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The US has decided to confront China in every aspect of human endeavour to keep what Washington regards as the 'free world' from being sucked into its perceived trap of 'subjugation' which China is supposed to be constructing clandestinely. Take for instance China's Belt and Road Initiative (BRI) which, according to Beijing's explanation, has been launched to compress global market, bringing it within reach of every country, big and small.

On the face of it, hardly any ulterior geopolitical motive could be detected hidden in the BRI. But the US feels that there is one using which, Washington believes, China proposes to take over the so-called 'free world'. Therefore, the US has started mobilizing its friends under the rubric of "Build Back Better World" to counter the Chinese 'onslaught'.

Keith Johnson writing for Foreign Policy magazine (Belt and Road Meets Build Back Better, published on October 4, 2021) says that since Xi announced the "One Belt, One Road" initiative or BRI in 2013, hundreds of billions of dollars, tens of thousands of Chinese workers, and scores of Chinese companies have descended on countries like Pakistan, Thailand, Myanmar, and Djibouti to build what these countries need: power plants, pipelines, ports, and connectivity.

"Countries on the receiving end of Chinese investments either tilted toward Beijing (as Greece did after major Chinese investments in the Port of Piraeus) or defaulted to the East, as Sri Lanka did when it handed over control of the Hambantota port complex to Beijing for the rest of the century after being saddled with unsustainable debt.

"Initially, the Western response was either a quest for cooperation or chiding and consternation. That began to change a few years ago. The United States moved, trotting out a new initiative with G-7 countries to promote infrastructure development that could provide an alternative to the Belt and Road Initiative. For funds it turned to the straitjacketed Overseas Private Investment Corporation, which channels private investment into overseas ventures, into a beefed-up U.S. International Development Finance Corporation, doubling its war chest to $60 billion.

Since the US and its G7 allies have decided to enter into competition rather than cooperate with China's BRI, the launching of what has been termed as the B3W initiative, loaded arguments have ensued from interested quarters belonging mostly to Western sources to show that the projects so far launched under the BRI were not only economically unviable but they would also end up adding to the mounting burden of debt on these countries.

The China Pakistan Economic Corridor (CPEC) costing around $60 billion and launched in 2017 has also been "condemned" for the same perceived reasons by these very sources. It is being projected as an attempt by Beijing to ultimately turn Pakistan into an economic colony of China rather than improve, as per the wishes of Islamabad, the country's capacities to safeguard and protect its economic sovereignty and lessen its dependence on foreign 'assistance'.

Shedding selective light on Beijing's global programme, a report released early this month by AidData, a US-based international development research lab, has listed the following 'negatives' in the CPEC project:

The interest rate is 3.76pc for an average loan with 13.2 years' maturity and 4.3 years of grace period. Pakistan received about half of all Chinese development finance in the form of "export buyer's credit" i.e. money lent by Chinese institutions to Pakistan in order to facilitate the purchase of equipment and goods to be bought by Chinese implementation partners. As much as 40pc of China's lending to Pakistan is now directed to state-owned companies, state-owned banks, special purpose vehicles, joint ventures and private sector institutions. These Chinese loans do not appear on the government's books "for the most part".However, they often benefit from an explicit or implicit form of government liability protection, which blurs the distinction between private and public debt, noting that the government has issued sovereign guarantees in some cases. This means the national exchequer will repay the loans if non-government borrowers fail to generate sufficient revenue to meet their financial obligations. In other cases the government has provided a so-called guaranteed return on equity to borrowers. This type of guarantee is effectively a form of hidden debt to China. These financial arrangements are attractive to the government because they need not be disclosed as public debts with the economy already in the "danger zone" based on the public debt-to-GDP ratio of 92.8pc. Chinese loans under CPEC constitute 95.2 per cent and 73pc of total commitments in energy and transport sectors, respectively.

Pakistan's official counter narrative: All CPEC projects are fully transparent and involve zero hidden loans. All projects are Nepra (National Electric Power Regulatory Authority) and NHA (National Highway Authority) approved. Nepra and NHA websites show capital costs of all projects, including Chinese financing. China is outspending the United States in Pakistan by 8.4 times as opposed to only 0.68 times in 2002. While Chinese financing has mostly been in hard infrastructure sectors like energy and transport, US assistance in the same period has focused more on civil society, social infrastructure, education, etc. Even at the height of Pakistan's crippling energy crisis during the mid-2010s, only around 10pc of US development assistance to Pakistan was in the energy sector. The country is leveraging China's expertise in agriculture and IT sectors. The Chinese investment is balanced across the four provinces. Maximum focus is, however, on Balochistan. The western route being developed under CPEC will benefit the most impoverished and far-flung areas of the province. Gwadar is witnessing huge development and a marketing plan is being devised to further develop the Gwadar Port. Pakistan had a debt servicing and debt sustainability challenge but not a China debt problem. Information on CPEC projects have been shared with the Senate and the National Assembly committees maintaining as well parliamentary oversight. Data on energy and power projects was available with Nepra. The government has provided information about CPEC to the International Monetary Fund at the start of its programme. Sovereign guarantees were provided to all independent power producers - whether domestic or foreign - and nothing new was created in this and neither is it a secret. There are various other projects where the government utilised measures such as sovereign guarantees or standby credit to support the private sector in making investments instead of putting up its own cash. CPEC loans for private power projects were comparatively cheaper than loans from other international agencies such as the World Bank or the Asian Development Bank. Majority of loans for infrastructure projects were taken at a concessional rate of two per cent. China has provided various grants as well for different CPEC projects and if they were included then the average rate of the government-to-government loan comes down to less than 2pc. Chinese debt comprised only 10pc of the country's general debt (domestic and foreign) and 26pc of its external debt. So it doesn't endanger Pakistan. Pakistan's debt sustainability challenges are not due to Chinese loans but because of country's own internal challenges. No preferential treatment was being given to Chinese investors. The same conditions were devised and offered to the world for setting up power projects. Only Chinese investors came to set up power plants under those conditions. So this policy was not made just for the Chinese but for the whole world. The progress made on CPEC projects has been largely satisfactory and there was no criticism on the rate of progress from the Chinese quarters as well. The first phase of CPEC infrastructure projects was not intended to generate employment. Jobs would be created from new projects starting soon, such as industrialisation ventures, industrial investment, manufacturing and agricultural projects. Public transport the world over is subsidised. So, is Lahore's Orange Line Metro Train System.

Both the AidData and the Government of Pakistan are interested parties. Therefore, the respective narratives of the two on the CPEC project need to be read with as much critical appreciation as possible.

If so far CPEC has not been able to revitalize Pakistan's economy, the fault does not lie with the project but with Pakistan itself for having failed to take full advantage of the project. We urgently need to train our manpower in the skills that are needed to adopt and adapt to the new technologies that CPEC is bringing into Pakistan so as to be able to make the most of the 'economic corridor in the making' at a faster rate.

Pakistani private sector is not taking full advantage of the concessions being offered to the CPEC projects not because it has been denied these concessions but because by nature it is a rent-seeking entity. It evades taxes and pilfers utilities like electricity, gas and even water. That is not possible when you invest in a CPEC project. Also when you can double your profits overnight by investing in real estate why would you invest in industrial and manufacturing ventures with gestation periods of three to five years when you start earning profits, if at all?

Copyright Business Recorder, 2021

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