Jyotishman Bhagawati, Research Intern, Institute of Chinese Studies
The China Pakistan Economic Corridor has created a sense of both euphoria and scepticism in Pakistan. The euphoria is because of the size and scale of the corridor project which is expected to create 700,000 direct jobs and whose total cost, according to a Deloitte study, is estimated to touch US$75billion upon completion . At the same time, there are also increasing concerns over the project primarily due to the lack of concrete details about the various schemes falling under it which the government is accused of not sharing with the public . Against this backdrop, it is imperative to note the perceptions of the business community in Pakistan regarding the CPEC as it is one of the most crucial stakeholders in the project.
The multi-billion dollar project is widely termed as a “game-changer” for the region in view of the current state of Pakistan’s economy which is witnessing rising debt and modest growth. But recent controversies and opaqueness surrounding the project concerning corruption allegations, lack of transparency, inordinate delays, unfair trade practices by the Chinese, displacement of local populations etc, have created numerous doubts and suspicions in the minds of a ‘worried business community’ in Pakistan .
Already reeling under a US$5billion trade deficit with China after signing a FTA in 2006, a study by the Pakistan Business Council in 2013 ascertained that Pakistan did not benefit from the FTA as the Commerce Ministry which ‘lacked both homework and imagination’, went ahead with the agreement without having any consultation with the private sector .
Apparently, the same approach is being pursued by the Pakistani government for the CPEC as well which has fuelled apprehensions that once it is fully operationalized, it will further damage the domestic industry. The government has also not declared any special measures to protect its industries, while it has announced a slew of measures to protect the Chinese investments, including sovereign guarantees for the US$34.4billion Chinese investments in the power sector, at a time when its own power distribution companies are facing mounting debts .
Questions have also been raised on the impact of CPEC in provinces like Baluchistan and Gilgit-Baltistan. Recently a report by the Federation of the Pakistan Chambers of Commerce and Industry (FPCCI) has noted that with the current rate of influx of Chinese nationals in Baluchistan, they will outnumber the Baloch natives by 2048 . Similar anxieties have also occurred from Gilgit-Baltistan where the locals fear getting displaced by rich investors from outside. While some are hopeful that the project will be a catalyst for growth in the region by opening up opportunities in trade, tourism and hydro-power sector, others argue that the local people will be left out of the gains as the government has not engaged with them and there are concerns about profits being extracted by middlemen and regarding the costly imports of coal from China when there is abundant hydropower potential in Gilgit itself .
Moreover, already having to cope with the dumping of cheap goods from China, the traders in Pakistan are also worried about the smuggling of such goods once the corridor opens up . The State Bank of Pakistan and the Federal Board of Revenue have already highlighted rampant malpractices by the Chinese over invoicing and unprincipled dealings. Furthermore the State Bank and the Finance Ministry has also expressed concerns about the lack of local labour and indigenous content used in CPEC projects . There are also fears that the government’s method of working in isolation from think-tanks and universities without taking inputs from other stakeholders like the local people and the political and business community and the lack of coordination between the various ministries involved with the project might jeopardise the entire project and lead to a disastrous impact on the economy .
Moreover, in stark contrast to the private sector relationship between Pakistan and China which did not exist six years ago, relations with the US have been more enduring and still remains the dominant economic partner for Pakistan. This was clearly stated by Saquib H. Shirazi, the CEO of Atlas Honda in an article in the Business Recorder where he also mentioned that besides periodic yarn exports, there are no meaningful Pakistani exports to China compared to the more holistic nature of trade with the US where Pakistan also enjoys a trade surplus of US$2billion .
Meanwhile, in comparison to other provinces, the CPEC is proving to be a major attraction for domestic investors in Punjab where there are expectations of huge demand as work moves ahead on the project. Abdul Basit, chairman of the Punjab Board of Investment and Trade (PBIT) states that besides domestic capital, the CPEC is also attracting foreign capital in the region. Similar sentiments were also expressed by Ijaz A Mumtaz, former president of the Lahore Chamber of Commerce and Industry (LCCI). He noted, ‘The CPEC is the last opportunity for Pakistan to get out of the vicious cycle of low growth and improve the lives of the people’ .
To conclude, while there are expectations of huge demand from CPEC-related work in the province of Punjab, there are also doubts and concerns in provinces like Gilgit-Baltistan and Baluchistan. Overall, however, business sentiment in Pakistan displays a sense of cautious optimism with respect to the CPEC. As Shirazi notes, ‘Proof will be in its delivery’ .