EDITORIAL: The China Pakistan Economic Corridor (CPEC) Authority Chairman, Khalid Mansoor, briefed senior representatives of Chinese companies on developments and opportunities available in Pakistan.
The criticality of this initiative may be gleaned from the fact that in recent months Chinese companies have increasingly expressed their concerns over their treatment by the Pakistan authorities ranging from failure to release payments to power sector projects as per contractual obligations, a lapse that is compromising these companies’ ability to pay dividends which in turn is the major lacuna in approval by the Chinese insurance companies for Phase-II projects, to charges of the cost of these projects being much higher than available internationally to failure of the government to release counterpart funds to provision of the necessary infrastructure at agreed rates.
The list is indeed exhaustive especially given the context of two obvious factors with respect to the CPEC: first and foremost, Chinese investment under CPEC’s umbrella remains the major source of investment in Pakistan, be it as debt, government guarantee or repatriable profits. And second, the Chinese interest to set up Chinese-owned productive units in Pakistan’s special economic zones (SEZs) with the specific objective of exporting to other countries is widely believed to have the capacity to become a major export source for the country.
These objectives remain unmet as the PTI administration continues to face difficulties in terms of meeting its contractual obligations to the companies no doubt due to the lack of adequate resources. In this context, one would hope that the government prioritizes due payments to Chinese companies because it would empower the companies to pay dividends which in turn would get them approval from insurance companies for future projects in Pakistan.
One way to generate revenue would of course be for the government to impose taxes on items that are a health hazard like in other countries, particularly tobacco and sugary drinks, as suggested by the Prime Minister’s Special Assistant on Health.
Adviser to the Prime Minister on Finance Shaukat Tarin’s deferral to entertain this proposal for seven months based on the fear that this would be seen as a mini-budget is inexplicable as one would not have expected a technocrat to give more weight to political as opposed to economic and health considerations.
Mansoor stated that four of the nine agreed SEZs along with Gwadar free zone are at an advanced stage of development; however, this claim was periodically noted by his predecessor as well as several cabinet members however on ground situation was that work on SEZs was not complete. In addition, providing cheaper utilities to exporters, particularly gas and electricity, remains pending.
Of particular concern is the fact that mismanagement by the team at the helm in the Energy Ministry second year running accounts for failure to import adequate RLNG on time, which is expected to lead to a severe gas shortage this winter that, reports indicate, will translate into load (gas) shedding to all consumers, including exporters.
To conclude, there has been many a slip between the cup and the lip and unless a dedicated and concerted effort is not made to prioritize the CPEC and deal with Chinese concerns this major source of economic activity in the country may well peter out with implications on growth, employment and exports — after all, the CPEC, according to Khalid Mansoor, is our last chance for industrialisation.
Copyright Business Recorder, 2021