Questions about transparency in the China Pakistan Economic Corridor (CPEC) remain unanswered. A Senate Special Committee on the CPEC led by Senator Sherry Rehman complained last week that information was not being provided to it, and that the committee knew no more than what has been published periodically in newspapers about this project.
This is not the first time that the Senate Special Committee has complained. Another special committee led by Senator Taj Haider, the tenure of which ended in March last year, had also voiced similar concerns.
Earlier, when on March 13 the cabinet committee on CPEC met under the planning minister, the press release stated that it had taken “several decisions with regards to the game changer project.” It gave no further details.
Subsequent media reports quoted the planning minister saying “some new projects” had been approved in the meeting. A new joint working group had been set up for cooperation in “modernising the country’s agriculture,” focusing on food supply chain, enhancement of seed quality, irrigation systems and technology transfers. No details of the “new projects” and “modernisation of agriculture” were provided, except that the working group will meet soon. The prime minister also plans to visit China early next month.
Reports about the agricultural dimension of the project first surfaced in May 2017, when a hitherto undisclosed official document surfaced in the media titled Long Term Plan. Members of the parliament and other stakeholders were surprised and demanded that implications of agricultural cooperation be first discussed extensively. The government, however, dismissed the “Long Term Plan” report as “factually incorrect” and aimed at “creating fear.”
When demands for transparency continued, the government claimed that an “abridged version” of the Long-Term Plan had been shared with key stakeholders, including the provincial governments, and that their feedback had been incorporated. Questions about why only an abridged version - and not the entire Long Term Plan - was shared remained unanswered. If the five-year plans, the IMF agreements and all medium-term economic development plans are public documents, why has the CPEC Long-Term Plan been an exception, especially in view of its profound impact on the economy?
It is highly unlikely that the Chinese are not fully aware of the “new projects” approved in the March 13 meeting, or about the plans for “modernising agriculture.” Why should the parliament be not informed about their details?
Issues in financing of projects also remain under wraps. The previous Pakistan Muslim League-Nawaz (PML-N) government had decided to finance the massive ML1 railway line project through an interest-bearing Chinese loan. The Pakistan Tehreek-i-Insaf (PTI) had objected at the time and demanded renegotiation of the terms under which the project was to be executed. They had called for Build-Operate-Transfer (BOT) to avoid incurring huge loans. Under the BOT, the Chinese would finance the project and recover their investment by operating the railway line for a specified period of time.
However, media reports of the meeting of the cabinet committee on CPEC said that the government had decided to adopt the financial plan for building ML1 of the previous government and would build it through a direct loan, abandoning all previous objections.
Why has the PTI-led government now reversed its position on the financing of ML1 and decided to build it on borrowed money? Did the Chinese refuse the BOT offer? What are the terms of repayment of the direct Chinese loan for the project? Has any study been carried out on how the loan will be repaid?
Some time ago, the State Bank governor had also publicly stated that he was unaware of the structure of CPEC deals. It only goes to show how secretive these agreements have been. Questions about preferential treatment of Chinese companies and workers, about equity and debt terms and conditions have not been answered satisfactorily. Recently, Rs24 billion from CPEC projects were quietly diverted to development funds for MNAs. Why? The matter is now subjudiced before Islamabad High Court.
CPEC’s security has been handed over to the military but little is known about the terms and conditions of its financing. Will it be paid for out of the budget or from revenue earnings from the port? Pakistan’s share in revenue earnings is slated to be 9 percent but there are no projections of revenue earnings. If the cost of raising army division is more than the revenue earnings, how will the differential be met? Has any feasibility been carried out? Has any thought been given to the army’s deep ingress into economic activities while providing security? Increasingly, the security of roads, bridges, pipelines, power plants, industrial parks and mines in Balochistan is being handed over to the military which in turn demands a pie in the economic share. Has any thought been given to its consequences? Mobile phone companies have developed a successful model of securing towers and structures through private security. Can this model not be replicated for CPEC security, or are the Chinese demanding military security? What will be the long-term impact of abnormal military security on investors and investments?
Sometime ago, noted economist Dr Kaiser Bengali had demanded answers to some very key questions. He asked whether an overall CPEC feasibility had been prepared, whether an Environment Impact Assessment made, how Pakistan’s share in port revenues been calculated, how much share would Balochistan get and who would collect the toll fee along the corridor, if any, and if the provinces would get a share in it? This last question is the most relevant as toll collection on motorways has been given to FWO without bids on long-term basis.
Dr Bengali also raised questions about the impact of tax exemptions to CPEC-related Chinese imports on Pakistan’s manufacturing sector, repayment of Chinese loans, financing of desalination plants and plans for ensuring that Gawadar’s demography was not adversely impacted.
Then eager to demand transparency, the PTI owned Bengali’s prescient and pointed questions and raised them in the Senate also. Complete and satisfactory replies never came.
There is no doubt that potentially CPEC is a real economic game changer, not only for Pakistan but also for the entire region. However, touting it as a security, instead of an economic project and needlessly militarising it has tended to mystify it.
We need to demystify and demilitarise the game changer project and not let it become an unaccountable and opaque security enterprise.
The writer has served on the Special Senate CPEC Committee
This is not the first time that the Senate Special Committee has complained. Another special committee led by Senator Taj Haider, the tenure of which ended in March last year, had also voiced similar concerns.
Earlier, when on March 13 the cabinet committee on CPEC met under the planning minister, the press release stated that it had taken “several decisions with regards to the game changer project.” It gave no further details.
Subsequent media reports quoted the planning minister saying “some new projects” had been approved in the meeting. A new joint working group had been set up for cooperation in “modernising the country’s agriculture,” focusing on food supply chain, enhancement of seed quality, irrigation systems and technology transfers. No details of the “new projects” and “modernisation of agriculture” were provided, except that the working group will meet soon. The prime minister also plans to visit China early next month.
Reports about the agricultural dimension of the project first surfaced in May 2017, when a hitherto undisclosed official document surfaced in the media titled Long Term Plan. Members of the parliament and other stakeholders were surprised and demanded that implications of agricultural cooperation be first discussed extensively. The government, however, dismissed the “Long Term Plan” report as “factually incorrect” and aimed at “creating fear.”
Some time ago, the State Bank governor had also publicly stated that he was unaware of the structure of CPEC deals. It only goes to show how secretive these agreements have been
When demands for transparency continued, the government claimed that an “abridged version” of the Long-Term Plan had been shared with key stakeholders, including the provincial governments, and that their feedback had been incorporated. Questions about why only an abridged version - and not the entire Long Term Plan - was shared remained unanswered. If the five-year plans, the IMF agreements and all medium-term economic development plans are public documents, why has the CPEC Long-Term Plan been an exception, especially in view of its profound impact on the economy?
It is highly unlikely that the Chinese are not fully aware of the “new projects” approved in the March 13 meeting, or about the plans for “modernising agriculture.” Why should the parliament be not informed about their details?
Issues in financing of projects also remain under wraps. The previous Pakistan Muslim League-Nawaz (PML-N) government had decided to finance the massive ML1 railway line project through an interest-bearing Chinese loan. The Pakistan Tehreek-i-Insaf (PTI) had objected at the time and demanded renegotiation of the terms under which the project was to be executed. They had called for Build-Operate-Transfer (BOT) to avoid incurring huge loans. Under the BOT, the Chinese would finance the project and recover their investment by operating the railway line for a specified period of time.
However, media reports of the meeting of the cabinet committee on CPEC said that the government had decided to adopt the financial plan for building ML1 of the previous government and would build it through a direct loan, abandoning all previous objections.
Why has the PTI-led government now reversed its position on the financing of ML1 and decided to build it on borrowed money? Did the Chinese refuse the BOT offer? What are the terms of repayment of the direct Chinese loan for the project? Has any study been carried out on how the loan will be repaid?
Some time ago, the State Bank governor had also publicly stated that he was unaware of the structure of CPEC deals. It only goes to show how secretive these agreements have been. Questions about preferential treatment of Chinese companies and workers, about equity and debt terms and conditions have not been answered satisfactorily. Recently, Rs24 billion from CPEC projects were quietly diverted to development funds for MNAs. Why? The matter is now subjudiced before Islamabad High Court.
CPEC’s security has been handed over to the military but little is known about the terms and conditions of its financing. Will it be paid for out of the budget or from revenue earnings from the port? Pakistan’s share in revenue earnings is slated to be 9 percent but there are no projections of revenue earnings. If the cost of raising army division is more than the revenue earnings, how will the differential be met? Has any feasibility been carried out? Has any thought been given to the army’s deep ingress into economic activities while providing security? Increasingly, the security of roads, bridges, pipelines, power plants, industrial parks and mines in Balochistan is being handed over to the military which in turn demands a pie in the economic share. Has any thought been given to its consequences? Mobile phone companies have developed a successful model of securing towers and structures through private security. Can this model not be replicated for CPEC security, or are the Chinese demanding military security? What will be the long-term impact of abnormal military security on investors and investments?
Sometime ago, noted economist Dr Kaiser Bengali had demanded answers to some very key questions. He asked whether an overall CPEC feasibility had been prepared, whether an Environment Impact Assessment made, how Pakistan’s share in port revenues been calculated, how much share would Balochistan get and who would collect the toll fee along the corridor, if any, and if the provinces would get a share in it? This last question is the most relevant as toll collection on motorways has been given to FWO without bids on long-term basis.
Dr Bengali also raised questions about the impact of tax exemptions to CPEC-related Chinese imports on Pakistan’s manufacturing sector, repayment of Chinese loans, financing of desalination plants and plans for ensuring that Gawadar’s demography was not adversely impacted.
Then eager to demand transparency, the PTI owned Bengali’s prescient and pointed questions and raised them in the Senate also. Complete and satisfactory replies never came.
There is no doubt that potentially CPEC is a real economic game changer, not only for Pakistan but also for the entire region. However, touting it as a security, instead of an economic project and needlessly militarising it has tended to mystify it.
We need to demystify and demilitarise the game changer project and not let it become an unaccountable and opaque security enterprise.
The writer has served on the Special Senate CPEC Committee