EXCLUSIVE: Planning minister Asad Umar explains how CPEC focus has shifted

Federal Minister for Planning, Development, Reforms and Special Initiatives Asad Umar talks CPEC, China-Pakistan relations, and Indian designs to sabotage both

Asad Umar

Asad Umar is Pakistan’s Federal Minister for Planning, Development, Reforms and Special Initiatives. Umar has previously served as Finance Minister of Pakistan. Umar joined Imran Khan’s Pakistan Tehrik e Insaf in 2012, became Vice President of the party and is a member of National Assembly since 2013.

He has also served as Chairman House Standing Committee on Finance, Revenue and Economic Affairs and Chairman Standing Committee on Industries and Production. He also remained part of Standing Committee on Cabinet Secretariat. Prior to entering politics, he was a business executive, serving as the Chief Executive Officer (CEO) of Engro Corporation from 2004 to 2012.

Umar is often credited for turning the chemical company into a major conglomerate and is considered one of the most popular and highly paid CEOs in Pakistan. In 2009, he was awarded Sitara-i-Imtiaz for his public service. Umar did his MBA from Institute of Business Administration (IBA) Karachi in 1984 and briefly worked with Exxon Mobil in Canada.

Planning ministry is overall responsible for planning megaprojects including CPEC. It is in this capacity that he sat down with Najma Minhas, Managing Editor, Global Village Space for a detailed discussion. The interview is also available on GVS YouTube channel.

Najma Minhas: What role does the planning ministry play in the grander scheme of things, given that Pakistan is a federation?

Asad Umar: The original role of the Planning Commission was a very broad one. Back in the 60s, it led the economic strategy development for Pakistan — controlling how the economy was going to grow. Over the last 30 years, since Pakistan has gone into the IMF programs, this role has become relatively circumscribed.

The key things it is responsible for these days are basically two things: it is now responsible for putting together the annual public sector development program, i.e. the federal government spending on development programs.

It is also responsible for approving funding for the development projects over a certain size, including provincial projects. For the last few years, CPEC has been a part of the Planning Commission’s agenda and the CPEC Authority is part of the Planning Commission.

Read more: How Punjab is gearing up for CPEC Phase-II, Mian Aslam Iqbal explains

Najma Minhas: What kind of projects are you working on within the planning division, other than CPEC related projects?

Asad Umar: There has been a shift of emphasis: In the previous five years, a major portion of the Public Sector Development Program (PSDP) was being spent on highways, motorways, etc. We are still spending a significant amount of money on NHA-PSDP-related projects, but the real focus has now shifted to developing our water resources.

We are an agricultural country; everywhere you go, people will tell you water is the number one issue. For the first time in Pakistan’s history, you have three dams under construction. We have the Diamer Bhasha, Mohmand and Dasu. In the communications (road, rail, etc.) part of the PSDP – there is a shift from roads to railways. With the ML-1, the Planning Commission will execute the largest infrastructure project in our history.

The third very important shift is that we want much more private sector finance. Government of Pakistan does not have much fiscal space, so we want to “crowd in” i.e. private sector investment. The Public-Private Partnership Authority, which is housed in the planning ministry, has now become functional this year.

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Najma Minhas: Is this why PC-1’s have been simplified?

Asad Umar: That’s the simplification of the process of decision-making related to the projects. PC-1 is the primary project feasibility document through which approvals are made. Not just that, the decision-making has been devolved.

We used to have a situation where ministries could only approve projects up to a small amount, while everything else had to go to the Planning Commission – now projects up to 2 billion rupees can be done in what is called departmental DWPs. So, to recapitulate: bring in the private sector, shift emphasis to water, invest in rails and simplify processes, so that decision making is sped up.

Najma Minhas: Where do CPEC projects fit into the government’s priorities?

Asad Umar: CPEC is moving into the next phase, as we call it – the first phase was primarily power generation, some hydel projects, and a few projects in Gwadar. Now we are moving into the next phase of CPEC. Phase-II is much broader and deeper. Industrial cooperation is a significant part of it. Three SEZs are coming up. One was approved last year in Faisalabad and has become functional.

Another one has been approved and will become functional in Rashakai, KP and the third one in Dhabeji, Sindh will also be inaugurated in the next few months. A big emphasis on agricultural cooperation and science and technology cooperation is being worked on. In CPEC Phase-II, there is a much broader relationship and much more emphasis on the role of the private sector.

Read more: CPEC: Once a game-changer, always a game-changer?

Najma Minhas: With regards to the CPEC PhaseII, has your government chosen different priorities – you mention industrial development, agricultural productivity and science & technology cooperation, or was it always planned to move in that direction?

Asad Umar: There is great ambiguity in that – the first MOU was signed in 2013; however, it wasn’t until late 2015 that we got access to the details when I became a member of the Parliamentary Oversight Committee. But the details on the long-term plan were always vague. Therefore, it is difficult to say, but in general, you can say that we were going to have a broad relationship that CPEC was going to be conducted in phases.

Najma Minhas: How much money has come in through CPEC phase 1, in terms of projects so far?

Asad Umar: The total worth of the projects under execution or those that have already been completed is about $29 billion — that is what the actual portfolio is. Part of it has been coming as equity by the Chinese firms, but largely it is debt that is coming from the Chinese financial institutions, and some is a contribution by Pakistani private sector investment and Pakistani government money (PSDP).

Najma Minhas: So, with regards to Phase-II, the Chinese Ambassador in Islamabad mentioned that Prime Minister Imran Khan wanted help in the agricultural sector? What do you exactly need help with?

Asad Umar: If you look at the productivity comparison between Pakistan and Chinese agriculture, you will find a huge difference. Just as China has made considerable strides in industrialization, they have also made significant strides in the agricultural sector.

Agriculture is what affects more Pakistanis than any other occupation. It is central to Pakistan’s economy and will be even in the twenty-first century. The idea is to get Chinese collaboration. Already, for example, Chinese firms are collaborating with Pakistani firms, developing seeds to improve the quality of cotton.

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Najma Minhas: Was your focus on cotton because it was in later stages of research development or because it is a large export earner for Pakistan?

Asad Umar: It has the most significant footprint on Pakistan’s economy compared to any other field crops. Wheat is the biggest crop, essential from a food security point of view. However, cotton contributes to the textile industry and the exports that come out of it; even today, more than half of Pakistan’s exports are cotton-related products. Hence, cotton is very critical for Pakistan’s economy.

Najma Minhas: Was there a deliberate policy the government adopted whereby it focused on cotton?

Asad Umar: It was simply the largest opportunity. Most of the work that is now going to be done in the industrial and agriculture sectors will be private to private sector between China and Pakistan. Therefore, you will not see Pakistan’s government taking on more debt while undertaking these projects.

Najma Minhas: One big thing that PM Imran has touched upon time and again is how China lifted 700 million people out of poverty. How are the Chinese helping the government with this?

Asad Umar: When we look at what can be a relevant development model for Pakistan, we need to understand that the western powers moved when the global conditions were very different, they were the early movers and frankly they were aided and abetted by colonialism.

They shut out the competition to themselves as they had gone and occupied the rest of the world. They got more than a century’s head start. Hence, their experience is not relevant to Pakistan. When we look closer to home, we have a large population; we are basically agrarian, so there are a lot of similarities to the social and economic structure of China.

The second thing is that it has always been central to the Prime Minister’s belief system: to improve the lives of the people. And that is the center of China’s development strategy also. Therefore, we look towards China as a model. Other countries have become very wealthy also, but they have seen tremendous inequality, so the average person has not become as well off as in China.

Read more: Ghias Khan: Engro’s vision under CPEC for energy & agriculture

Najma Minhas: If we discuss the industrialization part of CPEC Phase II, we have nine CPEC SEZs, but only two of them have been inaugurated, what is our timeline and why are we working so slowly?

Asad Umar: First, while, the MOU was signed in 2013, even after the PMLN government left, there was nothing on the ground – there was not a single SEZ. So, the work you see has been started by the current government. We now have investment coming into Faisalabad SEZ.

In the case of Rakashai SEZ, it is even more interesting because the developer is a Chinese firm and marketing is their responsibility, and we are starting to see Chinese firms come in and take advantage of the Pakistani incentives that have been offered.

Put it in the context of the ongoing tense relations and the rising conflict that is playing out between China and the US, even in the economic sphere; such developments are creating opportunities for other countries like Pakistan. We expect in the next two-three years there will be significant movement in this area.

Najma Minhas: Are SEZs only open to Chinese investors?

Asad Umar: They are open to anyone who wants to invest in Pakistan. Even in terms of joint development projects. In 2018, soon after the government was formed, when the Chinese NDRC chief was visiting Pakistan, who heads the CPEC effort on the Chinese side, we had meetings here, and a joint communique was also issued, and China said that it welcomes other countries coming in and working jointly on projects.

Najma Minhas: Is there a particular type of Industry that you are trying to welcome into Pakistan from China and other countries?

Asad Umar: It will depend on the type of endowments that Pakistan has. The country has cheap labour, cotton, numerous agricultural products at this point. So, the Chinese companies will invest in those industries where they see a competitive advantage in Pakistan.

Najma Minhas: How are you ensuring that Pakistan focuses on value-added goods as opposed to primary goods – or avoiding that it just becomes a transit route for Chinese goods?

Asad Umar: First of all, you follow a natural value-added curve. So, you start at the lower end, then go upwards. It’s very difficult for someone just to come in straight at the upper end of the value-addition. Even in cotton, Pakistan used to export raw cotton. This was a time when our total exports were just a few million dollars, more than half of it constituted cotton. Now we can consume all of it, but we sell it mostly in low value-added products.

Najma Minhas: Why do we need CPEC SEZs because we already had SEZs, why differentiate between the two?

Asad Umar: So, there are special incentives that are given under these terms. In some of these cases, the developers are themselves Chinese. So that’s why the idea was to create ideal conditions. We previously had Export Processing Zones, but then those were only export-oriented these SEZs bring something special.

Read more: SEZs: The Economic Gold Mines

Najma Minhas: Will the investors in the SEZs be allowed to sell their goods in the domestic market?

Asad Umar: Yes, they will also be allowed to sell in the domestic market.

Najma Minhas: Would you prefer SEZs to pursue an exportoriented policy?

Asad Umar: Exports are vital for Pakistan, and we need to start developing our export industries. At the moment, our growth has been limited by our export potential. The moment we start some growth in the economy – because our exports are limited when growth arrives, imports increase, the trade deficit rises, and current account deficit gets to a level which is not sustainable, and back we go into a macroeconomic stabilization program and IMF.

Hence, if we want to get out of this trap, we need to push exports. So exports are vital. But exports are not the only thing; other things we are interested in include technology transfer, digital commerce, etc. China has been hugely successful in digital commerce, that’s vital to get economic growth going and grassroots level entrepreneurship going.

Najma Minhas: Why did your government set up the CPEC Authority?

Asad Umar: During the previous government’s tenure, only a few large projects were happening; no progress occurred on the commerce, industries, agriculture, technology fronts, etc. As we move into phase-II, if you are going to be private sector-led, there will be many small to medium size private investment taking place – so, the scope of the work is expanding tremendously.

What we were doing earlier within the Planning Commission was that there was one mid-tier bureaucrat who was responsible for this work and he reported to Secretary Planning Commission, who was already loaded with other responsibilities, and this was one of many things he looked at.

So, it was decided that in the phase we are now moving into, we need to have a more robust management system in place which will deal with the additional challenges that are going to arise.

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The total public debt relating only to CPEC Projects is less than 10% of total debt. The public debt obtained from China has a maturity period of 20 years and the interest is 2.34 %. If grants are included, the interest value slides down to only 2 %.

Najma Minhas: How will you divide the responsibilities between the Planning Commission and the CPEC Authority?

Asad Umar: The planning ministry is responsible for the overall development strategy of the country; CPEC is an important element or part of that strategy. And in the way the organization of CPEC is structured: Joint Cooperation Committee (JCC) is at the highest level, which is chaired on the Chinese side by the NDRC and the Pakistani side by the planning minister. Then there are the JWGs below that.

Najma Minhas: How many meetings has the JCC had?

Asad Umar: It meets annually, but this year we were trying to have a special meeting of the JCC; to try and accelerate things and there was an agreement between Pakistan and China that a meeting was to be held in April, but due to Covid-19 it is now scheduled for October/ November, which will be in Beijing.

Read more: SEZ policy of Pakistan

Najma Minhas: Why do you think there is so much emphasis on spreading disinformation about CPEC, its role and talk of debt trap? What is your government’s strategy to counter this propaganda?

Asad Umar: We look at CPEC as an economic relationship, which is adding another dimension to a relationship that is already spanning half a century, which is strategic in nature and embodies several different aspects. However, the economic relationship did not reflect the overall relationship between the two countries. CPEC is filling that gap.

This emphasis is also visible from the appointment of the next Chinese Ambassador in the backdrop of the increasing economic ties between the two countries.

How the rest of the world looks at it, or India looks at it; in the parliamentary oversight committee, which was set up a few years back and in the first meeting that was held, I remember we were shown videos of Indian news channels, a 2.5-minute segment on CPEC, and the entire piece showed missiles, jet aircraft and army parades, it literally was shown as part of war.

You need to understand that there is a global realignment taking place; it is fraught with risk. It has very rarely been seen that a new global power emerges without a clash taking place with the existing power. We are hoping it will not happen this time. But in the last few months, we have seen how things have become tense between China and the US.

Pakistan’s close relationship brings us into that. And India, being used or viewed by the US as a strategic anchor to spread their influence in the Asian region complicates the picture even more. There are attempts at creating hurdles in the development of CPEC, especially by the Indians.

Read more: Must develop Balochistan for ensuring CPEC’s success

Anything good for Pakistan’s economy is generally seen as a negative development by Indians. We also know that they view China as a counterweight to India’s ambitions of dominating this region, so that’s why India has a strong strategic interest in both trying to ensure that CPEC does not succeed, and some of the developments in Balochistan, we believe are linked to that desire by the Indians.

As well as creating a narrative around the globe against CPEC, which mires it into controversy, and create fissures in Pakistani society to try to raise voices against CPEC. Luckily, that has not happened.

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