While ceremonies of celebrating 10 years of CPEC are going on with great pomp & show in Islamabad, little is known to the public so far for being equally jubilant over this project which was introduced to them as a game changer & rhetorically pushed as an investment not loan based. However, the only fact that is known to the public is that after every quarter there is a huge Chinese loan repayment due either solitarily or bundled with previously obtained other liabilities. On these successive due dates of balloon payments every time a heated debate sparks whether Pakistan will be able to honor its financial commitment or will default on its obligations. However, the more worrying aspect of these debates is neither opponents nor proponents of CPEC are seen to be possessed with accurate knowledge about the project.
Although to adequately dilate upon CPEC one must be privy to the core document i.e. project agreement between Pakistan & China to understand the feasibility of the project, the exact quantum of equity & investment, definitions of terms grants, investment & loans given therein, payback mechanism, project’s timelines, targets, available protections against odds, assurances, guarantees, etc however that very agreement is not accessible to the public keenly interested to know. At the inception of CPEC then opposition parties demanded that the CPEC agreements should be discussed in parliament but nothing such was done on the pretext of secrecy. The only curtailed and bare minimum information available is about the executing part which could be only derived from the project’s official website which suggests the CPEC is a basket having four major components Energy, Transportation Infrastructure, Port, and lastly the Special Economic Zones (SEZ) wherein 13 different types of industries were to be shifted from China along with further numerous sub-projects under each respective component. In Pakistan, the secrecy of CPEC agreements has been made such a sacred cow that the previous regime is often condemned to have committed treachery by allegedly sharing it with IMF for borrowing money. CPEC agreement(s), as we don’t even know the number, is perhaps the only civil commercial contract that Pakistan has kept so secret to date that the secrecy has rendered most of us a layman.
Other than the official website some piece of meal information is also available in the form of replies by the treasury benches in-response to the skeptical questions put by the members of the upper house when the project was first introduced especially regarding the energy component of CPEC whereby the then government of Pakistan adopted a consistent stance that this very sector does not involve any loan liability rather it is Chinese investment which has been safeguarded by the capacity charges and dollar-based special tariff. Likewise in support of that newly updated CPEC official website has used the term ‘financing by IPP’ for those energy projects. Whereas CPEC land routes segment which was also hailed as an investment project proved to be purely a loan-based project as per funding details available at CPEC’s official website terming them as the government’s concessional loans (GCLs).
Though the state of Pakistan has remained successful in keeping these agreements secret yet on completion of a decade of CPEC now we can gauge its impacts on the Pakistani economy by comparing key indicators of the pre-CPEC & post-CPEC era. These key figures include external and internal debt, the power sector’s circular debt, industrial growth rates, export figures, GDPs, etc to gauge the CPEC core business we can make a fair assessment from port activity at Gwadar, construction of cargo handling berths thereon by the Chinese counterpart. Unfortunately, the comparison gives us a very gloomy picture. Concisely both external & internal debts have swollen to almost double whereas the power sector’s circular debt has increased from half a trillion to almost three trillion rupees, GDP is off now is nose down, there is no noticeable increase in industrial growth and exports as special economic zones (SEZ) which were expected to house 13 different types of industries from China are yet to commence operations, Chinese cargo traffic at Gwadar port is still nil and port is still having a same number of berths i.e. three which were constructed by Singapore Port Authority (SPA) back in 2012 when the port was taken away from SPA and was given to China, except a grain terminal which has been built by the Chinese in last ten years. Whereas loan repayments are popping up regularly which gives the impression that as per an undisclosed CPEC agreement, the loan repayments are independent of either Chinese cargo movement or the completion of Gwadar port.
So we can squarely say that under CPEC the borrowed infrastructural growth has added nothing to our economy rather conversely have put our already fragile economy on the verge of default. The pre-existing roads & ports infrastructure was sufficient to cater to our trade & transportation needs and under CPEC we enormously burdened ourselves for such an infrastructure which was solely a requirement of our Chinese counterpart and that counterpart has not shifted its cargo movement at all despite the availability of functional land route mainly comprising of the eastern alignment. Since the CPEC agreement is a secret document we cannot estimate how loans for infrastructure were planned to be repaid however most probable assumption based on analogous estimation is that it was planned to be repaid from some sort of toll tax like of world’s most desired trade corridors Panama & Suez canals, built in year 1904 & 1869 respectively and still annual net revenue combined of those corridors generates approximately 10 billion dollars a year whereas CPEC is primarily designed for Chinese cargo only hence maximum possible income could be easily assessed against the continuously mounting financial liabilities. Recently, on CPEC’s 10th anniversary, Pakistan has agreed to obtain an additional Chinese loan liability of 6.5 billion USD for the upgradation of the Karachi to Peshawar railway line known as the ML-1 project to meet the demands of Chinese cargo movement and still, we have no assurance by the lender that this 4th land route will be utilized by them or will just mount the debt. Similarly where Gwadar port is exactly at 2012 position with 3 berths Chinese have offered us the construction of the new international airport at Gwadar and of course in addition to our existing airport on an undisclosed quantum of loan sugar-coated as ‘Grant by Chinese Government’ as per CPEC website.
The energy component of CPEC is no different from the road infrastructure segment although power projects are financed by Chinese IPPs however as a kneejerk reaction to power shortage we approved mouthwatering returns on investment coupled with generously granted capacity charges for unutilized energy which stands as one of the primary causes of the multiplication of power sector’s circular debt and to coup with this debt Pakistan is constrained to raise power tariffs resultantly now the highest slab of electricity tariff with 400% increase in a decade stands at 52 rupees per unit instead of earlier 13 rupees per unit.
Since eventually it’s the people of Pakistan who are burdened with trickling down effects of external debts hence they have a fundamental right to know why CPEC agreements were kept as a secret why no debate was allowed in parliament, what guarantees we obtained from china to mandatorily transfer cargo movement here, what timelines were assured by the “investor” to complete the project, why no industry got shifted to Pakistan from China, to what extent the project’s feasibility was so lucrative for Pakistani side that time tested debt free construction model of ‘Build Operate & Transfer (BOT)’ was altogether ignored, why already debt burdened Pakistan was contractually bound to pay for the construction of enormous road infrastructures which were solely desired, required, designed, price tagged & constructed by the Chinese counterpart, while entire road network segment is loan based why construction projects were not put to open bidding to fetch competitive construction prices, under which law CPEC construction projects were exempted from open bidding, how payback was formulated, why loan repayment was not made conditional with completion of CPEC and cargo transfer to ensure timely completion.
CPEC which happens to be a leg of China’s Belt and Road Initiative (BRI) has already been partly canceled, curtailed, and renegotiated by many participant countries which includes Malaysia, Myanmar, and Bangladesh in the recent past after the Srilankan seaport fiasco, and a few days back the Italian government also expressed its regrets for participating in BRI while terming it as unfair for trade. Above referred reviewing countries did commit mistakes in weighing the pros and cons of BRI but at least they realized their mistake before suffering from any further harm and they opted to review their decisions. Pakistan is a different story, at the launch of BRI through CPEC in Pakistan, we not only jumped on the bandwagon whilst ignoring the whistleblowers especially the USA the only country which at the state level warned Pakistan of the unbearable financial implications of CPEC but we took US criticism otherwise rather even now despite of experiencing realities of CPEC in last ten years we are proudly acquiring liabilities in the name of growth through such projects which either we do not need at all or whose benefit is insignificant when compared with its cost.
Its high time Pakistan should enter into damage control mode and public CPEC agreements as people have a right to know, nothing should be kept concealed especially which directly affects the masses, let people have their opinion after debate and escalate it to the parliament to conclusively find out what is in the best interest of Pakistan.