The prime minister’s recent visit to China yielded a rich harvest of agreements and contracts between the two sides. The bulk of these agreements centred on ‘investment’ by Chinese companies in energy projects in Pakistan. Not surprisingly, the government’s PR team went into overdrive extolling how the agreements would be a “game-changer” for the country.

Greater investment interest by China in Pakistan is indeed welcome and long overdue. The fact that out of a total of $101 billion outward FDI by China in 2013, only $90 million found its way into Pakistan is a reflection of how Pakistan has failed till now to leverage its unique and special relationship with its great north-eastern neighbour. While bilateral trade volume has soared since the signing of the FTA between the two countries, with the deficit heavily skewed against Pakistan, a more meaningful engagement had failed to materialise.

This is as good a time as any for Pakistan to woo strategic investments by China. As amply demonstrated by the recent APEC summit hosted by China and the developments on its sidelines, China has been craftily using its economic powerhouse status and riches to project ‘soft power’ and increase its economic and political footprint from Africa to Asia.

This is as good a time as any for Pakistan to woo strategic investments by China.

The main planks of the Chinese strategy so far have been:

— Strategic acquisition of natural resources, mainly in Africa

— Liberal lending via trade and investment credits by China’s Ex-Im Bank. (In fact, in the last two years alone, the Chinese Ex-Im Bank has lent $670bn — more than the entire amount loaned by the US Ex-Im Bank in its entire existence).

— Laying the groundwork for a new global as well as regional financial architecture to rival the West’s hold of the Bretton Woods institutions. This includes setting up of the so-called BRICS Bank (the New Development Bank), the recently launched Asia Infrastructure Investment Bank, and a separate planned initiative for a regional bank for members of the Shanghai Cooperation Organisation.

— The creation of a renminbi-trading bloc by the signing of currency swap agreements with a number of developing countries, including Pakistan.

The aggressive and heavily military-focused China containment strategy put together by President Obama is forcing the Chinese to ramp up their response. Regional connectivity initiatives and other projects under the ‘New Silk Road’ and ‘Maritime Silk Road’ framework are being speedily followed through. The China-Pakistan Economic Corridor is also part of this strategic thinking.

Given both our failure to take full advantage of our bilateral relationship with China in non-security areas, and China’s imperative to counter a ham-handed US enterprise, the energising (quite literally!) of the Pakistan-China relationship can only be welcome. In fact, we also need to guard against a concerted disinformation campaign against greater engagement with China that has already begun through various parts of the media.

That being said, it is perhaps even more important that any civilian agreements signed up to with China — even commercial agreements with Chinese companies — are subject to greater transparency and open to scrutiny. Full disclosure and transparency should have been the touchstones of the government’s policy right from the start.

Unfortunately, that has not been the case, raising legitimate concerns about some aspects of the recently signed agreements. On the contrary, the government has compounded speculation about overpriced projects and underhand deals involving commissions and kickbacks, by its secretive and non-transparent handling of this initiative.

To counter the speculation and conjecture, the government should provide forthright answers to the following questions:

What is the exact size and nature of the investment component? The government’s media handlers have done a successful job in portraying the agreements as Chinese “investment worth $45bn”. The figure surely refers to the expected total cost of the projects planned to be undertaken. Typically for power projects, the debt-to-equity ratio is 80:20, meaning that, even if all projects materialise, the investment component at the most is not more than $9bn. The rest would be debt.

Which companies — and who — are involved in the projects? Will joint venture project companies be formed to execute and run the projects — implying co-investment by Pakistan and possible issuance of explicit sovereign guarantees or implicit budgetary backstops?

Is there any involvement of members of the prime minister’s family, as is being suggested in some quarters? Any commercial or business interests would invariably involve — if nothing else — a conflict of interest which would be unethical at the very least.

However, the clear and present danger is that it could involve even more than ‘just’ a conflict of interest. If the prime minister’s or chief minister Punjab’s family is a beneficiary, then what privileges and state patronage will these companies receive that other companies competing for similar projects would not have access to? Are the financial returns ‘padded’ to accommodate kickbacks, cuts and commissions — ie would the ultimate consumer or taxpayer in Pakistan pick up the tab for private profits for connected insiders?

These are not just abstract concerns expressed to taint the prime minister. Unfortunately, the prime minister is no stranger to allegations of involvement in mega-corruption involving his two stints in power in the 1990s, and neither his nor any other government’s example in the recent past inspires confidence of above-board and ethical standards of conduct being followed in large projects.

What process was followed for project identification and selection? Did the Planning Commission conduct studies and make recommendations, or, as in the case of the finalisation of projects to be included in the PSDP in June this year, did the son of the Punjab chief minister have the final say?

Finally, in the case of the new capacity that will be installed in the power sector, has anyone thought of how we will pay for it — when we are only able to pay for a fraction of the current capacity?

The writer is a former economic adviser to government, and currently heads a macroeconomic consultancy based in Islamabad.

Published in Dawn, November 14th, 2014