China appears to be pulling back on its initial financial promises to Pakistan under the Beijing-funded China-Pakistan Economic Corridor (CPEC), a $ 60 billion infrastructure construction plan, amid mounting corruption and terrorist attacks on Chinese engineers.
According to the Asia Times, the Pakistani army will control the CPEC almost entirely to reassure Beijing that its investments will be safer in the face of terrorist attacks on Chinese engineers and others who facilitate the infrastructure projects.
The new bill comes at a time when reports suggest China is slowly pulling back on its promises.
Total loans from the state-backed China Development Bank and Export-Import Bank of China fell from a high of $ 75 billion in 2016 to just $ 4 billion last year. The preliminary figures for 2020 show that the amount has shrunk to around $ 3 billion in 2020, according to researchers at Boston University in the United States.
The tightening of the belt is believed to be in line with Beijing’s so-called “rethinking strategy” for its $ 1 trillion BRI, due to “structural weaknesses” such as opacity, corruption and overlap with poor countries leading to “debt traps.” “lead, under attack” and adverse social and environmental impacts, said Boston University researchers.
Pakistani Prime Minister Imran Khan, whose government has been criticized for being under military control, is also facing anti-aircraft guns in his country for failing to prioritize and accelerate Chinese infrastructure investments, Asia Times reported.
In 2018, Imran Khan suspended several CPEC projects suspected of corruption by the previous government. Two years later, however, several of his cabinet members were named in major corruption scandals involving the country’s energy sector. Around a third of Pakistani energy companies are involved in Chinese projects under the CPEC.
The 278-page investigative report, compiled by the Securities and Exchange Commission of Pakistan (SECP) and submitted to Imran Khan in April, revealed suspected irregularities of over $ 1.8 billion in subsidies to 16 independent power producers (IPPs), including those who include Imran Khan’s advisors Razak Dawood and Nadeem Baber, Asia Times said.
The SCEP also examined the profits of the Chinese energy companies. The report found that Huang Shandong Ruyi Pakistan Ltd. (HSR) and Port Qasim Electric Power Co. Ltd. (PQEPCL) were overpaid by 483.6 billion rupees ($ 3 billion).
Meanwhile, terrorists in Balochistan Province have stepped up their attacks on CPEC projects and Chinese nationals working on them, adding to the projects’ security costs and political risks. Islamabad’s attempt to give the military more control over the system is a clear attempt to allay China’s growing security concerns.
A high-ranking source in the Pakistani Ministry of Planning told the Asia Times, on condition of anonymity, that Beijing has agreed in principle to allow Pakistan to set up a new joint venture mechanism with companies other than Chinese state or private companies in order to advance the CPEC Project, including a billion dollar railroad upgrade.
“We definitely need foreign investors to raise funds for the mega-CPEC projects, including the refurbishment and modernization of the Karachi-Lahore Peshawar Railway Track (ML-1) valued at $ 6.2 billion and a half a dozen special economic zones the width and breadth of the country, “the source said.
The much-touted 1,872-kilometer ML-1 project is moving at a snail’s pace as China is unwilling to finance the project with a low return on investment of 1%. China is also reportedly dissatisfied with the government’s decision to cut the cost of the project from $ 8.2 billion to $ 6.2 billion due to the rising debt burden.
The slow execution of CPEC top-line projects, largely due to China’s lack of funding, was of major concern last month, according to a meeting between newly appointed Chinese Ambassador Nong Rong and Pakistani Foreign Minister Shah Mehmood Qureshi in Islamabad.
If China adheres to its original CPEC commitments, it would establish and finance at least eight Special Economic Zones in all four Pakistani provinces, as well as Islamabad Federal Territory, Port Qasam Federal Territory, and Pakistani-administered Kashmir and Gilgit-Baltistan, the Pakistan, recently funded as a province explained. Another SEZ is being built in Gwadar.
The Institute of Policy Reforms (IPR), a Lahore-based think tank run by Hamayun Akhtar Khan, Senior Leader of Pakistan Tehreek-e-Insaf (PTI), claimed in a recent report: “Pakistan is because of the failure government to bring about reforms and poor financial management. “
In a research report titled “Pakistan’s Debt and Debt Service Are Concerning”, the IPR summarized: “We are caught in a debt trap created entirely by ourselves. This is a risk to our national security. The government has credit started to repay the debt due, which now seems to be a concern of all political parties, business people and experts. “
Whether Pakistan’s attempt to give the military near-complete control of the CPEC will reassure China that its investments are safer, it is clear that Beijing is moving away from Pakistan’s $ 60 billion for reasons that as yet do not quite apply. Planke in the BRI is clearly withdrawing, reported Asia Times.