Will CPEC push Pakistan deeper into debt trap?

Alice Well, an American diplomat, cautioned Pakistan twice in November 2019 and January 2020 that the China Pakistan Economic Corridor (CPEC) would push Pakistan deeper into debt trap. Interestingly, these remarks appeared after almost all the CPEC projects completed their construction phase and began operation. Undoubtedly, these remarks are baseless and aimed at containing the growing influence of China by targeting the narratives of Pakistani citizens. This is also called hybrid warfare. The aim of this war is to prevent any country from achieving its political or economic ambitious by simply diverting the attention of people using false propaganda.

The US has raised three concerns:

First, CPEC is a loan given by China to Pakistan. Second, it is beneficial for Chinese companies more than Pakistan. Final, the blacklist companies of China have been given contracts under CPEC.

Lets discuss the concern of the US one by one.

Are the CPEC projects loan or Foreign Direct Investment (FDI)? If it is a loan than, surely, it will add to Pakistan’s debt woes and the US is right. However, if it is a FDI than the criticism of the US is propaganda against Pakistan because the FDI is always beneficial for the receiving country. For a project to qualify as FDI, there has to be an identifiable investor who share the risk of business. This can be a private investor or foreign state-owned enterprises. As many CPEC projects involve the import of heavy electrical equipment for power plants, these are FDI without any question because private investors are sharing business risk.

No doubt, Pakistan has also received loan from China for the construction of roads and railways. However, its cost is not as gigantic as cautioned by the US. For instance, the total value of CPEC has reached around $67 billion. Against this amount, Pakistan has received only $5.3 billion as loan.

More interestingly, from 2013 to 2018, Pakistan received more loans from IMF than China.  The estimated loan for up gradation of Pakistan railways is approximately $8.3 billion. It can create problem for Pakistan. However, Islamabad has not signed this loan yet and still negotiation with China over its huge cost. 

Thus, the most of the CPEC projects come under the FDI and it is, therefore, Pakistan will not be caught in the vortex of debt trap in the long run as cautioned by the US.

Are the CPEC projects more beneficial for China? Beyond any doubt, the projects will be helpful for China, but neglecting their importance for Pakistan and highlighting only one side is morally and ethically wrong. If the investment, on the scale of CPEC, had been brought to any other country, its people would have planned to get maximum benefits from it. In Pakistan, sadly, our sentiments are exploited and created against it. The projects will be advantageous for Pakistan as well in many ways:

More interestingly, from 2013 to 2018, Pakistan received more loans from IMF than China. 

Firstly, the investment will address the issue of unemployment. Already, the CPEC has employed 75,000 Pakistani workers and 2.3 million new jobs are expected to be created by 2030. The World Bank has estimated that the developing countries need an investment of $100 billion in infrastructure annually.

Secondly, the CPEC will transfer the technology from China to Pakistan. For instance, China will introduce the state-of-art seeds, fertilizers and harvesting technology that will flourish the agriculture sector.

Thirdly, it will create a unified market with Pakistan being a central hub. The goods from China, Russia and Central Asian regions (CARs) will enter into Pakistan for further transport via Arabian Sea because Pakistan provides the shortest transit route for their export. China is constructing roads in Pakistan for this purpose.

Fourthly, it will solve the existing power crisis of Pakistan. Electricity is an engine to run a country. Without uninterrupted supply of the energy, Pakistani textile sector became less competitive in the globe. Hence, the CPEC will make the textile sector more competitive by solving the energy crisis and connecting Pakistani market with the globe via roads and sea routes.

Finally, Pakistan will get an opportunity to utilize its nature resources and drill oil with the help of Chinese companies. Its raw material will also be exploited by the industries that will be setup in Pakistan under the CPEC plan.

Besides, China works on Public-private partnership or Built Operate Transfer (BOT) basis. For example, it constructs a motorway on its own expenses and operates it for the period, normally 20 to 30 years, and collects all the toll taxes. After the expiry of the period, it handovers project to the government. Hence, Chinese projects prove beneficial for all the countries. The most of the early infrastructure of the US was built on Public-Private partnership.

Are the contracts given to blacklist companies? Whether the companies are blacklist or not, Pakistan does not need to worry. The CPEC projects are FDI. Thus the Chinese own enterprises, not the government of Pakistan, share the risk of business.

Thus, the concern of the US is propaganda against the CPEC. It is a duty of our responsible citizen to act wisely and avoid taking any measure that can jeopardize the investment under the CPEC.