CPEC: Looking a gift horse in the mouth

Published March 27, 2017
A High-level Chinese delegation led by Dr. He Zhimin, deputy commissioner, State Intellectual Property Office, China, called on Federal Minister for Commerce Khurram Dastigir Khan in Islamabad last week.
A High-level Chinese delegation led by Dr. He Zhimin, deputy commissioner, State Intellectual Property Office, China, called on Federal Minister for Commerce Khurram Dastigir Khan in Islamabad last week.

Despite the promise that $51bn CPEC-related projects hold in removing big hurdles to investment and tackling infrastructure and energy bottlenecks, many in the country’s business community do not appear to be comfortable with the influx of Chinese investors, the government’s tilt towards the East and what they call the non-transparent way of doing things.

“Yes at collective forums, the corporate sector is softly opposing CPEC by casting doubts on its purpose, perceived benefits and the real cost. Individually, however, they are approaching the government for participation in CPEC project,” a member of the government economic team told Dawn over phone from Islamabad.

He pointed out the contradictions in the private sector conduct and dissected their position on CPEC to identify the real trigger of reservations. “They are afraid of competition”, he said.

Pakistani business houses, like corporate entities anywhere, passionately resent poky media and block out all information except the one they are obligated to release (like annual reports) or what they wish to market.

However, over the past few months many business tycoons have discovered the value of transparency. Persistently demanding clarity on ‘opaque deals’ they are championing the cause of public access to business information on CPEC projects.

They oppose minimum wage policy and long for free hiring and firing rights. However, now they have developed a caring heart. They are stoking fears that CPEC projects will absorb Chinese technocrats and workforce at the cost of local talent and labour.

“There is nothing opaque, all project details are available online.” — Dr Nadeem Javed, chief economist, Planning Commission of Pakistan

Championing the cause of open competition in an even playing field, they miss no chance to express reservations over concessions to foreign investors but never shy away from demanding tax exemptions for selves.

Dr Nadeem Javed, chief economist Planning Commission, said, “I understand their anxiety keeping in view the transformational nature of CPEC projects. Such mega investments always create new winners and losers. However, concerns raised are not valid as they are based on perceptions.

“There is nothing opaque, all project details are available online. It is bizarre to assume that the Chinese workforce will be engaged when one Chinese worker costs twice more than a local one. The top end management jobs require specialised skill set and previous experience, which, of course, can’t be made bound to be offered to locals. The data shows in the ongoing energy and infrastructure projects roughly 82pc workforce is local and rest of 18pc is foreign.

“Similarly, raw materials (cement, steel, crushed stone, etc) are being used from local markets as there is no concession offered except for capital goods (plant, machinery and equipment).

If the business community feels undue favours are being offered to the Chinese, it can approach the Tariff Commission of Pakistan for invoking anti-dumping duties or countervailing measures in this regard.

“Regarding the industrial cooperation under CPEC, my unsolicited advice to our business community would be that acquisition of information is not free of cost even in this age of ICT revolution. They need to invest in getting right information and human resources before strategising and designing/re-designing their business models.

“Though, the government will identify some of the opportunities, but only those who have done the home work would be able to reap the the harvest.”

Independent experts believe that the nervousness of the corporate sector is rooted in their lack of confidence.

“They can wrap their fears but you need not be Einstein to see through. They know that the pie of Pakistan’s economy is going to expand but not sure if their share will grow proportionately”, an analyst said.

Reached for his comments Ehsan Malik, CEO, Pakistan Business Council mailed the following:

“Job creation is the first priority for the country, yet jobs are seldom explicitly mentioned in the context of CPEC. Pakistan can be more proactive in securing a high percentage of the reported 20m jobs that will be displaced in China due to the rising cost of labour. There is opportunity to partner with the Chinese in textiles and other labour-intensive industries.

“Neither the State Bank nor the ministry of planning have a long-term forecast of foreign exchange inflows and outflows associated with CPEC. Estimates of outflow range from $3 to $5bn per annum. Will our incremental export earnings cover this?

“We need also to see an aggregate environmental impact. What is known is that our reliance on coal for power generation will increase from nil to 18pc of the fuel mix by 2024. Whilst significantly below India — can be justified as a cost reduction measure — its environmental impact when added to daily 7,000 truck movements up and down along the CPEC highways will be considerable and needs to be shared.

“The Chinese will be granted long-term leases at concessional rates to set up in Special Economic Zones where they will also enjoy 20-year tax holidays, water, power and effluent treatment facilities and where trade union activities will be suspended. Will this undermine existing businesses in the rest of the country?

He concluded his response thus: “CPEC is the single largest investment since the British built the irrigation system over a hundred years ago which still irrigates much of the country’s agriculture. If we get infrastructure that is equally enduring, CPEC will definitely be a game changer.

However there is a tendency to treat CPEC like the proverbial gift horse — the one you don’t look in the mouth. The gift horse may prove to be a Trojan horse! There is a dire need for transparency”.

Published in Dawn, Economic & Business, March 27th, 2017

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