CPEC phase II

• Expectations, challenges and worries

CPEC is presented as a game changer that would address some of the major vulnerabilities of Pakistan’s economy in the coming 10 to 15 years. Besides ending the country’s power shortages, it would lay down a network of highways and railways that would improve domestic inter-connectivity while at the same time linking Pakistan with the BRI network connecting Asia with Europe. Over the years CPEC is expected to introduce a crucial social transformation. The trade avenues opened by the CPEC, it is hoped, would encourage Pakistan’s military establishment to give primacy to economic development and regional trade thus creating conditions for a gradual transformation of Pakistan from a national security state into a people’s welfare state.

A high level two-day session of talks is opening today between China and Pakistan on CPEC’s Long Term Plan (LTP). The Plan’s main focus is on nine special economic zones (SEZ’s) along the CPEC stretch in Pakistan which will bring in investment, raise productivity and provide tens of thousands of jobs. Investors in the SEZ’s would be offered 15 to 20-year tax holidays. The Chinese side would start investing in the SEZs immediately after the clearance to avail benefits of tax exemption.

Pakistan however has yet to complete its homework. Potable water has still not been provided for Gwadar port city. A number of SEZ plans in Balochistan, Sindh and Punjab are still under process. The center-province dispute over 1,500 acres of Pakistan Steel Mills stands in the way of development of an industrial park. A similar dispute around the Karachi Circular Railway hinders the commencement of the project. Unless the administrative hitches are urgently removed, Pakistan will not be able to gain maximum benefit from the CPEC.

The federal government has long kept the CPEC plan a state secret which was shared with the provinces only after a long and unnecessary squabbling. The secrecy over the interest rate agreed between the government and the Chinese banks, total sum of loans acquired and their schedule of repayment need to be made public. This is required all the more to respond to the criticism that CPEC imposes an unsustainable debt burden.