India’s baseless objections to CPEC

Angoor khattay hain kiya?

Indian aversion to the China Pakistan Economic Corridor (CPEC) knows no bounds. Chinese President Xi Jinping’s One Belt One Road (OBOR) envisages the creation of an economic belt connecting China’s main cities with Central Asia, West Asia, Mediterranean region and ultimately to Europe. OBOR has two components ‘Silk Road Economic Belt’ (economic belt on land) and Maritime Silk Road (economic belt on water). Both components of OBOR involve passing through India and passing around India. Being ever mistrustful of China, India argues that through OBOR, China will encroach India’s sphere of influence in areas like Bhutan, Nepal, Sri Lanka, Maldives, East African Coastal Countries among others. India further contends that China’s OBOR will further strengthen its String of Pearls, which is perceived as a strategic noose through which China will develop bases like Sri Lanka, East Africa, Maldives, Bangladesh and Pakistan around India, which can have also have strategic purpose if India ever goes war with China. Additionally, according to Indian perception, the string of pearls also reduces India’s influence in the region.

CPEC, being a pilot project and integral part of the OBOR and being located in the close vicinity of India, makes it uncomfortable. The major objection which India has raised against the CPEC is that it passes through Azad Jammu Kashmir (AJK), which is disputed between Pakistan and India. The protest is that constructing a mega infrastructure on disputed territory is not advisable as per International norms. India believes that since China is funding CPEC, it will try to protect its interest in AJK, which can make China a third party in the Kashmir dispute. India has propagated that the Kashmir dispute should be resolve bilaterally between India and Pakistan.

Indian opinion builders hold that in accordance with international rules and conventions developed in various judgments, if a country has invested heavily in a disputed area, then while deciding the ownership of that area, the judgment is given in favour of the country which has invested more in that area. Thus if India and Pakistan if ever take the Kashmir dispute to an International Court, Pakistan will have the upper hand.

In a fresh spin on targeting CPEC, former Indian diplomat and now a prolific writer, Gopalaswami Parthasarathy, in his Op-Ed titled ‘The Chinese Way’ published in the March 09, 2017 issue of an English daily has made some farfetched claims regarding Chinese investments in Sri Lanka and Pakistan. Parthasarathy asserts that Chinese investments of constructing the Hambantota Port, a power plant, an airport, a cricket stadium, and a sports complex have all fallen in disarray. To rub salt in the wound, the academic insinuates that unable to repay its debts to China, Sri Lanka is handing over the power plant, Hambantota Port and possibly the airport to Chinese control in a debt/equity swap where Sri Lanka now spends 90 per cent of all government revenues to service debts. The truth is that Sri Lankans view China as a saviour and redeemer for them.

1. Parthasarathy, who has also served as India’s High Commissioner to Pakistan (1998-2000), interpolates that CPEC, will meet the same fate as Chinese investments did in Sri Lanka. The erudite scholar propagates that given the realities in and surrounding Pakistan, Gawadar will almost exclusively be a strategic naval base for China and Pakistan astride the Straits of Hormuz, with limited prospects of commercial use.

Seditiously, Parthasarathy surmises that CPEC is now leading to doubts about the project, with a total lack of transparency and realism about the terms and conditions. He is partly correct that inter-provincial rivalries have also risen, with concerns that the prime beneficiary of the project will be the dominant Punjab province, with little or no economic benefit for the already alienated people of Balochistan. The fact is that the current political dispensation in Islamabad has already put such fears to rest.

The Indian scholar construes that studies by Pakistani analysts have led to some startling conclusions. With a substantial portion of the Chinese investments focused on power projects, the viability has been examined based on interest rates charged by China Development Bank and China EXIM Bank. Official documents have revealed that with an estimated debt-equity ratio of 75-25 percent, the cost of borrowings could surge to 13 per cent by including insurance costs, as the China Export and Credit Organisation charges 7 per cent fee on insurance for power projects. Interestingly, China is providing concessional finance for only 3-5 per cent of the project. Parthasarathy maliciously avers that the entire Chinese approach, as always, is crassly mercantilist.

An Indian daily also goes to extent of falsely propagating that Pakistan government sources from its Planning Commission, which oversees CPEC projects, have averred that only Chinese investors would be allowed to invest in special economic zones under the CPEC. There is no provision to protect Pakistani business interests. Moreover, there are no assurances that the Chinese would utilise Pakistani labour in any meaningful manner in these projects. On the converse, Board of Investments in Pakistan (BOI) assures that it is an active member of working group on Industrial parks special economic zones of the CPEC which is mandated to identify potential feasible sites for consideration by Joint Working Group. BOI, in consultation with all stakeholders, has identified potential sites in all provinces from Khunjerab to Gawadar to establish Special Economic Zones alongside the corridor. Each economic zone will target specific products and services based on the availability of local raw material, work force and other such factors. Establishment of these zones will attract local & foreign investments and generate huge employment.

It is unfortunate that some Pakistani analysts too lend credence to the odious disinformation campaign by Indians to discredit CPEC. Contrarily, Pakistani officials predict that CPEC will result in the creation of upwards of 2.3 million jobs between 2015–2030, and add 2 to 2.5 percentage points to the country’s annual economic growth.

Apropos the interest rates, approximately $11 billion worth of infrastructure projects being developed by the Pakistani government will be financed by concessionary loans, with composite interest rates of 1.6%, after Pakistan successfully lobbied the Chinese government to reduce interest rates from an initial 3%. According to another daily’s report of September 3, 2015: ‘Economic corridor: China to extend assistance at 1.6 percent interest rate, “Concessionary loans will be dispersed by the EXIM Bank of China, China Development Bank, and the ICBC.” For comparison, loans for previous Pakistani infrastructure projects financed by the World Bank carried an interest rate between 5% and 8.5%, while interest rates on market loans approach 12%.

India tried its best to develop Iranian port of Chabahar as an alternate to Gawadar and woo central Asian States and Afghanistan to steer clear from CPEC but now Iran itself has expressed interest in joining CPEC. Russia and the Central Asian States are already on board.

Perhaps it would be prudent for India to become a part of CPEC rather than oppose it with whimsical and fallacious objections.