Can we afford delaying CPEC?

Sharif family needs to keep its hands off CPEC projects

It is a common story in Pakistan: A project’s cost goes up over the time well before its conclusion, just because of red-tape, ill-planning, and so on. We have a $46 billion China-Pakistan Economic Corridor (CPEC) project. If it suffers the same fate, the cost will be huge and, at the end of the day, the people of Pakistan will have to bear it.

The government, by its actions and intentions, is going to double the cost. It is important to keep the project on track, which is the beginning of a new era of development, transformation and prosperity in entire South and East Asia.

The CPEC is to generate more avenues once it is on track. Pakistan is the South Asian gatekeeper due to its strategic potential and CPEC is set to connect Eurasian, SAARC, Iran and East Asian blocs.

The CPEC also reflects China’s grand vision of establishing a trans-Pakistani trade corridor to cultivate a centre of economic gravity that seals everything together. Once the CPEC is completed, it would play the role of a linchpin in the One Belt One Road project launched by China.

This strategy hinges on expansion of the Karakoram Highway to construct parallel rail, industrial, and pipeline networks from the southern port of Gwadar all the way up to China’s Xinjiang province. Under the scheme of things, Iran is capable of playing the role of an engine to provide energy to Pakistan through the Iran-Pakistan-China pipeline project. It would be supported by the world’s largest solar farm being developed in Pakistan under the CPEC with the assistance from China.

This energy and trade corridor would help expand China’s direct economic outreach all the way to the Arabian Sea through Gwadar Port. Gwadar would also help China avoid the murky waters of the South China Sea, where all the foes are out to hamper the Chinese trade. Hence, CPEC is set to act as China’s geopolitical and geo-economic pivot down to the Middle East oil fields, which is a major source of its energy requirement.

CPEC also reflects China’s grand vision of establishing a trans-Pakistani trade corridor to cultivate a centre of economic gravity that seals everything together

After China, Russia is also geared to enter the arena as another strategic partner of Pakistan – thanks to Pakistan’s geopolitical and geostrategic potential, which is attracting more regional players to join the new axis of development, peace and progress in the Asia region. More foreign investment is to follow from Russia and other Central Asian Republics.

But fears and concerns are being raised in China and Pakistan that this rosy picture may turn bleak due to lack of interest and incapability of Pakistan government to carry out such a huge development project.

Politicians and bureaucrats involved with the CPEC project feel that the prime minister was more interested in using the CPEC for ‘political mileage’ against Imran Khan-led Pakistan Tehreek-e-Insaf (PTI) than as strategic planning for the future of the country.

Some others view the control of Sharif family over all CPEC projects with suspicion, feeling the younger Sharifs have been calling all shots, and federal secretaries were asked to report to younger Sharifs, bypassing federal ministers.

Whatever might be the reasons, however, CPEC implementation is becoming a major challenge for Pakistan and China. While the Chinese part was completed around six months ago, it seems Pakistan is lagging far behind in rising to the challenge. Despite some messages of concern sent from China into Pakistan, nothing has changed on the ground.

While Prime Minister Nawaz Sharif and his core team members are using the CPEC for political mileage, nothing concrete is being done. It is interesting to note that the Sharif family is keeping its hands on all CPEC projects.

Although 83 percent projects under the CPEC are energy ventures, Water and Power Minister Khawaja Muhammad Asif has not attended even a single meeting of the CPEC and Sharif family members are calling the shots from behind the scenes.

The minister has time and again expressed his anger publicly over the fact that he is kept at bay while all energy projects were either signed by Punjab Chief Shehbaz Sharif or ministry officials.

It is learnt that a prominent businessman relative of the chief minister is acting as de-facto minister for water and power and takes all decisions. Even the Pepco chief, who is practically dealing with most of the power generation plants, also reports to him, who has the last word on the organisation’s affairs. He also finalises the tendering while remaining behind the scenes.

On the other hand, the rest of CPEC’s 18 percent chunk relates to infrastructure development, transport and free trade zones, information technology parks, and other smaller projects.

Since the ministry of communications deals with infrastructure building, these projects are also facing delays as the prime minister is keeping this portfolio under his own belt. Now, another fact is that Mr Shahid Ashraf Tarar, who is a close relative of former President Rafiq Tarar and Minister of State for Health Services Saira Afzal Tarar, has been given both top posts – Chairman NHA and secretary of the communications ministry.

Another fact is that while there is so much noise against the CPEC projects in Pakistan, Planning Commission Minister Ahsan Iqbal, PML-Q Secretary General Mushahid Hussain Syed and China’s dynamic Ambassador Mr Sun Weidong are the only souls trying to clear the air about CPEC. But their burden needs to be shared by others too.

Moreover, the planning commission is only a coordinating body between various ministries and it can only facilitate the implementation process. But it has no role in CPEC.

Another factor which is hampering the facilitation process is that the active spirit in the Prime Minister’s Delivery Unit (PMU), Dr Musadiq Malik, is now is making efforts to bring under its control another special unit working in the planning commission.

The CPEC secretariat at the planning commission is headed by Maj Gen (r) Zahir Shah, and is only the actively delivering body for CPEC coordination. It has no powers but coordination and correspondence between various ministries. However, now manoeuvring is on to shift it to the Prime Minister’s House.

On the other hand, PML-N leaders claim that the government has yet failed in identifying local companies for collaboration in energy projects. They say Khawaja Saad Rafique and Khawaja Asif are being ignored in detailing transport and energy projects.

Now, if the CPEC projects face delays, the entire project might suffer badly and the costs involved may also hike, as in the case of the Nandipur Power Project.

One needs to understand that the CPEC funding of $46 billion is not a static fund or a grant. Rather it is a bouquet involving loans and grants. It is a calculated amount by Chinese companies for CPEC projects. This assessment was made in 2014 after thorough feasibility reports compiled by Chinese companies.

A roughly generalised procedure for starting a project by any Chinese company is first securing its contract in Pakistan by signing it and then going back to China to convince the Chinese banks to give the company loans to implement it.

So when President Xi Jinping asked the private firms of China to go and invest in CPEC projects, the investors visited Pakistan, got their feasibility reports complete and went back to Chinese banks seeking loans for targeted projects.

If any project suffers delays, the contract is to be renegotiated and the Chinese company would have to repeat the entire process, while the principle loan stays. Now it has been almost half a year since the loans were awarded but there is no progress on the Pakistani side to get projects implemented.

The big missing link in CPEC implementation is that the cost and utility of the projects are remotely related to each other. Just take the case of Neelum-Jhelum Hydro Project, which has been delayed since long and its cost has escalated five times over the actual amount. The cost of the project has increased many times, while there is no addition to the utility of the project.

The minister for inter-provincial coordination, Mian Riaz Hussain Pirzada, needs to be included in the CPEC management team and he should be asked to take on board all provincial governments on board

So if this $46 billion jumps to $66 billion, the number of projects would be the same. In case of delays, the Pakistani nation would bear the brunt in terms of loan payments. There is another possible scenario that the total number of projects is reduced but the cost may still escalate. This would also leave its strategic partners thinking twice before banking on it in terms of future strategic planning.

Since there are so many grants, preferential and commercial loans involved, there is a dire need to complete these projects within timelines agreed upon between both sides.

Unnecessary delays and hiccups in implementation of CPEC can even affect the mutual trust and the capacity of the Pakistani government in the eyes of the Chinese leadership. There is a need for institutionalisation of decision-making regarding CPEC implantation.

I would also like to make some suggestions to put this CPEC implementation on fast track. The government may create a dedicated ministry to help remove all procedural and technical delays to get CPEC projects implemented within stipulated timeframes. If the prime minister can keep the Benazir Income Support Program (BISP) as a dedicated ministry, why not install an autonomous ministry for ‎carrying forward CPEC implementation.

There is a need for the prime minister to immediately install a minister for communications who should be tasked to put the infrastructure and transport projects on a fast track. Moreover, the communications minister should also respond to the noise being raised by some political parties over the route controversy.

The minister for inter-provincial coordination, Mian Riaz Hussain Pirzada, needs to be included in the CPEC management team and he should be asked to take on board all provincial governments on board to help remove misunderstandings. Being a senior campaigner, Mr Pirzada enjoys respect and has influence among top political parties of the country.

China’s announcement to scrutinise all CPEC projects by its anti-corruption watchdog is a welcome sign. The announcement by China’s Vice Minister of the National Bureau of Corruption Prevention Mr Liu Jianchao to apply strict vigilance in execution of all projects of CPEC reflects the commitment of China to ensure transparency.

It would be interesting to note what areas are to be covered under the Memorandum of Understanding (MoU) to be signed this year between the National Accountability Bureau (NAB) and the National Bureau of Corruption Prevention (NBCP). Both bodies also need to jointly investigate and interrogate anyone is found involved in malpractices in the CPEC and other economic projects.

If the prime minister really wants to make CPEC a success, he must ensure that this family keeps its hands off it. It would help save CPEC.