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CPEC: hidden catch?

September 12, 2017

THE China-Pakistan Economic Corridor (CPEC) is indeed a regional game changer. It brings with itself bulk of foreign direct investment, jobs and opportunities to improve our ailing economic sector, increasing the geo-strategic importance of Pakistan.

However, the CPEC has expensive price tags in the form of massive loans, which we as a nation will have to bear collectively.

According to a rough estimate, the total worth of CPEC projects, including infrastructure, railways, powerhouses, etc., has surged from $46 billion to $62 billion.

The CPEC is a massive investment. The funds which have been pouring into Pakistan by the Chinese come in the form of FDI, soft loans and commercial loans.

Interestingly, according to some top economic analysts, it will take more than 40 years for Pakistan to return these loans. Additionally, the loans and funds which have been coming for CPEC-related projects come at a high interest rate. The more the worth increases, the higher we are trapped into debt.

Let us also not forget the situation of the Hambantota port and Mattalla International Airport (just five flights take off every week) from Sri Lanka that had been built with Chinese investment.

Unfortunately, both the projects failed drastically to bring the expected economic fruits which the Sri Lankan government had thought of. Now Sri Lanka is struggling to repay that money and so has signed an agreement to give a Chinese firm a stake in the port and airport as a way of paying down that debt. This agreement is a form of debt-to-equity swap that will convert the debt of Sri Lankan government into equity of Chinese firm, which may finally lead to their full ownership.

Therefore, our government should rationally plan the economic policies of our country, keeping in view the pros and cons of such mega foreign-invested projects.

Furthermore, the government should keep all the expected results and repercussions in their mind while managing and planning the CPEC-related projects and the loans and funds that come in their wake. This should be done keeping in view that, according to latest figures, we have to repay additional money of $40 billion as interest, which makes the total cost of the project more than $90 billion.

Our developing and poverty-stricken country of 207.77 million people cannot afford to sink any further into the oceans of debt. If not properly managed, CPEC could turn into another East India Company.

Syed Hamza Younas

Peshawar

Published in Dawn, September 12th, 2017