CPEC: 8th JCC

The 8th Joint Cooperation Committee (JCC) meeting was held late last week, but sentiments among business and policy community are still lukewarm, with many observers pointing to the obvious absence of any mega project announcements. Some are already calling it a failure. But that is not necessarily a correct reading of the 8th JCC.

To begin with, the Planning Minister Khusro Bakhtiar had stayed back in China after the 8th JCC, for some follow up interactions with Chinese public and private sector to take a pulse reading for the prospective industrial cooperation between the two sides.

The press conference is expected today or tomorrow where the minister is expected to make announcements. Consider also that this government so far has not displayed the best of communication and branding skills.

But Khusro’s announcements will still not be ‘mega project’ announcements, save for the news of finalisation of few power projects such as two small projects in Gilgit-Baltistan which will be consumed in that territory and won’t even need a separate evacuation project to connect with national grid. And there may be three reasons behind it.

First, Islamabad is still struggling to finalise the IMF bailout where the government is not reportedly agreeing to the IMF’s condition of full disclosure of CPEC projects. Even if new mega projects were discussed, it would be best not to finalise or even announce it right now, given the current scheme of things; mega projects after all come with their own mega financial implications.

Second, more importantly, Pakistan is still trying to complete the early harvest projects that were planned to be completed or reach at least some promising shape by 2018. These early harvest projects were mostly energy and infrastructure projects. The second phase of CPEC was already expected to create less photo-opportunity, being the softer aspects of economy.

Add to that the third factor, that the PTI has a positive bias towards social sector development, if the party’s choice of public sector spending in Khyber Pakhtunkhwa in the last five years is any guide.

From Pakistan’s side, two of the main items on the JCC agenda this time around were cooperation in agriculture and social sector. In the case of former, the two sides are expected to sign a framework agreement for agriculture cooperation in April 2019, where yield increase, joint marketing, co-branding for exports and other aspects will be on the agenda.

In the case of latter, poverty alleviation, health, and education are some of the key areas of cooperation, where working groups from the two sides are expected to sit together early next year and chalk out a “mega” scholarship plan in consultation with the Higher Education Commission Pakistan.

A similar exercise is expected in the case of power sector. China will soon be sending its expert group on power to Islamabad to sit with their Pakistani counterparts for a review of power demand-supply by March 2019. Whether or not further power projects will be put in place under CPEC depends on findings of that review.
A key area that Khusro is expected to announce is the MoU on industrial cooperation, where the PTI is aiming to create a framework of cooperation between Chinese and Pakistani private sector. To that end, the Board of Investment will be setting up a CPEC unit under its wing by February 2019, whereas the groundbreaking of two SEZs is also expected in 2019.

The ‘great achievements’ after the groundbreaking of other SEZs are already quite famous so one cannot be too sure of what two new groundbreakings will achieve, but to give the devil its due, the MoU for industrial cooperation was long overdue, and the signing of that MoU is an important step towards a framework agreement on industrial cooperation by April 2019.
Whether or not the PTI will stand true to its claims and promises of transparency and make public the said MoU and framework agreements will be a great test of character.