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Two weeks ago, I wrote a piece about the special economic zones planned under the China-Pakistan Economic Corridor in which I drew attention to a news item that had come and gone largely unnoticed in which officials of the Planning Commission were quoted telling the Senate Committee on Planning and Development that “only Chinese investors will be allowed to invest in these SEZs”.
That article drew a sharp response from the Planning Commission and Miftah Ismael, special assistant to the prime minister who is heading the Joint Working Group on Industrial Cooperation, called me to give a lengthy and detailed rebuttal, saying no such exclusivity will be allowed. As a journalist I feel duty-bound to convey the contents of the responses I received, but must also add that these were not the only people who got in touch with me after that article appeared.
So let’s start with the government version. The Planning Commission sent a written response saying the article was “concocted and baseless, reported to mislead the masses”. They “condemned such distorted stories, appeared to be part of a campaign to malign the government efforts for development and economic prosperity of Pakistan”.
They claimed that a process to establish SEZs under CPEC had only just begun, and “[i]t is nowhere explicitly stated that only Chinese companies can invest in all SEZ”. Miftah Ismael went a step further, saying he would never acquiesce to such a request if the Chinese ever put one up, emphasising that even the Chinese side has not requested exclusive access.
What will really happen once the SEZs are ready is something that will only be known by its effects.
Fair enough. If the government side wants to stake out such a strong and unequivocal position on such an important matter, their view deserves to be known. But the chairman of the committee, Senator Tahir Mashaddi, continues to strongly say that the government delegation before his committee did indeed say what was attributed to them in the news report, adding that there was even a lengthy discussion on the matter after their remarks. “They often do this,” he tells me. “They often back away from things they say during these hearings afterwards”. The reporter who covered the hearing also strongly stands by what he reported, saying that he definitely heard the delegation say what was attributed to them.
So let’s get past this verbal impasse. If the government wants to today strongly emphasise that they will not negotiate exclusivity for Chinese investors in these SEZs, let’s take them at their word. After all, with time all will become clear, although hopefully by then it will not be too late.
The thing is, this is Pakistan, and the age-old adage that used to be said about the game of poker applies very well here: look around the table, if you can’t figure out who the sucker is, it’s you. In this country, the rules of the game are rigged long before they have been written down. Winners and losers are preselected before the game even begins. So what will really happen once these SEZs are ready is something that will only be known by its effects, not by the rules negotiated by any working group.
The point to note is this: thus far the country’s CPEC conversation has revolved around the question of routes, which province is receiving the largest share of the investment, and the financial terms on which this investment is coming in. But now it is moving into a new area: land.
Land is what this country is fundamentally about. Land is where the rubber meets the road. In my last column I gave the example of Sri Lanka, where things went wrong in a couple of large projects and their debts proved too burdensome for that country’s economy to manage. The penalty that Sri Lanka had to pay was land, swapped along with operational control of the port, in exchange for the debt that they could no longer service.
Since then I have learned that such examples are numerous. Tajikistan gorged itself on Chinese investment with much fanfare more than a decade ago. There too the arrival of the Chinese was hailed as a ‘game changer’ when the enterprise got under way. By 2009 or so, they had difficulty meeting their debt-service obligations. So they asked for some relief from the burdensome terms.
And you know what they had to give up in exchange for this relief? Land.
In 2011, the government of Tajikistan announced that they had just concluded a deal with the government of China, ceding control of 1,100 square kilometres of mountainous land to the Chinese under the garb of settling a centuries-old border dispute. The agreement had been reached in 1999, but finalised precisely at a time when Tajikistan’s debt difficulties began. The territory represents one per cent of the country’s total land area.
At the time, more than a third of the country’s total external debt was owed to China. By 2010, the year before the land deal, some 82,000 Chinese were working in Tajikistan, up from less than half that in 2007. The land that was ceded is now being tilled by Chinese farmers.
We have much to learn from Central Asia’s experience where Chinese investment has played a very positive role in building infrastructure. But the authoritarian nature of the regimes there meant very little of the growing collaboration was done with any transparency, and once the costs of the deals began to assert themselves, one of the instruments of settlement was land.
So now that Pakistan and China are at the ‘inception stage’ of a process to negotiate the creation of SEZs, and their associated infrastructure and raw material requirements, it is worth bearing in mind that the game is becoming very serious indeed. Nothing summons up the animal instincts of our economy quite like land does, and now that a party as large as the Chinese government is poised to enter that field, extreme care must be taken. Let nothing be agreed to in the dark.
The writer is a member of staff.
Twitter: @khurramhusain
Published in Dawn, March 23rd, 2017
Comments (36) Closed
The planning commission is telling the truth. So long as Pakistani business groups and wealthy individuals are willing to put up their own money, and get their own financing to open their own businesses, industrial plants, warehouses and corporations they will be able to utilize the new economic zones. The Chinese will not finance you or your families businesses, only theirs. They are financing the construction. The rest is up to Pakistanis to make the CPEC work for them. You have to buy stakes in your own futures. The Chinese have no intention of taking your business risks for you. That is nonsensical. The smart people are investing in the real estate early. Buy raw land. When the CPEC concept starts working your family can open a restaurant or a petrol station with the money you make on the appreciation of the land you bought. You can put up the land to secure a bank loan to build a small restaurant or petrol station or a store selling workman's clothing, etc.
Debt burden must be thoroughly studied by all the leading political parties and intelligentsia. One important reason for the fall of Ottoman Empire was debt burden.
As always, you have extremely diligently brought to attention a most serious and economically important issue to the attention of concerned oversight institutions and public. These corrupt governments that unfortunately govern us, would like to get away with anything if they could. Their shameless disregard for the welfare of their own people who are mostly poor, and this impoverished country in which they enjoy super human status, is utterly disgusting. We need thorough and honest journalists like you to keep the finger on their pulse, so not to allow them to hide any deal and truth from the nation. Since these leaders on their own will not do the right thing and feel no shame in committing a crime.
If only a handful of people were like u to awaken your nation from slumber Mr.Khurram it would have been a much better place. Hats off to u Sir.
a well written article, The transparency is required for every project, dealings by every private and government concerns. This is not only for current development but for decades to come.
The factors working are - an over enthusiastic government desperately wanting to usher in some change, a bureaucracy determined to guarentee visible changes on ground and an investor whose horizon of vision is only partly visible to host. In Africa Chinese are building roads, ports, airports, Trade centers, Indsuatrial corridors, housing, industrial park , research centers. In return vast number of huge vessels are carrying ores, rare earth and best agri produce. Every month huge containers arrive from Bingo, Shenzen and Shanghai carrying everything from shoes to geysers to ceramic tiles and shops across Addis Ababa, Maputo, Kampala, Dar e Salam are full with Chinese wares. It is impossible for local industry to compete at Chinese price. Take a case of shoes. Chinese offer a Reebok or Nike or puma at 20 dollars as against 45$ for a local produce. Water pumps- Chinese available at 50% of local produce. Policy makers be clear of how much they give away for Wht they get in return.
our iron brothers will not cheat us. they will wave off the loans and invest more. and protect us from terrorism inflicted by india, usa and afghanistan. we will become one nation, long live pakistan-china friendship!
@bryan Excellent points here Bryan
Time will tell how deeper than ocean.
excellent writing. keep it up sir.
great insight i hope your voice is heard by your government and steps taken to protect people interest and their future.
The article boils down as game is over before game.
Brave article. Hope you stay safely
"Those who ignore history are destined to repeat its mistakes". Proceed, Pakistan,but with caution! Safeguard your own interests, specially the longer term ones. Do not sacrifice the long term future for short term gains. Do examine the points raised by the author.
very well written and rightly raised the matter.. hope we wakeup and review all the deals under CPEC,, here I also assert that we must include the clauses where our labor (skilled and unskilled) must be used,, I think 80-90% must be local labor at all the time of the project. coz this is our money (we have to pay with interest) also our companies must be engaged in projects.. why from our money Chinese companies are making projects with Chinese labor and with Chinese equipment's on our land.. the profit will goes to china and they will untilize their labor and produce more cheap stuff to sell us from our money and from our land,, this look insane..
If not land, what do we have to offer the Chinese for their investment?
Besides Tajikistan, Sri Lanka faced the same fate...
Keep the government's feet to the fire. The pressure for transparency and accountability at every step must be relentless and persistent. You are doing a great public service. This is Pakistan, where our leaders and their minions in the bureaucracy have no experience of accountability. They are not used to the light shining on their (mis)deeds, keep that light bright and focused.
Excellent article. All weather friendly relations aside, Pakistanis should not expect not even in dreams that Vhina is going to gift them anything. It is always 'give n take'. China wants Gwadar more than for just economical reasons and Pakistan wants economical gains from CPEC more than anything else. It is a delicate situation. But China hasn't backstabbed anyone, not as yet. Sri lanka and Tajikistan have themselves to blame, they cannot expect China to just write off the loans.
In Pakistan's case the situation is more delicate when terrorism was at its optimal peak, West has turned its back on Pakistan, India rising and cornering Pakistan, UN was almost re ady to brand Pakistan a Terrorist state. Islamic world giving up its high hopes about Pakistan. And Pakistan literally was on brink economically, politically, securitywise and International standing wise, China didn't shun it. Instead embraced Pakistan tighter. So let's hope CPEC is a huge success for the entire region.
The case studies available in this and last column is highly notable. We have to learn from other Nations like Sri Lanka and Tajikstan which made worst deals by handing over Mother land to Chinese.
More Chinese investors arriving in the wake of CPEC...
"Theft through skimming devices: banks being told to upgrade ATM technology"
Today's Dawn.
The conflicts and complications within the CPEC have already begun surfacing supporting your assertions:
"“They (Chinese) told the prime minister that the tariff model announced early this week by the National Electric Power Regulatory Authority (Nepra) did not provide incentive for fresh investment and hence unacceptable,” a participant of the meeting told Dawn. “They think the new tariff model has evaporated profitability.”"
"High-powered committee on K-Electric to review Nepra’s decision" Today's Dawn
@bryan Very true. In the name of free trade the countries are becoming dump yards of cheap Chinese goods. Similar effect can be seen in India too, though not as severely. Manufacturing jobs are lost. Off course trading jobs are created but not as many. Good thing about Chinese goods is that these are affordable to poor people also. But bad thing is that industrial backbone is crushed. Pakistan has more to lose than India. The road which will take Chinese goods cheaply to far off lands, will surely dump a lot of it on the sides.
Very well pointed out. I have fears about the deal too but I did not know of the Tajikistan and Srilanka example. Another thing to worry about is there is not much details being discussed about CPEC in our worthless electronic media (TV).
@ashraf " Pakistan wants economical gains from CPEC more than anything else." That is where people get confused. "Pakistan" is only used (offered) by those negotiating on it's behalf (people in government), as collateral to advance personal gains from CPEC. At this point there is no one forwarding "Pakistan's wants". Paradoxically, the only one negotiating on Pakistan's behalf, seems to be China, in whatever way it can, but finding no partner. Till you don't look the whole drama from this angle, CPEC will continue creating doubts about China's intentions. And that is an additional benefit for "negotiators". Pocket the maximum benefit from the positive aspects of CPEC, and blame China for it's cost.
@Syed F. Hussaini "If not land, what do we have to offer the Chinese for their investment?" According to the law of gravity, the bigger body doesn't wait for an 'offer"from the smaller one, to put that force into action. The smaller one is attracted because of it's nature and all the forces of nature. But the earth needs the moon more than the moon needs the earth. Hope you get my point.
@Asim "there is not much details being discussed about CPEC in our worthless electronic media". Since they don't dare talking against CPEC, and unwilling to talk in favor, their silence is comprehensible.
@ashraf agree China needs Gwadar more than anything. Advantage is it provides base to surround India on all sides srilanka,Bangladesh and Pakistan.
Yes, @BAXAR !
Thank you.
chinese play this game of economic domination in all the countries and grab land deals to thier sweet terms for thier enterprises. some countries, like cylon, trjakisthan, and some african countries have learnt their lessons in a hard way, of chinese clever manuvouring of dumping cheap products and killing all local enterprises. they even follow unscrupulous methods. trying to dump even diwali crackers with banned chemicals in to india and cought redhanded is an example. you know indan import is 180 billions dollars worth chinese GOODS as against 50 billion dollars worth goods exxxport to that country. now present govt. has taken up strongly with chinese govt. to correct the balance of trade! author has given a timely warning and it is upto the powers that may be to wake up and be vigilant so that pak. local manufacturing is not affected.
You have to realise that Pakistan and Chinese governments are bound in a strategic partnership. It's not just an economic one. The financial benefits like CPEC are a part of this strategic relationship. Therefore what happened in Sri Lanka or anywhere else cannot be used as a yardstick for us.
Glad to see Pak investigative journalists are maturing into a consummate professionals. Regarding Land; Pakistan as a matter of policy should insist on long-term leasing instead of outright buyouts by foreign investors-including Chinese.
@Ashok Saigal I like your objectivity and sincere advice and yes. we need to watch Chinese intentions but isn't China has the same approach with India in trade? If you look at the volume, the nature of commodities exchanged between China and India the trade imbalance has been growing in China's favor year and it reached $50.00 billion last year. Is it sustainable and if it is what India will offer that China does not produce and cheaper?
Indeed we need caution - the Chinese made a similar bid in Myanmar once it opened up for business. They had offered to set up a brand new city in exchange for control of land/port. But then - the Chinese model is far more equitable and just than the good old 'British model'. Remember East India Company? I am sure the Chinese have no appetite to set up a Chinese Raj in the area.
@jamshed "Is it sustainable and if it is what India will offer that China does not produce and cheaper?" Subcontinent's businessmen are trained as subcontractors to provide cheap labor to "goras", and did quite well in that regard. Now goras don't need that segment, as manufacturing is shifted to China which has plenty of it. They are left with one last niche segment, it is to provide cheap hi-tech labor to "goras", for which you see the emergence of expensive private universities in every street corner. Even that business is under threat from Trump and cohorts in EU. They don't have anything to offer to their own people, let alone China. The subcontinent needs to clean out it's "business" elite first, in order to stay relevant.
Excellent work. Please awake the whole nation for the slumber... and please write such columns in Urdu too, I think CPEC is considered good for the future of Pakistan but it may put the country in serious jeopardy. We should not sell our country for the military race with India.