Beijing and Islamabad recently celebrated the tenth anniversary of the ambitious USD 62 billion China-Pakistan Economic Corridor [CPEC] and complimented each other for the spectacular progress this project has made. While this project has promoted infrastructural development in the power generation and surface communication sectors, it most certainly hasn’t measured up to Beijing’s oft-repeated claim of being a ‘game changer’ for Pakistan.
Au contraire, CPEC has been viscously plagued by time overruns resulting in burgeoning budgetary escalations. To add to these woes, inexplicable opaqueness in the terms and conditions of contracts as well as interest rates on loans extended to Islamabad by Beijing makes an accurate cost-benefit analysis of this project extremely difficult. Nevertheless, information available in the public domain does suggest that things may not be as hunky-dory as being portrayed by both Beijing and Islamabad.
On paper, CPEC is a brilliantly conceived initiative incorporating “early harvest” projects for speedy provision of basic facilities to the people of Pakistan and simultaneously generating income for the government into three phases [short, medium and long-term]. While the short-term phase [2015-2022] focussed on infrastructure, energy and port development projects, creation of 33 special economic zones [SEZs] were planned to be executed in the medium phase. The third phase is yet to commence formally.
While several independent power projects [IPPs] being operated by Chinese companies have come up in the first phase, electricity is still not available to many living in remote areas due to inadequate power distribution infrastructure. To make matters worse, instead of generating revenue for the government, CPEC’s power generation project has created a ‘circular debt’ in Pakistan due to unpaid government subsidies and this leads to debt accumulation in power distribution companies.
Quoting data released by Pakistan’s Power Division of the Ministry of Energy, Dawn, has disclosed the total circular debt of Pakistan [as on March 2024] was a whopping Rs 3,000 billion. There have been several allegations of over invoicing by IPPs resulting in exorbitant per unit cost of electricity as well as huge transmission losses. Furthermore, thermal power plants created as part of CEPC utilise imported coal and the regular requirement of foreign exchange to procure the same further depletes Pakistan’s already woefully scarce foreign exchange reserves.
Port Qasim Electric Power Company Ltd, an ‘early harvest’ IPP owned by China’s Sinohydro Resources and Qatar’s Al Mirqab Capital Ltd which runs a 1,320 megawatts power plant using imported coal. The fact that in May last year, this IPP served a payment default notice of USD 263.5 million on Pakistan’s Central Power Purchasing Agency, illustrates how CPEC is slowly turning out to be a liability of sorts. It also indicates that the patience of Pakistan’s ‘Iron brother’ is fast running out and this isn’t the first such incident.
In September 2021, while presiding over Pakistan’s Senate Standing Committee on Planning and Development, its chairman Saleem Mandviwalla disclosed that the “Chinese ambassador has complained to me that you have destroyed CPEC and no work was done in the past three years.” [Emphasis added]. Beijing has also publicly expressed its annoyance on several occasions as regards the Pakistan Army’s dismal failure to prevent attacks by Baloch freedom fighters on its nationals working on CPEC projects.
Another issue riling Pakistanis is that the promise of employment opportunities on a large scale has turned out to be a damp squib. While some data has been furnished by Beijing and Islamabad, but in absence of any independent verification, the same can’t be relied upon as there’s a wide disparity in the official data. While Chinese official state media estimates that about 1,55,000 Pakistanis are working on various CPEC projects, Pakistan’s erstwhile minister for planning, development and reforms Ahsan Iqbal estimated that CPEC has created more than 2,30,000 jobs!
Excessive restrictions on movement and frequent military operations in Balochistan, purportedly for ensuring security of CPEC projects and Chinese workers, result in indiscriminate arrest of innocents and enforced disappearances on mere suspicion cause untold miseries to locals. In addition, with Chinese fishing mafia using sophisticated trawlers in the area, the traditional fishermen of Gwadar have been deprived of their traditional vocation, while security fencing in this area has literally made Gwadar ‘out of bounds’ to locals.
Institutional repression of Baloch people has not only led to an escalation in attacks on CPEC assets and Chinese workers but also inspired the immensely popular ‘Haq Do Tehreek Balochistan’ [give us our rights movement of Balochistan] non-political mass public campaign. The fact that Baloch women who traditionally avoided participation in public rallies and stayed indoors came out in great numbers to protest against the Pakistan Army’s highhandedness indicates the gravity of the prevailing situation. Speaking in the Senate, PML-N’s Senator Kulsoom Parveen lamented that “the people of Balochistan have not gained anything from the [CPEC] project” and aptly echoing their disillusionment by adding that “Maybe, the people of Balochistan will only be given jobs to fix punctured tires”!
While CPEC has undoubtedly brought about development, the costing of this mammoth project is one of the major factors responsible for pushing Pakistan into the inextricable morass of financial instability. So, the question arises is- whose interests does the CPEC primarily serve? A quick project intention internet search of CPEC offers two answers.
Popular Indian educational technology company BYJU’S opines that “The project intention of CPEC is to rapidly upgrade Pakistan’s important infrastructure and strengthen its economy by the construction of energy projects, special economic zones, ports, and transportation networks.” [Emphasis added]. However, even after more than a decade, neither has CPEC resulted in a rapid infrastructure upgrade, nor has it strengthened Pakistan’s economy.
On the other hand, Wikipedia maintains that “This sea-and-land-based corridor is aimed to secure and reduce the passage for China’s energy imports from the Middle East by avoiding the existing route from the Straits of Malacca between Malaysia and Indonesia which, in case of war could be blockaded, and thus hamper the Chinese energy-dependent economic avenues.” [Emphasis added]. Being a more practical assessment, this reasoning is certainly more convincing.
Accordingly, while it would be incorrect to consider CPEC a white elephant for Pakistan, it would also be equally naïve to believe that the driving force behind this extremely cost-intensive project is Beijing’s love for its ‘iron brother’ Pakistan. The harsh reality is that CPEC is primarily meant to serve Beijing’s commercial interests and any benefits from it that may come in Pakistan’s way are just incidental.
Because had CPEC indeed been truly Pakistan centric, then why [in the words of the Chinese ambassador], “no work [on CPEC] was done in the past three years” by Islamabad? And if this project was not primarily meant to serve Beijing’s interests, then why did the Chinese ambassador get so agitated and complain to the Chairman of Pakistan’s Senate Standing Committee on Planning and Development that “you have destroyed CPEC”?
