Pakistan’s debt trap 2.0
The China Pakistan Economic Corridor (CPEC) continues to find itself in controversy. In this regard, two narratives have run parallel: one is aimed at highlighting the project’s potential in terms of regional and domestic economic prosperity while the second is associated with Pakistan’s internal political, security and economic dynamics that continue to persist as a challenge.
Two things stand out as far as the project’s successful implementation is concerned: one, Beijing has never invested in places where it doesn’t stand to gain commercially or militarily. Therefore, the billions of dollar worth investment in Pakistan was not the result of an impromptu vision; rather a well thought out policy rests behind the mega funding where China stands to gain on global scale. Moreover, it’s obvious that Beijing wants to see the project come through for only then its “One Belt One Road” regional and global project can ascertain its effective relevancy. Second, the successful implementation of CPEC – as mentioned above – by and large depends on Pakistan’s internal challenges rather than external pressures.
For Pakistan, the challenge begins with the terms of bilateral lending where Pakistan remains at loss for apparently the entire ownership of the plan has been leased out to Beijing. While the government remains reluctant from releasing the strategic details of the project, it’s evident that majority of the loans offered to Pakistan by Chinese private and the state controlled firms would like to see their stakes continue after the commercial route becomes operational. Moreover, in this regard, lenders would also make sure that the loans returns and the revenues generated through other – mostly energy – projects do not entirely go to Pakistan; rather, part of it should come back to China which puts Islamabad’s interests at stake.
The negotiations in this regard have been conducted poorly by Islamabad. Recently, the IMF in its evaluation of the CPEC’s repayment procedure warned that Outflow of revenues and loans from Pakistan “will also come in the form of repayment obligations on the loans taken from Chinese banks for these projects, which are expected to rise after 2021. Both of these, repayments and profit repatriation could reach about 0.4 per cent of GDP per year over the longer run”.
Moreover, the explicit danger and dilemma that seems to be shaping in the CPEC’s wake is Pakistan’s continuous dependence on foreign loans which have historically remained a major hurdle in the country’s successful independent economic development. Besides Chinese investments, apparently, Pakistan’s leadership doesn’t have any viable major economic plan to shape the country’s economic future. Instead of diversifying Pakistan’s economy and strengthening the existing indigenous economic structures, the country’s political leadership has engrossed itself in a new cycle of foreign dependence – with a difference that this time money comes from the East rather than the West. .
While the project promises to inject some lifeline to the country’s collapsing economic system, the question remains: why Pakistan’s leadership always have to rely on foreign initiatives and economic plans to ensure the country’s survival and economic prosperity? For China, Pakistan’s territory only fulfills its regional and global economic plans while for Pakistan, it only highlights the country’s reliance on foreign economic agendas for its survival. The “romanticisation” of China-Pakistan friendship is nothing more than “one way traffic,” where Pakistan continues to remain just another country’s that absorbs and facilitates Beijing’s export inflows.
Besides the abovementioned concerns, the other challenges related to political and security instability are likely to remain for the foreseeable future. The unresolved issues connected with unfair distribution of resources under the CPEC still continue to figure once in a while. So far, Beijing has intervened number of times to express its concerns over such disagreements. Pakistan’s smaller provinces continue to lament over the economic corridor’s Punjab favored orientation where the share of projects in regions such as KPK and Baluchistan have been minimised.
On security front, the challenge remains with the volatile situation in Baluchistan. The military has promised to assemble a special military force to protect the CPEC route, but in the long run, it doesn’t reflect as a viable solution: “The corridor passes through what is currently the heart of the insurgency,” said the economic adviser to Baluchistan’s Chief Minister recently while adding that the notion that the special military force can successfully protect the route is “laughable”.
Moreover, while the Gawadar port is said to become a future economic hub, the district, which is the nucleus of the entire project, remains a neglected area on its periphery. “The whole area has been captured by the government with local people pushed aside,” said the area’s local resident. Moreover, it likely that such policy will further hinder the province’s reconciliation efforts to bring back the so called angry Baloch leaders, which have persistently rebelled due to the state’s much debated policy of alleged unfair treatment.
With all of its promises and episodic celebrations, the project underscores Pakistan’s policy failures that have remained stuck with the country’s leadership as a stigma.