What you need to know:
- The decision means Pakistan will provide additional attention to projects in a special corridor created by the Chinese
Pakistan is creating a special authority to protect and speed up Chinese investments in the country, in what could be something to watch for other countries along Beijing’s planned Belt and Road Initiative (BRI).
The decision means Pakistan will provide additional attention to projects in a special corridor created by the Chinese, flagship programme under China’s ambition to connect countries via infrastructure up to the Indian Ocean and beyond.
Last week, the Pakistani Senate passed the China-Pakistan Economic Corridor (CPEC) Authority Bill, in spite of a protest by opposition leaders, who argued the proposed law had jumped stages.
But the government of Prime Minister Imran Khan can now establish the agency to speed up investments in the Corridor. Officially, the Authority will find “new drivers” of economic growth as well as help develop links between local production and international value chains, aided by China.
The authority will plan, facilitate, coordinate, monitor and implement all projects in the Corridor, which was first established in 2015 as China picked on Pakistan to help start its Belt and Road Initiative.
The BRI, is China’s ambitious plan to interconnect its local production to international markets.
One network goes through a number of Asian countries up to the Indian Ocean, including to countries like Kenya, Mozambique and South Africa, as well as Djibouti in the Horn of Africa.
Established in 2015, the China-Pakistan Economic Corridor involves projects either completed or under construction, now values at $62 billion.
The authority, which could have sole responsibility to licence and protect investments, came after Beijing got frustrated with slow implementation of projects.
With the new agency, the corridor could be shielded from litigation and granted certain immunities to ensure smooth implementation, the Asian News Agency reported last week.
Chairman of the corridor, Lt Gen Asim Saleem Bajwa, told local media last week the Chinese were willing to add $12 billion more of an investment into the corridor.
Criticism over debt
Critics, however, say some of the infrastructure projects have indebted the country, warning Pakistan could find itself in the same boat as Sri Lanka which has since ceded the port city operations in Colombo to the Chinese, over debt.
“China has its logistical limitations in the Indian Ocean area. Hence it requires the building of logistical infrastructure at strategic locations in the Indian Ocean,” observed Dr Guilbin Sultana, a research analyst on Asian geopolitics, commenting on Sri Lanka’s similar new law that created a Port City Economic Commission to specially licence and regulate investments in the sea area built by the Chinese.
“China’s interest behind the investment in the huge developmental projects in Sri Lanka cannot, therefore, be seen just as commercial interests, as claimed by both the Chinese and the Sri Lankans.”
Pakistan was supposed to settle about $3 billion to Chinese banks who, according to Asian Times, have refused to renegotiate the repayment.
Most of the money owed was accumulated through the setting up of special economic zones, construction of a railway line, upgrading of an old port and projects were undertaken by Independent Power Producers contracted to enhance electricity generation.
After years of setting up plants, Pakistan has surplus power it cannot consume. Under the contract, however, the producers have to be paid whether it is consumed or not, to recoup their more than $19 billion investments.
“CPEC was plagued by stalled projects, reports of corruption, and terrorist attacks,” an analysis by the Council on Foreign Relations said of the Corridor.
“CPEC has likely been a humbling experience for China; if it could not pull off transformative development in a country with which it enjoys strong ties and shares a border, then it will have to scale back its ambitions in other BRI countries.”
Pakistan had created a 15,000 force to guard the CPEC projects but they were still ambushed by terrorists, adding to delays.
A local government committee had found that the Chinese had overcharged by up to $3 billion on two main power plants in the Corridor.
One of the ports upgraded has yet to attract commercial shipping lines while a metro service built in one of the cities was not making money yet. Some analysts though argue the projects are important for both countries, in seeking markets, enhancing production and cementing China’s influence.
“Pakistan should seize the opportunity of global value chain and industrial chain restructuring to develop its emerging industries,” argued Liu Zongyi, secretary-general of the Research Centre for China-South Asia Cooperation at the Shanghai Institute for International Studies, on Friday.
“At the early stage of the project, there were issues including energy supply shortage, infrastructure deficiency and inefficient implementation of the incentive policies.
“At that time, some in Pakistan lacked a clear understanding of the direction of industrial development, despite seeing the value building on the country's core competitiveness.”