China’s BRI vision in Pakistan stumbles amid debt, security fears & poor governance

A decade later, China’s BRI vision in Pakistan stumbles amid debt, security fears & poor governance

https://www.firstpost.com/world/a-decade-later-chinas-bri-vision-in...

The CPEC initiative is way behind schedule. At least 31 projects, valued at more than $22 billion, have yet to begin. While Islamabad pitches a CPEC 2.0 to its citizens, Beijing has not committed to any major new investments in the country
Ten years after it was hailed as a transformative moment in Pakistan’s economic history, the China-Pakistan Economic Corridor (CPEC) is languishing in uncertainty, with key projects stalled, security threats mounting, and once-ambitious visions for regional connectivity left unrealised.

When Chinese President Xi Jinping visited Islamabad on 20 April 2015, he signed a raft of agreements marking the start of CPEC— Pakistan’s $50 billion flagship component of Beijing’s Belt and Road Initiative (BRI). The venture was supposed to overhaul infrastructure, supercharge growth, and reforge Sino-Pakistani ties in steel. Today, analysts describe it as a shadow of those original aspirations.

Nikkei, citing official figures, reported that 38 CPEC projects worth $25.4 billion have been completed and another 23 are in progress. But at least 31 projects, valued at more than $22 billion, have yet to begin. Behind the delays lie a mix of economic distress, internal mismanagement, and increasingly, a deteriorating security environment that has targeted Chinese nationals.

“The project, which was started with great optimism, has almost halted,” said Ghulam Ali, deputy director at the Hong Kong Research Center for Asian Studies.

Gwadar dream fades into dust
Nowhere has the dissonance between promise and progress been more stark than in Gwadar, the port city in southwestern Balochistan province that was pitched as the crown jewel of CPEC—a future Singapore of South Asia. But a decade later, Gwadar still suffers from chronic electricity shortages, a promised coal power plant has not materialised, and only $890 million in CPEC funding has been spent there.

Even the city’s most high-profile success—its new international airport—has failed to spark wider development. One former government official, speaking anonymously, described the vision for Gwadar as fundamentally flawed from the outset.

“All the forecasts regarding the Gwadar port and related to industrial development in Gwadar were also misplaced,” the official said. “This is not entirely China’s fault. It’s mostly due to Pakistan’s own inefficiencies and bad governance.”

Beijing has never been blind to those risks. But the situation has worsened in recent years. At least 20 Chinese nationals have been killed and 34 injured in targeted attacks since 2021, according to Pakistani records. Balochistan has been the epicentre of this violence, where Baloch insurgents have repeatedly attacked Chinese workers, projects and interests.

“More Chinese have lost their lives in Pakistan than in any other country,” said Ali.

“China has been caught in this lethal confrontation between the Pakistani military and Baloch militants … If Pakistan fails to improve its internal security, the future of CPEC remains bleak.”

CPEC 2.0: Real revival or empty talk?
Despite its stuttering record, both Beijing and Islamabad insist CPEC remains a “success story.” Pakistani leaders are now pushing the narrative of a “CPEC 2.0,” which promises a pivot to industrialisation, clean energy, agriculture and special economic zones.

The flagship of this proposed second phase is Main Line 1 (ML-1), a $6.8 billion project to upgrade Pakistan’s colonial-era railway network from Karachi to Peshawar. But despite being on the agenda since 2015, ML-1 remains stuck in bureaucratic limbo, with no progress on financing or implementation.

[Riaz Haq]

A decade later, China’s BRI vision in Pakistan stumbles amid debt, security fears & poor governance

A decade later, China’s BRI vision in Pakistan stumbles amid debt, security fears & poor governance

https://www.firstpost.com/world/a-decade-later-chinas-bri-vision-in...

“It seems like Beijing and Islamabad have been announcing the next phase of CPEC for years, and that’s not a good sign about the project’s broader direction,” said Michael Kugelman, a South Asia analyst.
“If the next phase is to succeed, it will need to emphasise relatively modest loans with reasonable debt repayment timelines and activities that don’t entail large security risks.”

China, for its part, has not committed to any major new investments under CPEC 2.0. Analysts say Beijing is increasingly hesitant, particularly amid Pakistan’s economic woes and rising insecurity.

“China has not made any promises for the second phase, no major new projects have been added and China is gradually pulling its support,” said Ali.

“As part of its diplomacy, China maintains formalities and does not want to openly say ‘break up.’”

In private, however, some suggest that Beijing’s interest is cooling.