Clarifying CPEC

Country's politics thrives on conspiracy theories. One may recall the so-called secret clauses of the Tashkent declaration and Simla agreement signed between Pakistan and India after 1965 and 1971 Wars, respectively. The details of these agreements were kept confidential for a long time. But, when revealed there was not much more to add to public curiosity than what had already been in the knowledge of public through piecemeal media leaks.
Early this week, CPEC's long-term plan was formally launched and its details were made public. How much of it has been revealed for public consumption and retained as state secrets constitutes a question. Nevertheless, it is a good beginning considering the fact that whatever has been made public was, by and large, already in public knowledge and subject of discussions and debates. The difference is that it is now officially in public domain, putting to rest some wild speculations about the project. The governments of both countries ought to have taken this step long ago.
The plan underlines that CPEC is going to be transformative, shall speed up industrialization and the urbanisation processes across the country and is good for both the nations.
The plan has put to rest the speculations regarding Gwadar by clarifying that it is more of a business deal than forfeiting Pakistan's rights over it. The operation and management contract of the port city has been awarded to China on a 40-year lease on BOOT basis with a margin of 9 percent of the earnings fee for Pakistan while all investments are to be made by China. It is more or less on terms on which the Singaporean company was earlier working on.
The plan clarifies that most of the development projects that CPEC will undertake are based on loans, negating government's earlier announcements through which it described these loans as investments.
Some critics often cite the example of Sri Lanka, where China invested $8 billion and upon Sri Lankan government's failure to repay the debt it entered into an agreement with China and ended up leasing out its island port to China for 90 years. They express the same fear for Gwadar.
The example of Sri Lanka has absolutely no relevance in Gwadar mainly because of the fact that Pakistan is under no loan obligation and is instead on the receiving end of 9 percent earnings which is a reasonable return. The pressure to make it work is only on China.
Further, most of the loans secured from the Exim Bank of China are dedicated project loans and the worst scenario could be that if the project fails it will turn out to be a bad loan. But this risk lies with the Chinese lenders and project sponsors and not with the government of Pakistan.
The 26-page document of the Plan released by the government is reported to be only an abridged, abbreviated and heavily edited version of the longer document.
Apart from highlighting the energy and infrastructure projects whose details are well known, the plan presents basic business guidelines such as:
-- Pakistan will encourage Chinese enterprises, private sectors and private sector funds of other economic entities to make various forms of direct investment.
-- Effective ways shall be explored for Pakistan's federal and provincial governments, enterprises and financial institutions to conduct RMB financing in Mainland China, Hong Kong and other offshore RMB centers.
-- Both countries shall promote the mutual opening of their financial sector and the establishment of financial institutions in each other; encourage financial institutions of the two countries to support the financing, including the loans from international consortium of banks, for the projects along the CPEC; establish and improve a cross-border credit system, and promote financial services such as export credit, project financing, syndicated loan, trade finance, investment bank, cross-border RMB business, financial market, assets management, e-bank, and financial lease; support the project financing by RMB loans, and establish the evaluation model of power bill in RMB."
The Minister Ahsan Iqbal had said that the government is considering accepting the Chinese proposal to use renminbi (RMB) instead of the US dollar for payments in bilateral trade.
Another important news is that the government has recently rejected a Chinese proposal to allow Chinese yuan as a currency in Gwadar city, mostly developed by the Chinese, as the offer strengthens doubts about China's investments in Pakistan.
The new move about the use of RMB as a currency for bilateral trade has been generally welcomed by importers. Exporters, however, have not shown any enthusiasm in this regard.
"The government takes decisions unilaterally without paying attention to other stakeholders such as traders and industrialists," said Javed Bilwani Chairman SITE Association of Industries and a fashion apparel exporter.
He said that recently a regulatory duty was imposed on certain imports to cut the trade deficit, however, several raw materials were also included in these imports and the government is now trying to resolve the issue.
"We were not consulted at the time of imposing import duty and we are not being consulted over the Chinese proposal of making RMB the currency of bilateral trade. No calculation is available to guage the impact of this move on our businesses," he said. However, he added, that overall there seems to no loss in accepting the Chinese proposal.
He said the imports from China are much higher than the official figures and the Chinese customs is not ready to cooperate with Pakistan in disclosing the size of under-invoicing from China. While many traders have supported the RMB proposal, some have expressed reservations.
The CPEC long-term plan has failed to ease the concerns of critics regarding the overall impact of the project in the best interest of Pakistan.
CPEC's detractors in Pakistan must not lose sight of the fact that China is an economic and political giant next door with massive global influence. CPEC has come to stay. The way forward is to understand its dynamics and secure the best of it. Last but not least, the country's leadership is expected to display its responsibility in the best national interest. Extensive debates and media intervention are healthy signs of a nation aspiring to be democratic in letter and spirit. Pakistan is now very much on track. The ruling party needs to be supportive of healthy criticism of its policies.
(The writer is former President of Overseas Investors Chamber of Commerce and Industry)