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US warns Pakistan of risks from CPEC

The top US diplomat for South Asia said the China-Pakistan Economic Corridor -- heralded as a game-changer by both Asian countries -- would profit only Beijing and said that the United States offered a better model.

Pakistan

The United States on Thursday warned Pakistan that it faced long-term economic damage with little return if China keeps pursuing its giant infrastructure push.

The top US diplomat for South Asia said the China-Pakistan Economic Corridor — heralded as a game-changer by both Asian countries — would profit only Beijing and said that the United States offered a better model.

“It’s clear, or it needs to be clear, that CPEC is not about aid,” said Alice Wells, the acting assistant secretary of state for South Asia.

She noted that the multibillion-dollar initiative was driven by non-concessionary loans, with Chinese companies sending their own labor and material.

“CPEC relies primarily on Chinese workers and supplies, even amid rising unemployment in Pakistan,” Wells said at the Woodrow Wilson International Center for Scholars.

“There is a different model,” she said. “Worldwide we see that US companies bring more than just capital; they bring values, processes and expertise that build the capacities of local economies.”

The corridor “is going to take a growing toll on the Pakistan economy, especially when the bulk of payments start to come due in the next four to six years,” she said.

“Even if loan payments are deferred, they are going to continue to hang over Pakistan’s economic development potential, hamstringing Prime Minister (Imran) Khan’s reform agenda,” she said.

Read more: Book Review: The China Pakistan Axis

The United States has gone on the offensive against China’s Belt and Road Initiative, a signature project of President Xi Jinping which aims to build ports, highways and railways around the world.

But Wells’ speech was unusually specific in warning of risks to Pakistan, a historic ally of the United States which has had a turbulent relationship with Washington in recent years over Islamabad’s shady ties with Islamist militants.

While acknowledging that the United States could not come to Pakistan with offers from state-run companies, Wells said private US investment, coupled with US grants, would improve the troubled economy’s fundamentals.

“There is a different model,” she said. “Worldwide we see that US companies bring more than just capital; they bring values, processes and expertise that build the capacities of local economies.”

Read more: Map of China Pakistan Economic Corridor (CPEC) Projects

She pointed to interest in Pakistan by US companies including Uber, Exxon Mobil, PepsiCo and Coca-Cola, with the soft-drink makers together investing $1.3 billion in the country.

China’s main promises in Pakistan include the development of Gwadar on the Arabian Sea into a world-class port.

Beijing hopes to link Gwadar to the western Chinese region of Xinjiang, giving the world’s second-largest economy more access to the oil-rich Middle East and reducing reliance on the dispute-ridden South China Sea.

China and Pakistan’s interest in CPEC

China first proposed the corridor project in May 2013. Chinese President Xi Jinping then visited Pakistan in April 2015, and both sides agreed to elevate their relationship to an “all-weather strategic partnership.”2 During Xi’s visit, the two countries signed fifty-one agreements at an estimated value of $46 billion.

China and Pakistan regard the CPEC as a new source of potential synergy between their respective national development strategies, which may help the two countries translate their close political cooperation into multifaceted economic cooperation, attain mutual benefits, and achieve win-win outcomes.

China believes economic development can strengthen Pakistan’s internal stability, thus reinvigorating the latter’s economy through investment in infrastructure projects as well as the construction of oil and gas pipelines. China hopes this will create a certain level of stability within Pakistan and in turn stabilize China’s western periphery, particularly the province of Xinjiang.

Read more: Government merging existing infrastructure to establish CPEC secretariat

More broadly, the CPEC has to be understood in the context of China’s strategic interests in East Asia and the way the United States has challenged them. Faced with such difficulties, China hopes it can expand its strategic space by heading west. Pakistan serves as a crucial bridge between China and Central Asia, South Asia, and the Middle East.

Security and stability in Pakistan will make it possible for China to exercise greater influence in these regions and to ensure security at home. This is why China is willing to pour vast amounts of resources into the economic corridor—based on the logic of improving security through economic development.

Pakistan has realized that no other country places such high strategic importance in its economic relationship with Pakistan as China does.

According to Pakistan 2025—a blueprint for economic development published in 2014 by Pakistan’s Ministry of Planning, Development, and Reform—Pakistan aims to advance from being a lower-middle-income nation to an upper-middle-income nation by 2025.6 To achieve this goal, Pakistan hopes to attract increasing amounts of foreign investment. The country is working to improve its overall economy by constructing energy projects and other forms of infrastructure, to create employment opportunities for its populace, and to improve its governance.

 

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