Editorial Periscope: Where we Stand on CPEC and Looking Forward

CPEC cannot merely be understood in the context of BRI because Pakistan China relations are much older, deeper and stable than the relations. Our October special issue on CPEC looks at where we have reached, what projects are underway, and what is next for this special Pakistan-China flagship project.

CPEC Special edition

CPEC cannot merely be understood in the context of BRI because PakistanChina relations are much older, deeper and stable than the relations other countries, in this hemisphere, have enjoyed with each other. Germs of CPEC may have been present in the KKH initiative of the 1960s -Editors GVS argue.

This is a Special CPEC Edition. When we decided to produce one, little did we realize how difficult and unwieldy it could become. The idea was that while much is written and said about CPEC, most of it is rhetorical in the form of often repeated phrases like “Game Changer” so we thought that there is a genuine need for a single volume that can collect, assemble, describe and give an overview of what happened under the umbrella of CPEC in the last six years.

As we set out, we realized that this was not a month’s job; for what we are witnessing is a multidimensional process and means different things to different people, institutions and businesses who are trying to benefit from it– and similarly, it is also perceived in myriad ways by its critics and all those across the world who are disturbed by the rise of a peaceful China and its Belt and Road Initiative.

These “disturbed souls” then put their twisted meanings and interpretations upon CPEC, discovering “debt trap” here and “Xinjiang’s Uighurs” there. This reaction takes several forms from CPEC/BRI being so successful or humongous that it represents “Reincarnation of East India Company” to “CPEC being unworkable” or “abandoned” under the Indo-US pressures. But it does not stop there; we recently met someone “wise” who lectured us that Pakistanis don’t realize that rise of China is a threat to the world and the rule of law because Chinese are barbaric and uncivilized.

On behalf of the National Development and Reform Commission of China and Director He Lifeng, and as the Chinese chairman of the CPEC Joint Cooperation Committee, I would like to express my sincere appreciation to the Pakistani side and Global Village Space!

 Mr. Ninge Jizhe, Vice Chairman NDRC, China

Really, what a reference to a civilization that invented imperial examinations for “mandarins” and wore silk robes at a time when most in the western fringes of Eurasia were still living in the forests. It’s evident that the peaceful rise of China has produced turbulence in the global power structure and its linked media.

Reactionary statements, misleading theories – focused on concepts like Thucydides Trap – thus often make it difficult to see what good CPEC is doing in this part of the world in terms of creating infrastructure, logistics, jobs and skills and imparting political stability by ushering dreams of a better future for countless millions.

This volume is thus an effort to assemble Pakistan’s narrative on CPEC without the use of adjectives. We don’t claim to have produced a masterpiece, and we are painfully aware of the deficiencies of this edition, but we have tried to bring some sense and structure to the subject.

CPEC Special edition

CPEC Special edition

This quest has also made us realize that CPEC cannot merely be understood in the context of BRI because Pakistan-China relations are much older, deeper and stable than most other countries, in this hemisphere have with each other.

Hardly any country – out of the 14 neighbours in the rim of China – can claim to have the kind of longstanding stable relationship Pakistan has with China. An analytical piece by Salman Bashir, Pakistan’s Ex-Foreign Secretary and our interview discussion with Chairman CPEC Authority, Lt Gen. Asim Bajwa (R) will help many to grasp this concept.

CPEC predates Belt & Road Initiative?

Salman Bashir, who has also been Pakistan’s Ambassador in China (2005-08) reminds us of historic Buddhist trails that exported a new religion – Buddhism – into China from this part of the world that is now Pakistan. And he traces, step by step, how Pakistan and China gradually built up a relationship of trust with each other from the early 1950s.

But it’s not only Salman Bashir, the lifelong diplomat who remembers that PIA was the first non-communist airline to fly from Karachi to Shanghai in 1964, how Pakistan took Kissinger to meet Mao and Zhao Enlai or how Pakistan was the biggest advocate of bringing China into the United Nations where Taiwan sat on its position till 1971.

One of us had a long coffee discussion with Zubair Tufail, CEO Tufail Chemicals, a septuagenarian Karachi businessman who has been travelling to China since 1970. He remembered that for a long time, China was so isolated from the world that PIA used to bring all the post from Shanghai to Karachi for onward distribution.

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There is thus much evidence to suggest that Pakistan had a unique special relationship with China before the world discovered China – so to say. And in many ways, CPEC was long in the making – much before the concept of BRI surfaced in 2013. This becomes obvious during our discussion with Chairman CPEC Authority Lt Gen. Asim Bajwa (R), as he dwells upon the history of KKH and creation of FWO beginning from the 1960s and the slow march towards Gwadar port.

Now, this revelation – if it is one – has an interesting dimension that needs to be understood by everyone, especially by the aware citizens of Pakistan and our media. Much of the flak which CPEC gets is because of its association in western minds with Belt and Road Initiative launched by President Xi in 2013. CPEC, in its feverish activity, is, of course, a part of BRI, but its seeds were present in KKH, Gwadar port and Pak-China relations.

Of the six BRI initiatives, only CPEC has manifested on the ground in a visible and inter-connected physical sense. One reason is that CPEC – unlike other BRI projects – is bilateral. Rest have at least three or more countries involved. But the kind of relations of mutual trust Pakistan and China had been growing since the 1950s, could also be a substantial contributing factor.

This is why political point-scoring or taking credit – as has been done by one or the other party in Pakistan – is flawed and misleading. Salman Bashir, in his piece, admonishes politicians. But Ambassador Yao Jing, in his interview, is more explicit that China-Pakistan relations are above party politics – this is a relationship between two states, geographies and histories.

NDRC reinforces our understanding!

This Edition not only contains Messages on CPEC from the President and PM of Pakistan, Foreign Secretary, President and PM of AJK but for the first time, a publication was granted a message from Mr. Ninge Jizhe, the Vice Chairman of National Development and Reform Commission (NDRC) of China.

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This message arrived, from Beijing, while we were about to go to press with our content collated, edited and designed, but it says something, that supports our own contention throughout this publication; It says: “China and Pakistan are all-weather strategic and cooperative partners. No matter what changes there have been internationally or domestically, China-Pakistan friendship has always remained as solid as rocks”, and it then goes on to argue: “The world today is undergoing major changes unseen in a century.

The international landscape is showing all the turbulence, complexities and instabilities. In this special period, it is even more critical for China and Pakistan to further build up trust, enhance cooperation, rise against difficulties and move forward in joined hands.”

Can CPEC be discussed without broader Pak-China relations?

In almost three years of continuous publication, this has been our most exhaustive compilation of articles, interviews, blogs and sponsored corporate stories in one volume. It necessitated creating sections – content description pages are your guide.

Almost all pieces examine CPEC in one or the other way though we quickly realized that CPEC risks becoming soulless and mechanical – something made of brick, mortar and steelwithout the broader theme of Pak-China relations. So, you find several pieces – like from Tipu Mudassir, DG China in Foreign Office, Dr. Aadil Nakodha, Prof. Zamir and others- repeatedly talking about it.

There is much about CPEC, but three interviews stand out; one with the outgoing Chinese Ambassador, Mr. Yao Jing that perhaps for the first time describes the CPEC Phase II in such clarity. A broader picture of where CPEC fits in Pakistan’s overall development strategy is obtained from our discussion with Pakistan’s’ Planning Minister, Mr. Asad Umar who has been country’s finance minister too, and thus brings a multidimensional understanding.

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However, if Asad Umar explains his government’s overall governing vision, priorities and thrust, then Chairman CPEC Authority, Lt Gen. Bajwa (R) brings in precise details of what’s happening on the ground. Both these interviews are available on GVS YouTube Channel, so listening and reading to both helps one understand why a new institution in the form of CPEC Authority had become a necessity.

It was a management need in response to the growing complexity of a process that has initiated projects – in energy and infrastructure – worth almost US $30 billion in five years – something that has never happened in the history of this country. This enormous process, that now continues onwards in phase-II, with SEZs, ML-1, expansion of motorways between Khunjerab and Gwadar and development of western route – has led to many confusions and misunderstandings; the oft-repeated phrase is that “CPEC is a debt trap.” But is it?

Is CPEC a debt trap?

The Pakistani government has refused this theory many times; it was repeatedly denied by Ahsan Iqbal, PMLN leader, who once headed Planning Commission and later was planning minister, later it was Asad Umar who after becoming finance minister angrily rejected this “debt trap” on a western TV channel – and has done it many times since then. However, the impression persists. Many may be trying to mislead, but there is genuine confusion as well.

What government ministers have failed to explain well and what media have never really picked up is that most loans in case of CPEC are from Chinese financial institutions to Chinese companies or joint ventures and partnerships between Chinese and Pakistani concerns and these loans are not “Chinese loans to Pakistan” as these are not covered by sovereign guarantees.

CPEC Special edition

The same confusion exists in case of overall Chinee loans – not connected with the CPEC. For instance, when recent Economic Affairs Division (EAD) data shows total Chinese loans to Pakistan as amounting to US $22.8 billion, it includes US $3 billion in safe deposits, leaving the total around US $19.8 billion.

Out of these US $12.9 billion are shown as “bilateral state to state,” i.e. from China to Pakistan but US $9.26 billion fall under the category of non-guaranteed. EAD data we have seen, if correct, shows the only US $3.9 billion of guaranteed loans backed by sovereign guarantees.

Some commercial loans have been backed up by sovereign guarantees, but EAD data shows that it’s rare. Of the total US $6844 billion commercial loans extended by Chinese financial institutions like China Development Bank and ICBC-China, only US $193 million enjoy sovereign guarantees.

Now coming back to CPEC itself; total infrastructure-related CPEC debt amounts to US $6.25 billion, but apparently US $1 billion of that has yet to be received and is pending. Financial details are always hard for lay citizenry and media, but government ministries need to do a better job.

Was CPEC being abandoned?

multi-layered relationship that has developed between China and Pakistan over seven decades – a relationship that is rooted in history, geography and shared strategic needs. However, to those who only see CPEC as a nascent idea, the rumour mills between Islamabad, Delhi and Washington have worked well.

Till a few days ago, pieces have been appearing from apparently credible sounding authors talking of how CPEC is being curtailed due to pressures from Delhi and Washington or because of less than warm relations between the PTI government and Beijing. While nothing could be far from the truth, there is an old saying, “there is never a smoke without a fire somewhere”.

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When PTI government took over, and politicians and ministers started exchanging barbs then more than one minister made statements on media about ‘review’ and ‘costs”. In all probability these statements were never part of any “real thinking” anywhere, but these got mixed up with the news circulating that progress on CPEC projects is slowing down or is stuck. It was true! But it was not due to policy but challenges of implementation.

Gwadar Coal Plant, Hydropower projects in AJK and Thar Coal were all facing myriad issues of tariff settlement, land acquisitions, water use agreements, environmental concerns and so on. Most of these issues – if not almost all – have been resolved in the last two years. Three CPEC related Hydropower projects (HPP) in AJK – Kohala, Karot and Azad Pattan – are moving ahead with two at an advanced stage of completion.

Our section on AJK has a piece by Midhat Shahzad, Secretary Information, AJK, that contains succinct information about these projects, and these do find mention in our discussion with Chairman CPEC Authority. Power projects completed in Phase 1 (9 out of 21 conceived) have already added more than 5000 Megawatts of electricity in Pakistan’s national grid, now HPPs in AJK and others like Suki Kinari in KP and others, on completion will add another 4000 MW to the grid.

Suki Kinari itself remained stuck due to land acquisition issues and complex tariff negotiations with NEPRA, Private Power Investment Board (PPIB) and Central Power Purchasing Agency (CPPAG).

Challenges in AJK had additional complexity because of private corporate entities entering into agreements with two governments – Pakistan and AJK – and because of issues of land routes, roads and bridges getting submerged due to construction of dams – and thus demanding compensation settlements and alternate routes and bridges.

Most of these issues have been resolved. This process of resolution got a huge fillip when CPEC Authority was created towards the end of 2019 to provide “One Window Facility”. Previously corporate entities had to deal with different ministries and process of discussion, negotiation and approval was prolong and tedious.

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Thar Coal remained stuck because Sindh government had to coordinate the development of a separate canal to drain the water that emerged from the mining site. This magazine contains lots of information about the Thar Coal project, including one piece from China Machine Engineering Corporation (CMEC) that is working in collaboration with Engro in Thar. Ghias Khan, CEO Engro has been interviewed on these and related issues.

Most of these issues have been resolved CPEC Gwadar Projects and projects – from Thar Coal, Gwadar Coal and HPPs in AJK – are making fast progress. And so is the western route. During the corona pandemic, and after PIA Air Bus crash, panicked people suddenly discovered that they could travel by road from Islamabad to Karachi.

This was made possible due to the CPEC linked international standard motorway between Multan and Sukkur; with the construction of Sukkur-Hyderabad section, such travelling will further increase. In a few years’ time, with completion of road networks on the western route (Islamabad-Hakla, Dera Ismail Khan-Zhob, and Zhob-Quetta) Islamabad to Quetta by road will become a possibility.

This is all CPEC transforming the connectivity inside Pakistan. In this magazine, Farman Zarkoon, CEO Baluchistan Board of Investment and Technology (BBOIT) has contributed a piece; that piece also contains information about the 26 CPEC related projects across Balochistan. Boston SEZ will soon be added to the CPEZ priority SEZs and PM had himself approved the Quetta-Zhob motorway work a few months ago.

CPEC: Way Forward?

Habib Bank is the largest executor of CPEC-related financing in Pakistan worth over US $6 billion. In November 2019, this Pakistani bank created history when the HBL Urumqi Branch formally commenced the RMB business by becoming the first and only bank from Pakistan and one of the three banks from the South Asia and MENA region to offer end-to-end RMB intermediation.

In December 2019, HBL became the first Pakistani bank to be awarded the much-coveted branch license to provide financial services to clients in Beijing, which is expected to go operational later in 2020. The Beijing branch will allow HBL to interact with regulators, major state-owned enterprises (SOEs) and leading financial institutions involved in the China-Pakistan Economic Corridor and across other Belt and Road Initiative (BRI) corridors.

CPEC Special edition

This looks impressive, but most Pakistani businesses and institutions have not been able to penetrate the enormous Chinese market. Despite an expanded Free Trade Agreement, FTA-II, Pakistani exporters have not found any niche in the enormous Chinese market. This should worry Pakistani governments and businesses.

APTMA decision-makers – like Gohar Ejaz argue that Chinese companies should have joint ventures with Pakistani textile manufacturers – since an integrated cotton and fabric network exists in Pakistan and with JVs a US $15-20 billion export market can quickly develop. Shahid Sattar, CEO APTMA, has argued similarly in a piece in this magazine.

However, we believe that to benefit from CPEC, Pakistani governments and businesses both will need to invest in quality education and human skill development. We are grateful to the Foreign Office and especially DG China whose team was forthright in helping us understand concepts and could help in distinguishing between facts and fiction – especially when it comes to the confusion of “debt trap.”

Thanks are due to CPEC Authority – especially Brig. Javed Iqbal (R) who was generous with time and information. And finally, to all the public entities and companies like FIEDMC who provided information and sponsorships. Special thanks are due to Aamer Saleemi, CEO FIEDMC.

This issue has many strengths and many weaknesses – of which we are painfully aware, but this will nevertheless add to the understanding on the subject – especially when all the content will be absorbed into the enormous belly of Google. We will welcome your comments; a shorter edited version of your comments may be published in next issue, do mention your full name, title and institutional affiliation. Looking forward to your feedback!

Moeed Pirzada

Najma Minhas


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