Potential leaks

Published May 30, 2017
The writer is an economist.
The writer is an economist.

THE government says the China-Pakistan Economic Corridor is the most discussed topic in the country. True. But why? Because if someone expresses an adverse opinion, the government issues a rebuttal and the debate goes on.

The time that ministers and other government officials spend on denying stories and issuing clarifications can be saved by placing relevant information on www.cpec.gov.pk. For example, indicating the interest rate on the amount lent by China on the website may check the view that loans have been contracted at exorbitant rates. No rebuttals will then be required. Potential leaks can be avoided by revealing the right kind of information.

The CPEC website tells us of the location, cost and capacity, etc of energy projects. Citizens would also like to know on what rates these plants will sell electricity to the government or the National Transmission Despatch Company and hence to the people. Complicated references to rates on the power regulator Nepra’s website may not suffice.

Why not simply post on the CPEC website that power plant X will sell electricity at Rs12 per unit, or whatever, to the NTDC? At what tariff is electricity available from other plants and what is the going market rate? Of course, some preferential treatment to the Chinese is warranted, if investors from other countries are not coming here in droves. But still the nation and parliament need to know its extent. If it is not disclosed, then a potential leak exists.

The CPEC website conveyed in December that details of the planned mass transit in Karachi, Peshawar and Quetta are being worked out by the joint working group on transport. Any updates? On the Orange line train, the website does not go beyond mentioning the name. Information on the CPEC website on the cost of the train would be appreciated. How much is China financing and on what terms — interest rate, repayment period etc? Again, a potential leak is there in the absence of information.

The CPEC website needs to give more details.

The website says nine special economic zones will be developed across the country. New industrial zones are typically viable under a preferential tax regime with access to utilities. One wants to know what kind of feasibility exercise was undertaken to identify the sites of the planned SEZs. Some existing industrial zones are lying underutilised. Has the demand for SEZs been estimated while accounting for underutilisation?

The Gadoon Amazai Industrial Estate was set up in the early 1990s under a preferential regime — credit at three per cent and utilities at 50pc of the going rate. This led to relocation of existing industries hence the withdrawal of the preferential regime. GAIE is now almost deserted. Do feasibility studies for the nine SEZs account for failures like GAIE? How will relocation of existing industries to the SEZs be avoided?

The government has dispelled fears that the SEZs will be reserved for Chinese industrialists. Whether Pakistanis can set up industries in the SEZs without entering into joint ventures with China is, however, not clear. This again is a potential leak.

Twelve projects are mentioned under the Gwadar link. Costs have been mentioned for eight which totals approximately $772 million. The nation needs to know the terms of the loan.

A crucial element of the CPEC controversy was the debate on the eastern vs western route. The debate was led by KP. The province now seems satisfied. What convinced the province? Here’s yet another potential leak. A convincing effort earlier could have prevented the controversy in the place.

If the CPEC website can include the following frequently asked questions and answer these, it will help avoid leaks. The questions are:

What is the tariff of the individual power plants included in CPEC? What is the extent of preferential treatment, if any, allowed to Chinese power plants? What are the annual debt-servicing obligations for each project under CPEC (separated into principal and interest payments)? Does any research study shows that after incurring the CPEC debt, the country’s debt will remain sustainable? What annual outflows are expected under the repatriation of profits and dividends against the FDI from China? Does any study predict the balance of payments accounting for debt servicing and CPEC-related profit outflows?

What preferential regime will be offered in the industrial zones? Will Pakistani industrialists be allowed to set up plants in the planned nine industrial zones without entering into joint ventures with Chinese firms? Has some agency assessed the demand or viability of these zones? Where can these feasibility studies, if any, be found? What is the Long-Term Plan, the MOU for which was signed in 2013? What settled the debate on the eastern versus western route? All these need answers.

The writer is an economist.

idreespide1@gmail.com

Twitter: @khawajaidrees11

Published in Dawn, May 30th, 2017

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