CPEC: risks ahead

The verdict on the extent to which CPEC will be affected by the growing political crisis is still out there. The CPEC was born out of the womb of security and strategic interests and as such, it continues to be seen from that lens, which implies that political instability should not result in discarding the idea of the corridor.

However, there is no denying that political stability at home is paramount to ensure that things move as per the envisaged plan, especially at a time when China has been tightening administrative measures to curb capital outflows in general and outward FDI (OFDI) in particular.

Those following this space would recall the red flags this column raised on June 30, 2017. It highlighted how China’s public and private sector outward investments are slowing across the world. The piece titled ‘Chinese OFDI’ cautioned stakeholders about its possible impact on the CPEC.

“The impact of slowing Chinese OFDI on CPEC may be none or insignificant in the short term, since a decent size of CPEC deals are backed by Chinese state-led firms. But if Chinese private sector is indeed put under strict deal-specific or firm-specific administrative reviews then the so-called private sector spillover of CPEC may not be as high as is being hoped for by certain quarters,” that column concluded.

In latest development, fDI Intelligence, the FDI portal of the Financial Times group, says that signs of a slowdown in Chinese outward FDI (OFDI) are very much expected. “Chinese signals on outbound investment and outbound capital movement suggest that its policy may become increasingly restrictive (again), leading to a decline in Chinese outward FDI which would bring down global FDI,” says the group’s latest annual FDI report, enlisting it as one of top six factors influencing global FDI.

While uncertainty hangs over Pakistan’s investment environment, the FT’s report says that India has to keep the crown as the world’s number one location for Greenfield capital investment for the second year running – ahead of China and the US; she attracted $62bn- worth of FDI projects announced in 2016.

The moral of the story isn’t to suggest that former PM Nawaz is critical for FDI; but that political stakeholders from across the spectrum should ensure that Pakistan’s fragile journey on the road to economy recovery is not sacrificed at the altar of political egoism.