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Can CPEC weather Pakistan's political storm?

August 07, 2017

In a highly partisan political environment, China reiterated its neutrality towards the internal affairs of the country by stating its resolve to abide by ‘a strategic cooperative partnership with Pakistan’.

Despite this stance the momentum of the CPEC initiative seems to have been compromised over the last two months.

Senior officials in Islamabad, who coordinate with the Chinese side for the CPEC, informed Dawn that the political crisis did hamper the pace of progress, particularly on projects in the pipeline.

“Yes, the divide blurs the line between civil and military leaders as Generals vow to secure and support CPEC related project as much, if not more, than civil political leaders.

“This unity of opinion is not enough. For CPEC to stay on course a conducive investment environment is absolutely necessary”, commented a business leader who wished anonymity.

A statement on the subject mailed to Dawn by the Chinese Embassy reads, “It hopes that all parties and sections in Pakistan can prioritise state and national interests, properly deal with their domestic affairs, maintain unity and stability and keep focusing on economic and social development.

“The all-weather friendship between China and Pakistan has withstood the test of time. We believe that the China-Pakistan strategic cooperative partnership will not be affected by the change in the situation inside Pakistan.

“China stands ready to work with Pakistan to continue jointly building the Belt and the Road and build a community of a shared future, which serves the fundamental interests of the two countries and peoples and promotes peace and development in the region and beyond”.

Prime Minister Khaqan Abbasi, in his very first speech on the floor of the house after his election, mentioned his intent to fasten the pace of progress on CPEC related projects.

Dr Nadeem Javed, Chief Economist, Planning Commission, admitted the comparative slow down but insisted that the fortnightly coordination committee on the CPEC meets regularly.

The said body is attended by related departments and ministries. It tracks and monitors progress and provides a forum to unwind bureaucratic knots.

“How can anyone deny that happenings of the past two months distracted the government’s attention from the economy and compromised its effectiveness? Yes we could have covered more ground had we been able to handle the situation better.

“There were exchanges and two-way travelling by relevant ministers and officials over the past two months but the private sector, particularly in Pakistan, withdrew into its shell, citing uncertainty” he said.

He saw harmony and enthusiasm in state level interaction but was not happy with the level of interest in the private sector. “The reluctance of local investors is hard to digest. Their attitude might change as plans of nine special economic zones start materialising”, he said.

“The CPEC is a large package of Chinese investment projects with the potential to transform Pakistan’s economy by relieving supply-side constraints to growth through investment in power generation and transport infrastructure.

“If implemented as planned, the CPEC would lift Pakistan’s potential GDP growth significantly and catalyse higher private-sector investments and exports.

“However, security-related issues and Pakistan’s weak track record of public project implementation suggests that the pace of execution will be relatively slow.

“Moving forward, continued support for the CPEC project across all branches of government will be critical to its success and full implementation,” said Moody’s in a current report on the country.

Some business leaders contacted blamed the tilt in policies that suit Chinese investors better.

“The policy framework is unfair towards locals. In their enthusiasm policymakers go the extra mile and roll out the red carpets for foreign investors. However, if we ask for what is our due they play deaf”, a business leader retorted.

“PM Abbasi may claim what he wants but hollow words will not in-still confidence in the private sector.

“The government will need to move decisively towards confidence building measures to motivate local investors”, he added.

Published in Dawn, The Business and Finance Weekly, August 7th, 2017